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We0d Trade and Output of ManufacturesoRiruduitraFTirends and2 2Ilwds 9JExDortu _____________
SWP316World Bank Staff Working Paper No-. 3116
January 1979
The views and interpretations in this document are those of the authorsand should not be attributed to the World Bank, to its affiliatedorganizations or to any individual acting in their behalf.
Prepared by: Donald B. KeesingEconomics of Industry Division-Development Economic Department
Copyright © 1979The World Bank1818 H Street, N.W.
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The views and interpretations in this document are those of the author and should
no: be attributed to the World Bank, to its affiliated organizations, or to any
individual acting on their behalf.
WORLD BANK
Staff Working Paper No. 316
January 1979
WORLD TRADE AND OUTPUT OF MANUFACTURES: STRUCTURAL
TRENDS AND DEVELOPING COUNTRIES' EXPORTS
This is a revised version of a paper originally completed in February 1978,
as a background study for the World Development Report 1978. Compared to the Report,
it uses somewhat narrower definitions of developing countries and of manufactures.
Developing countries' manufactured exports increased from 1960 through 1976
at rates around 15 percent per year. This paper is concerned with the changing
structural features of these exports and how they relate to world manufacturing output
and markets, which have expanded much more slowly. Numerous relationships are explored,
with speculative interpretations as well as tables. Here are examples of findings:
the share of manufacturing output traded internationally in market economies has risen
rapidly, but remains less than one sixth, and is lower in developing countries. The
share of LDC exports in manufactures in developed countries has recently passed one
percent, and ranges in individual countries from about 0.5 to 2 percent; but examples
are given of much higher penetration in narrow product lines. Even these exports come
mainly from a few countries and consist predominantly of labor-intensive goods such
as clothing and electronic assembly products; rapid export growth has also taken place
in a wide range of other products and in many other LDCs, and has extended to trade
in manufactures among developing countries themselves, which has quite a different
composition.
The author would like to thank Bela Balassa, Larry Westphal, Martin Wolf
and many others for their suggestions, and Phi Anh Plesch and Gail Triner for statis-
tical assistance.
Prepared by: - Copyright ( 1979
Donald B. Keesing The World Bank
Economics of Industry Division 1817 H Street, N.W.
Development Economics Department Washington, D.C. 20433USA
WORLD TRADE AND OUTPUT OF MANUFACTURES: STRUCTURAL
TRENDS AND DEVELOPING COUNTRIES' EXPORTS
TABLE OF CONTENTS
Page No.
Introduction ......................... .......................... 1
The World Location of Manufacturing Output vs. GNP ....... ...... 1
Trends in Output by Broad Product Groups ..... ............ 4
Exports vs. Output Growth in Manufacturing .................. ... 5
Recent Vicissitudes and the Worldwide Recession 7............... 7
Trade as a Share of Output .................................... 9
A First Look at Trade in Manufactures .......................... 10
Recent Increases in Developing Countries' Exports .............. 15
The Matrix of Trade in Manufactures ............ .. .............. 17
Export Growth by Types of Trading Partners ........ .. ........... 18
Market Economies' Exports by Destinations ......... .. ........... 19
Markets for Regional Groupings of Developing Countries ......... 20
Trade in Manufactures Among Developing Countries ....... ........ 21
Structural Change and Diversification in Developing
Countries' Exports ........................................... 22
Developing Countries' Growing Share of World Exports .... ....... 24
Differences in the Composition of Developing Countries'
Exports by Destination ....................................... 25
Country Concentration of Exports ................... ............ 26
Growing Numbers.of Successful Exporters of Manufactures .... .... 28
Domination in Many Product Groups by "Powerhouse"
Middle-Income Exporters ...................... 29
Ex e . X :: S ¢ W a 3~~~ge N 0
Export Performance by Developing Countries More Narvow&4y Def-ined 30
ExDort of Manufactures by Income Level o000000000o ...... 00o0o0 31
Export Price Trends for Developing Countries' Manufactures O 35
Developed Countries' lmuort Growth by Product GroU 0 38
Market Penetration in Developed Countries 0............000000000 41
A Case Study in 'b!arket Penetration: Clothin An Tmztiles in
the U .S Market 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 43
