How innovation can offset deindustrialisation in an open trade context. Causal analysis for four countries: Chile, Mexico, Germany, France

The development of international trade has enabled industrialised countries to obtain supplies of high-quality, high-tech products very cheaply from developing countries. But the ever-falling prices of these imported goods have eroded the interest of industrialised countries in producing them themselves. This has led to a phenomenon of deindustrialisation, resulting from the loss of export markets, production offshoring and increased investment abroad by transnational companies. Drawing on an empirical analysis and case studies of four countries, this article shows that deindustrialisation is not inevitable. The right mix between government economic policy and the strategies of companies and entrepreneurs has enabled industry in some countries to do better than just resisting globalisation. This mix of public policy and business strategy has to aim to keep domestic companies? margins in line with their international partners and competitors, accentuate and sustain research and innovation efforts in the long term and emphasise mid-range and high-end production. The economies of the industrialised countries that are already committed to this approach are currently those doing best in the current crisis. JEL Codes: O14, O3, F02