Global Trade and Third World Development

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Global Trade and Third World Development
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Manufacturing Trade

• Manufacturing accounted for only 20 percent of
  total exports in 1960
• Now manufacturing accounts for more than 50
  percent today
• By the end of 1970s, the value of manufactured
  products exported from the developing economies
  exceeded that of their food and raw materials
• From the early 1970s, exports of manufactured
  goods from developing countries grew at twice the
  rate of exports of raw materials

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Comparison between Table 3.1 and 3.2

• Exports are less concentrated than production
• Share of imports by the top 15 increased
  dramatically from 46 to 71
• Emergence of developing countries as exporters
• US evolved as the major importer

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Map of World Merchandise Export
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Trade Surplus and Deficit
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Trade Networks

• What might be advantages when we examine trade as
  networks rather than as imports and exports
  across borders?
• Think about integration of global economy and the
  ways in which fortune of each country may affect
  those of other countries.
• What are you observations on the figure 3.7?

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Linking Production and Service Trade Networks
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Exports in Services
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Patterns of Service Trade
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Global Trade in Services

• What are characteristics of geographical patterns
  of global trade in services?
• Are there any significant different between
  patterns of trade in services and those in
  production?
• How may we explain the difference and its
  implications for future global development?

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Trade and Third World Economies
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Trade and Third World Economies

• Generalization of Trade in 1960s
• Major share of trade occurred among first world
  and among second world 58.7 of all exports
• Third world countries traded with mostly with
  first world nations (two thirds of their exports
  and four-fifths of their imports)
• Colonial linkages

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Trade and Third World Economies
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Trade and Third World Economies

• Changes in Primary Commodities Trade
• Dependence of Third World Economies on Primary
  commodities
• Dramatic Reduction in dependence on primary
  product exports East Asia and South Asia
• Africa and West Africa 80 of exports still in
  primary products
• Japans heavy dependence on Oil

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Who Gains from Primary Commodity Trade?

• Free Trade Theory based on Comparative Advantage
  it should not matter which products a country
  exports as long as it has comparative advantage
  in something. Yet at the same time, the gains
  from trade may be unequally distributed between
  the partners in a way that can increase rather
  than reduce economic inequalities

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Who Gains from Primary Commodity Trade?

• Ways to examine the terms of trade the
  relative value of the countrys exports compared
  to its imports
• Example bananas vs. hot rolled steel plates
• What does the graph tell you?

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Who Gains from Primary Commodity Trade?

• More general measures net barter terms of trade
• The price of exports and imports are calculated
  by dividing the weighted average price of all
  their world primary products
• Weights are the relative quantity of each
  commodity

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Who Gains from Primary Commodity Trade?

• However, the terms of trade can be affected by
  changes in the volume of exports or in production
  methods
• Income terms of trade a measure of the quantity
  of imports that can be purchased with the money
  made from primary commodity exports

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Who Gains from Primary Commodity Trade?

• The quantity of manufactured goods imported by
  third world countries quadrupled between 1968 and
  1994 ? the increased purchasing power of primary
  commodity exports has brought less money than
  third world countries need to pay for the
  increased manufactured imports

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Explain the terms of trade

• Primary vs. Manufactured Commodities
• Engels Law as people become more wealthy, their
  demand for food products increases more slowly
  than their demand for manufactured goods
• The increased consumption that comes with wealth
  is oriented toward more to manufactured
  commodities and services than to food

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Explain the terms of trade

• Primary vs. Manufactured Commodities
• Why havent the price of manufactured goods
  decreased with advances in production
  technologies?
• Development of Transportation technologies and
  its impact on the price of goods
• Social Conditions and Wages Differences
• Boom and bust cycles

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Explain the terms of trade

• The Situation of Third World Nations
• Less bargaining power due to heavy dependence on
  trade outcome is more likely to favor first
  world countries
• Competition among similar produces tend to lower
  price of third world countries Indonesian Cocoa
  and Ghana Cocoa European Tractor vs US Tractor.