Employent Trends in Developed Countries OO00000000O0048
Employment Effects of Imports from Developing Countries 00000000 51
Employment Effects in Developing Countries 000 0000000.. 00000 54
What Causes Protectionism Today? ..0o0 0 oo_ ...... .00o ......... 57
Trends in Protection 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 58
The New Wave of Protection .... o...ooo oooOOooooooooooooo0000.000 60
ANNUE A: DEVELOPING COUNTRIES' IMPORTS OF MUSUFACTGUES
ANN 3: MAUFACT'D EXPORTS OF DVELOPLiG COUNTRIES RON 1965
TO 1976 BY COUNThIES AMD REGIONS (TABLE)
- Liu -
LIST OF TABLES
Table 1: GNP Originating in Manufacturing and Total GNP by Region andGroup of Countries, 1973
Table 2: Growth Rates of Manufacturing Production by Branches, 1960to 1977
Table 3: Growth of Manufacturing Output vs. Exports in Market Economies,1960-1976
Table 4: Index Numbers of the Volume of Manufacturing Output and Exports
Table 5: Index Numbers of Manufacturing Output in Developed Countriesby Branches, 1972 to 1977
Table 6: Exports of Manufactures-Absolute Value, Growth and Relationshipto Exports and to Gross Manufacturing Output
Table 7: Shares of World Exports of Manufactures and World GNP byGroups of Countries in 1974
Table 8: Estimated Exports of Manufactures from Developing Countriesin 1976 Compared to 1965 and 1970
Table 9: Matrix of World Trade in Manufactures, 1976
Table 10: Growth of World Exports of Manufactures by Types of TradingPartners, 1965-1974
Table 11: Percentage Distribution of Exports of Manufactures byDestination
Table 12: Exports to Developing Countries as a Share of Exports ofManufactures
Table 13: Destinations of Exports of Manufactures from DevelopingCountries Grouped by Reions -
Table 14: Trade in Manufactures Among Developing Countires by GeographicalRegions, 1974
Table 15: Changing Structural Composition of Developing Countries' Non-Oil Merchandise Exports by Broad Categories
Table 16: Percentage Composition of Developing Countries' Exports ofManufactures in Selected Years
iv
Table 17: Developing Countries' Shara of !lorld mLOha dioe aportz byProduct Group
Table 1S: Product Compositio0 of Developing Couxtries' E2zporgs toDeveloped Countries vwo Other Developing Co rAeie 1976
Table 19: Leading Developing=Econoeay Enpovterv of in3ug'es in1965 and 1975
Table 20: NAbers of Developing Countries with Exports of ManufacturesOver Selected Values in Constant 1974 U.S. Dollars
Table 21: Shares of the Three and Six Leading `Po- Miho=e` PUddle'Incaoe Exporters in Developing Country fiports byProduct Groups in 1974
Table 22: Exports of Manufactures in Selected YKrs D by Regionefrog Developing Cotries farroly DEofined
Table 23: Exports Per Person of .anufactures froEa Dve3loping to OECDCountries in 1974, Dased on OECD Impots St zistics, asRelated to IncoaSe Levels in the Developing CountrieS
Table 24: Trends in UN Indees of Unit Prices for &porto of Manufactures
Table 25: Trends in U.S. Wholesale Price Tnde by Produrt Group
Table 26: National Export Price (Unit Value) Indmes andd Terte ofTrade Xndexeo in Leadin Develoying Comgn ics Coiapcred toIndus trial Countries as a Group
Table 27: Developed Countries' Tmponse of Manuactures ftoa DevelopingCountries by P-roduct Group in 1967, 1973 and 1974
Table 28: Imports froEa Developing Countries as a Share of MP in 1974and as an Estimated Share of Appareat ConEiption of Manufacturesin 1973, in Selected Developed Countries
Table 29: Patio of U.So Imports for Constz3ption foOe All Sources to ApparencDo2eesic Market of Teztiles and Aparel Prodcts by Fiber Weight,1964°1 975
Table 30: U0oS. Tports of Twztile Prodwtts in Equ8ivalent Squnre Yards
Table 31: Market Penetration Over Ti lparts as a Percent of importsPlus Production of Selected Tzraile and Clothing Ites inthe United States
Table 32: U.S. Imports of Clothing and Textiles from Developing Countries
Table 33: Economy-Wide Unemployment in Sixteen Developed Countries
Table 34: Employment in Developed Countries' Manufacturing by Branches,1965, 1973 and 1974
Table 35: Employment and Labor Productivity Growth in Developing CountriesManufacturing by Branches, 1965-74
TAble A-1: Developing Countries' Imports of Manufactures
Annex B: Manufactured Exports of Developing Countries from 1965 to 1976by Countries and Regions
WORLD TRADE AND OUTPUT OF MANUFACTURES: STRUCTURALTRENDS AND DEVELOPMENT COUNTRIES' EXPORTS
Introduction
This note examines some of the major trends in world trade andoutput of manufactures in the 1960's and 1970's with special reference tothe growth of developing countries' exports. To spice up what mightotherwise be a mindless parade of tables, some attention is paid to whatthe writer sees as likely reasons for (or implications of) some of therelationships. These remarks will serve their purpose if they stimulatethought and discussion.
