The Role of Licenses in International Trade

International license trade is the main economic mechanism of international technological exchange and currently has become widespread and rapid disseminated.

The growth of international license trade is due to a number of factors that encourage firms to sell and buy licenses in the world market:

• commercial interest in the technology transfer;

• increased competition in the world market;

• acceleration of the placing of new products in the market;

• gain of access to additional resources;

• penetration and winning of difficult markets in the countries with high tariff and non-tariff barriers;

• profits from the sale of licenses for the products that do not meet the new strategic priorities;

• countries with limited resources of scientific and technological development, participating in international technological exchange, have an opportunity to take a firm position in the world market without additional costs;

• licenses help to create advertising of domestic products and increase demand in other countries, as well as explore foreign markets;

• political and legal motivations.

International license relationships are mostly between the developed countries. The proportion of the developed countries is almost 98% in the total revenues from international license trade.

In general the turnover of license trade is about 30 billion dollars per year. However, the significance of this market is defined by the fact that the cost of products, manufactured in different countries with foreign licenses, is 330-400 billion dollars annually. The leading position in the market of licenses belongs to the USA (65% of income of the industrialized countries from license export).

The objects of licenses are as follows:

• a patented invention or technological process;

• technological knowledge and experience;

• know-how i.e. technical knowledge, practical experience of technical, commercial, managerial, financial and other character, which is commercial value, and is applied in production and professional practice and are not provided with patent protection;

• copyright;

• industrial designs (new art and design solution, which defines its outward appearance);

• trademark.

Licensing agreements are typically concluded for 5-10 years.

The Role of International Trade in Engineering Services

The common form of international technological exchange is engineering.

Engineering is a complex of engineering and consulting services for using technology and other scientific and technical developments.

The essence of international trade in engineering services is to provide on the basis of the engineering agreement by one party (a consultant) to the other one (a client) commercial engineering and design, consulting, construction engineering services. These services may include the following ones:

- preparation of production:

a) preliminary design services (socio-economic research, field studies, topographical survey, mineral exploration, feasibility studies, consultation and supervision of the work);

b) project services (master planning, preparation of diagrams, drawings, technical specifications, consultation, supervision, etc.);

c) post-project services (preparation of contract documents, supervision of construction, construction management, acceptance of delivery work etc.);

• the process of production (services for organizing the production process, enterprise management, staff training);

• the sales of products;

• the construction and exploitation of industrial, infrastructural, agricultural and other objects [16, p.273].

All of these services are intellectual and aimed at optimizing the investment projects at all stages of their implementation.

The main factors, influencing the development of international market of engineering services are as follows:

• acceleration of scientific and technical progress, which can lead to significant shifts in the structure of international trade towards the increase of the trade in related types of equipment that need special knowledge to solve technological and organizational issues, ranging from the design of enterprise to its introduction into operation;

• increase in public and private investment, which allows to extend the building and to introduce new objects, where engineering services are needed;

• free capital available in the market of engineering services;

• high demand for engineering services from the countries that started their independent economic development and do not have the necessary experience and experts for the exploration and exploitation of their natural resources, development of fuel-and-energy base, creation of heavy industry, etc.;

• striving of large TNCs for foreign economic expansion, i.e. to expand the spheres of influence. They use the technical services as a means of penetrating into the economies of other countries. For example, the provision of engineering services to any country subsequently causes the supply of machinery and equipment, whose value in 10-20 times higher than the cost of services for their delivery;

• increase in the number of major engineering firms with large turnover and broad field of activity, creation of national and international associations of engineering firms to promote engineering [16, p.273].

The characteristics of the market of engineering services are as follows:

• results of the trade in engineering services are not embodied in material types of product, but in some useful effect, which may or may not have a material object, i.e. engineering is an implicit form of technology transfer. For example, services of staff training, construction management do not have material objects;

• engineering services related to the preparation and provision of the process of production and realization, for intermediate consumption of material goods and services. Productive services are not engineering services;

• the objects of sales are services, adapted for the use in specific contexts and transfer of the average available scientific and technical, operational, commercial and other expertise.

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