This study analyses linkages between trade and innovation in the chemicals sector, building on past work at the OECD on trade and innovation. The chemicals sector has a long history of innovation and is a large trading item. It covers very diverse sub-sectors. This paper analyses and compares different trade and innovation linkages in basic industrial chemicals, speciality and fine chemicals and consumer chemicals. This sector has also been a subject of successive rounds of multilateral trade negotiations, and partly as a consequence tariff rates have been reduced over time. Nonetheless remaining tariffs are still non-negligible and constitute impediments to trade. Export restrictive measures on raw material inputs are also being highlighted on the trade negotiating agenda. Moreover, the chemicals sector is heavily regulated for health and environmental reasons and further legislative initiatives have been pursued, whose practical impact on innovation remains to be seen. Intellectual property has played a very important role in technology diffusion in this sector, and infringement of intellectual property continues to be a major problem.innovation, intellectual property, technical barriers to trade, emerging economies, financial crisis, Chemicals Tariff Harmonization Agreement, environmental regulations, chemicals, multilateral trade negotiations, export restrictive measures

TRADE AND INNOVATION -SYNTHESIS REPORT byNobuo Kiriyama, OECD Trade and Agriculture Directorate Innovation is critical to creating new sources of growth. Trade is one of the framework conditions that can strengthen innovation in the business sector, as set out in the OECD Innovation Strategy in 2010.This paper broadly sets out three channels through which trade affects innovation. First, imports and foreign direct investment (FDI) as well as trade in technology serve as channels of technology diffusion. Second, imports, FDI and technology licensing contribute to intensifying competition, which can affect incentives for innovation. Third, exports can affect innovation as it serves as a learning opportunity and gives incentives for innovative activities.The benefits of technology diffusion depend not only on the channels of diffusion but also on the absorptive capacity (that is, the capacity to assimilate and apply new information), which covers a number of policy agendas that go beyond typical trade policy issues. Multilateral trade liberalisation, including both tariff and non-tariff liberalisation as well as protection of intellectual property, contributes to ensuring the link between trade and innovation that are discussed in this paper.

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Information and communications technology (ICT) has been seen as a major contributor to productivity growth and as a key tool for innovation. Trade liberalisation can play a role in encouraging ICT adoption by fostering competition and by reducing ICT prices. While the trade in ICT goods has more than doubled since the mid-1990s, the share of trade involving low and middle income countries has significantly increased, with China now being the largest trader. During the same period, tariff levels have declined thanks in part to the Information Technology Agreement (ITA), although substantial tariffs remain with respect to ICT goods not covered by the ITA and by those imposed by non-participants to the ITA. The multilateral trading system produced early successes in the ITA and the negotiations on basic telecommunications at the World Trade Organization (WTO), but the progress has since been more modest. Yet it provides opportunities to further trade liberalisation in ICT goods, both with respect to tariffs and to non-tariff issues, not least through the Doha negotiations.WTO, information and communication technologies, Information Technology Agreement, multilateral trade negotiations, non-agricultural market access