The World Location of Manufacturing Output vs. GNP
Before looking at trade and trends it may be useful to look brieflyat the world location of manufacturing output in a recent year. In 1973-thelatest year for which suitable data are fully available--GNP originating inmanufacturing appears to have been close to $1,080 billion in the marketeconomies, or about 27% of their total GNP. By regions the picture wasapproximately as follows. No estimate is given for centrally-planned eco-nomies (CPEs) because of the conceptual problems involved, but Chenery givesan estimate of $308 billion for their manufacturing output in 1973, forpurposes of comparison with market economy figures. 1/
1/ Hollis B. Chenery, "Transitional Growth and World Industrialization,"in Bertil Ohlin, Per-Ove Hesselborn and Per Magnus Wijkmans, editors,The International Allocation of Economic Activity: Proceedings of aNovel Symposium held at Stockholm,_ Macmillan Press, 1977. The World-Bank's World Tables, 1976, gives a ratio .of 51.7% of GDP at factor --prices coming from manufacturing in 1973. Combined with World BankAtlas' GNP figure of $996 billion, this might imply manufacturing costsof S500 billion.
Table 1: GNP ORIGINATING IN MANUFACTURING AND TOTALGNP BY REGION AND GROUP OF COUTkIE=S 1973
ON?p f romoGNP GNP from M_go Percent Mfg. Per "Real" 1965-73T illion in US$) f roQ fa Cpta Growth of .mfg
Developed Market Economies 3 957.2 2900 _319 409Transitional Countries /a 117.6 31iO 2604 545 9.3Other Western Europe 1,241.1 434;6 35O0 1,512 5X0North America 1,435.2 348.8 2403 1,500 3.3JaDan 411.3 11706 28.6 1,085 13.0Australia, N.Z., S0 Africa 98.6 2502 2506 624 406
Developing Market Economies 64542 12106 18o9 64 609Latin America 23706 60.4 2T5- 208 708East Asia 86.0 17.4 202 54 12.3Turkey and Yugoslavia 48.3 1209 2607 218 8.OSouth Asia 9204 1201 13.2 15 3.9Kiddle _ast 63.2 8.2 9.8 112 504North Africa 35.6 4.4 1204 60 6.0Sub-Saharan Africa 6201 601 9o9 21 5.0
Total Market Economies 3 94908 27o3 411 5.1
Centrally Planned Economies (966.2) /b /b /b (807) /b
/a Spain, Portugal, Greece, Cyprus, Malta and Israel.
/b Meaningful estimate difficult; see test.
Sources: GNP from World Bank Atlas 1976; GW? from aEufaetuxing estimated basedon shares of GDP from manufacturing at factor prices in 'World Tables1976; real output growth from World Tables.
A striking feature of this cooparison ls thQ enormity of the con-trasts in absolute and per capita manufacturing output a0ong different groupsoi countries, not least among the developing countries themsQlves. 1/ At theextremes, GM?P per head from wanufacturing is in thc@ ordev of 100 tg@;s largerin leading developed countries than in South AoiA or, for that mattigr, thelow@r-income countries as a group.
1/ GNP from manufacturing is in effect a net form of value added, not outputin the usual phase of gross output, but the ttwo are, of course, closelyrelated.
- 3 -
Although not free of price distortions caused by protection, thesecontrasts in GNP from manufacturing are more "real" than the correspondingcontrasts in total GNP. Contrasts in the dollar value of GNP are partlycaused by very different price levels among different countries, particularlyin regard to services and construction, and also in regard to the less trade-able agricultural products, which are often very cheap in low-income areas.What looks like a fifty-to-one difference in per capita income turns outto be much less in the richer country's prices. Depending on how this isdone, the difference can be narrowed to much less than ten to one, or (as inthe Kravis, et al., international comparisons project) some in-between numberin the order of 20 to 1. In manufacturing, however, the contrast is not onlylarger prior to adjustment, but if agricultural processing, repair and handi-crafts are not counted, this difference is very real indeed, because prices ofmanufacturers tend to be broadly similar in different countries as a result oftrade.
Contrasts in industrial output per head are partly caused by, butalso help to cause the more familiar contrasts in income. Manufacturingproduces a smaller proportion of GNP in the poorest and least developedcountries than in richer ones, partly because the structure of demand favorsfood and other simple products for subsistence, and partly because industrialcapabilities tend to be especially backward. If this second obstacle can beovercome, an impoverished country can begin to export manufactures as a wayout of both inadequate demand and poverty itself, as Hong Kong and later SouthKorea did. But the route around the dilemma may be more difficult and theroad to industrialization may be a long one for a country with fairly amplenatural resources but underdeveloped human resources. Here it may be diffi-cult to export and difficult to generate much domestic demand.
In any event, using Chenery's figure for the CPEs, the developingcountries' share of world GNP from manufacturing reached 8.8% in 1973. Threefifths of this came from Latin America, Yugoslavia and Turkey. 1/ Only 1.3%of world manufacturing value added came from South Asia and Sub-Saharan Africawhich together contained 27.8% of the world's population.
The total GNP from manufacturing in the developing countries in1973 was about equal to that of Japan and smaller than that of West Germany.Only six developing countries had GNP from manufacturing of more than $4 bil-lion in 1973, according to the estimates underlying Table 3: in billionsof dollars the value of this GNP was 19.6 in Brazil, 13.9 in Mexico, 12.2 inArgentina, 9.8 in India, 7.0 in Yugoslavia and 5.9 in Turkey. 2/ Nineteenof the developed market economies (as defined in the table) were above thislevel, together with the eight largest CPEs.
1/' The definition of developing countries can-be seen from Table 1; it isnot the same as the one used in the World Bank's World Development Report1978.
2, These numbers are distorted in varying degrees by protection and un-realistic exchange rates.
Table 1 also shows sharp dif erences ong regions In outputgrouth within manufacturing, as illustrated by "real'" growth rates for1965-73. The fastest growth rates (12'13% per year) have been achieved
by Japan and the East Asian developing counuties, relying on exceptionallyexport-oriented policies. The nezt highcst growth rates (8-9%) have
come in the transitional and developing countries of Southern Europe
and the Mediterranean, closely rivalled by Latin Awerica (defined hereto include the Caribbean) 0 The slowest growth rates (under 5%) havebeen recorded in the "older'" developed countrics, especially those of
North America (3.3%), and in South Asia and Sub5Saharan AfricaoTaking into account population growth the industrial growth record inthese low-income regions has been disoal0
Trends in Output by Broad Product Grous
Manufacturing output has grown faster in developing countriesthan in developed ones. Within manufacturing relatively high growthrates of output have been achieved at a woeld level in machinery,transport equipment, chemicals, and other industlies producing tech-nically complex products. Reflecting trends in damand, the slowestgrowth is found in the textile, clothing, foote-iar and leather productindustries0 Growth rates in developing coumtries have been especiallyhigh relative to those in developed countries, in metal productsincluding machinery and equipment, basic aetals, and clothing and
foot-wear0 Advances in supply capability play a role along withdemand.
Table 2: GROWTH RATES OF MANUFAACTURING PRODUCTIONBY BRANCHES, 1960 to 1977
Product Group Developed Develowii World (lael0 CPEs) /h
Food, beverages, tobacco 3.7 5.5 4.4Textiles 2.9 38 37Apparel, leather, foot-wear 201 6.3 3.8Wood products, furtniture 460 506 4.9
Paper, printing, publishing 306 G66 4.4Chemicals, petroleum, rubberproducts 705 70 8.4
Non-metallic mineral products 402 7.8 5.5Basic metals 305 7.8 4.7Metal products, machinery,
equipment 503 10.6 705
All manufacturing 4.8 6.7 6.1
/a Weights and rates for CPSs must be considered dubious0
Source: UN Monthly Bulletin of Statistics, August 19780
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The faster overall growth of manufacturing output in the developingcountries is probably due in part to long-run influences, for example:
(1) Starting from low incomes and a low base, developingcountries have greater needs to meet, and as "latecomers"have much scope to expand output and generate demandby imitating the techniques and tastes of the richestcountries; while developed countries have less guidanceon where to go next.
(2) Population has grown faster in the poor countries, enlargingthe market while reducing the contrast in growth rates ona per capita basis. 1/
(3) Even though there have been wide differences among coun-tries and regions, over the last 15 years, as a group,developing countries have almost certainly made greaterstrides than developed ones in improving economic manage-ment and policies, and may have tried harder to fostergrowth of output and industry.
These three influences do not begin to explain, however, why thepoorest and least industrialized of the developing countries have done worsethan the rest. The explanations here may lie in a combination of poorlychosen policies and difficulties in expanding the market.
Exoort vs. Output Growth in Manufacturing
International trade in manufactured products has expanded inthe 1960's and 1970's at much higher real growth rates than manufactur-ing output, especially in the market economies. As one result, the marketeconomies increased their exports of manufactures relative to their output ofmanufactures by about 60 % in the nine-year period from 1965 through 1974 andmore since then. This trend appears to result from trade liberalization inand among the industrial countries, improved long-distance communications,increased export efforts in many countries, and increased internationaloperations by private business firms.
Meanwhile, especially in recent years since 1965, exports as wellas output of manufactures have grown faster in the developing countriesthan in the developed countries. The next table shows some of the long-term trends. Statistics refer to different definitions of manufactures
1/ The difference in population growth has been in the order of 1.5%per year in recent years. Populations of developed countries havebeen growing at 0.8% to 0.9%, those of developing counries at 2.3%to 2.4% per year. Note, however, that the relationship betweenpopulation growth and industrial development can be complex, becausesavings and the structure of demand are likely to be affected.
=6
because the output data include natugal resources processing industries, forexample, food9 peeroletm refining, and nonfeErous metals, in which exportsare countered as primary commodities. 1/
Table 3: GROUTH OF KANUFACTURING OUTPUT VS0 EPORTS INMARKET ECONOMIES, 1960=1974
Index Numbers (1970-100)
Real Growth Rates1960 1965 1976 1960=76 1965=76
Developed CountriesManufacturing output 57 78 121 4.8 6 1Exports of manufactures /a 41 60 157 8.8 9o1Exports of all products 44 63 149 7o9 8.1
Developing CountriesManufacturing output 54 75 153 607 607Exports of manufactures /a 37 55 205 1201 1207Excl nonferrous metals 28 49 232 1501 15.2
Exports of all products 52 70 137 6.2 6.3Excl. petroleum 62 77 142 /b 503 507
/a ?lus nonferrous metals, which are not counted aong exports of manu-factures in this paper.
/b Estimated; 124 in 1975.
Sources: United Nations Monthly Bulletin of Statistics, April, June, August,1978; developing countries' ezports of manufacturas eaxcludingnonferrous metals are estimaated bascd on price indexes for developedcountries' ezport of manufactures and UN trade data0
Reasons for especially rapid growth in of manufacturesfrom developing countries appear to include above all the following:
(1) Export incentives and industrial politics have becn improvedin many developing countries, shifting awey from excessiveemphasis on import substituion and production only for thedomestic market;
(2) Exporting of manufactures is so new that it has expanded froma small base with much benefit from learning and cumulativeexperience;
1/ Throughout this paper statistics on exports of manufactures refer toStandard Incernational Trade Classification (SITC) 5-8 less 68, excludingnon-ferrous metals.
-7-
(3) Supply capabilities have leaped forward through transferof technology and borrowing of production methods fromdeveloped countries, aided by rapid buildups of skilledmanpower, know-how, and investment in some developingcountries;
(4) Trade liberalization in developed countries has beenfavorable to imports from developing countries;
(5) Businesses in developed countries--retail chains, otherlarge buyers, trading firms, and multinational manu-facturing corporations--have played an active andcrucial role while seeking low-cost sources of supplybased on low-cost labor. Their efforts, which havegreatly accelerated export growth, have been spurredby slow labor force growth and rising real wagesin developed countries as well as by declining transportcosts, technological and organizational innovations, anda favorable international policy environment.
Recent Vicissitudes and the Worldwide Recession
The growth performance of developing countries looks all the betterwhen compared to the depressed state of the developed countries in recentyears as a result of the recession that reached the bottom in 1975. Index,numbers of manufacturing production and exports illustrate the pattern oftheir recent fluctuations. Production in the developed countries was hardlygreater in 1977 than in 1973, while industrial output in developing countrieshas continued to expand.
Table 4: INDEX NUMfBERS OF THE VOLUME OF MANUFACTURINGOUTPUT AND EXPORTS
(1970 - 100)
1973 1974 1975 1976 1977
World value added /a 124 128 126 136 143Developed countries 120 121 111 121 126Developing countries 129 137 141 153 163
Exports of manufacturesDeveloped countries 134 148 141 157 163Developing countries 149 167 169 205 /b
/a Includes dubious numbers and weights for centrally-plannedeconomies.
/b Not available but probably in the 220-225 range.Sources: UN Monthly Bulletin of Statistics, June and August, 1978;
UN Yearbook of Industrial Statistics, 1975, Vol. I; UN andnational statistics for 1976.
The disruption caused in the de'wloped cOunAico by the recession
can be seen further in the following indsex nuinbers by product: groupoo
Table 5: INDEX TUBERS OF MAMUEACTURING OUTPUT IN DEVELOFEICOUNTRIES. BY BRACHES, 1972 to 1977 (1970-100)
Product Group 1972 1973 1974 1975 1976 1977
Food, beverages, tobacco 108 113 115 116 121 125Textiles 112 118 112 104 113 112
Apparel, leather, footwear 108 110 108 105 114 113Wood products, furniture 116 125 119 109 120 125Paper, printing, publishiag 107 113 113 102 111 114
Chemicals, petroleum, rubber products 116 128 130 120 135 143
Non-metallic mineral products 111 121 120 109 119 124
Basic metals 104 118 118 99 108 107M4etal products, machinery, equipmnt 110 12 12 113 122 129
All Manufacturing 110 121 121 111 121 126
Source: UPN bonthly Bulletin of Statistics, AuEust, 1978,
The reasons for the sevevity of the 1974675 recession and the
weakness of the recovery are obviously a metter of much concern and dispute.
?erhaos it would not be out of place to miention here a few of the e3Kplanaations that are widely offered as hypotheses, together with postulated reasons
why these troubles have not equally afflicted the developing countriesO
(1) The sharp rise in oil prices in 1973074 has had defla-tionary effe@ts in developed counegis d has shigted
the structure of relative prices xand dewsnd in direcctions that have made some of their production capacityobsolete. Developing countries had feewe iavestmSntsaffected, while some-the oil eYporters_2gained frow
the price rise.
(2) Deflationary policies, pursued in leading developedcountries following the 1972-73 `suparbooi" and therise in oil prices, aggravated tho deflationaUeffects. Most developing countries tried insteadto maintain the pace of development, by borrowing if
necessary .
(3) A long downswing or down cycle in econoic stotimalation
from technological innovation may have aggravated thiorecession. Advances in technology havo led in the richercountries to much displacemeat of unskMlled labor throoughautomation and reorganization; this has not been ade°quatel7 offset bv new "boom" industnios0 Heanwhile, the
developing countries still know where to go est=0
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(4) More than the usual overbuilding of capacity may have takenplace in the late 1960's and early 1970's while the worldeconomy was t"overheating" through excess creation ofliquidity (e.g., from the U.S. payments deficit caused byinappropriate fixed exchange rates and the Vietnam War).Some developing countries (especially oil exporters) maynow be overbuilding capacity in expensive projects, but asa group, they could not afford much of this in the past.
(5) Developed countries have little capability as yet to growin the face of inflation because their tax systems arepoorly designed for this--not being indexed, they stilltax income earners, businesses, and investors as if nominalgains were real gains, leaving them inadequate purchasingpower, capital investment and replacement funds, and in-centives. Developing countries have this problem lessbecause their tax system are cruder or (in a few cases)better indexed.
(6) Leading developed countries have not yet learned to managetheir economies jointly and cannot agree on the principlesin the face of recession combined with inflation. Morespecifically, West German anti-inflationary preferencescombined with a high degree of interdependence haveinduced Western Europe to adopt a slow-slowth responsewhich helps to hold back recovery everywhere. Developingcountries generally seek growth even at some cost ininflation.
(7) Private businesses in the richer countries are said tobe dissuaded from investing by added uncertainty connectedwith shifting exchange rates, and by policies emphasizingsocial welfare, the environment, etc., at the expense ofbusiness-profits: growth and other older goals have beendowngraded as priorities. In most developing countriesno such change has taken place: policies aim squarelyat growth and development while uncertainty-springsmainly from conditions at a local level.
Some of these explanations, if-correct, would imply that the de-pressed condition of the developed countries can be expected to continue forseveral more years until different policies or new technological stimuli'appear. Thus, the developing countries might have to contend with a dis-couraging-international econiomic environment for years to come. In thesecircumstances it is fortunate that their growth has not proved highlydependent on a buoyant world economy.
Trade as a Share bf OutDut
To derive a figure for manufacturing output that would be roughly-comparable to exports, two main adjustments become necessary:
° 10 °
(1) The definition of manufactures taust be narrowd co match
the trade definition (SITC 5-8 minus 68)o This correspondsto eliminating a small fraction of the ONP from manufacturing
(15-20% in most countries) 0 I/ In addition, some further
deflation may be required to reflect the differences between
domestic and world priceso
(2) A conversion must be made from GNP (or value addd) from
aanufactures to gross output or manufacturers' shipments
since exports correspond to shipments. In some cases gross
output data are directly available for a narrow definition
of manufactures, but even here there are questions of defini-
tion: for example, some countries exclude intra-fixm shipments
that should probably be included0 On average for all manu-
factures, gross output is in the order of 2.5 to 3 times
GNP generated. 2/
Taking all available data into consideration, it appears that for a
narrow definition of manufacturing gross world manufacturing output (shipments)
in 1973, including CPEs, must have been around $3,000 billion in world prices,
give or take a few hundred billion. For the aarket economies alone they must
have been in the order of $2,200 billion, of which nearly S250 billion came
from developing countries and the rest from developed areas0
By comparison, world exports of manufactures narrowly defined
(SITC 5-8 ainus 68) in 1973 were equal to about $350 billion, or about 12% of
gross output. For the market economies, exports of manufactures comprised
about 14% of production0 The ratio between imports and constmption must have
been also about 14%oo In 1965 these last ratios must have been lower, in
the order of 9%; by 1976 they must have reached 15-16%o
A First Look at Trade in Manufactures
The table below provides a first look at the value of exports of
manufactures, by regions0 East Asia is the most export-oriented developing
1/ Industries that must be excluded are food, beverages, tobacco, petroleum,
products, basic nonferrous metals, and a part of wod products, pulp and
paper (since samn wood and pulp are in SITC 2),
2/ Based on available data in UN Yearbook of Industrial Statistics, 1975,
the ratio of gross output to value added in manufacturing in 1973 was
2.474 in developed countries and 2.675 in developing countries0 How-
ever, definitions of "gross output" vary among countries and are
sensitive to the treatment of intra-fim transactions, while "value
added" in many countries includes purchases of services, power, etc.,
so that it is not as "net" as GNP originating in manufacturing0 The
ratio tends to be somewhat higher in naeural resource processing than
in other manufacturing narrowlv defined to match the trade definition0
region, and has achieved the most rapid expansion of its exports of masu-factured products, largely as a result of its exceptionally export-orientedpolicies. There and elsewhere developing countries' exports come pre-dominantly from a small number of countries, as will be shown later. 1/
1/ See Table 19 (page 27) and Annex B)....
Table 6
Exports of Hanufactures--AbsoluLe Value, Growtlh,
and Relationship to Exports and to Gross Manufacturinng Output
Exporta as a
Real MIfE asa Percent ofGrowth Percent of ManufacturLng
Value (Billion Current U.S.$) Rate All Exports Output
Regioni and Group 1965 1973 1974 1975 1965-74 1973 1973
Developing 4.6 24.3 32.5 33.2 16.3 21.5 10
Latin Ainerica 0.63 4.09 6.41 6.55 2101 14.9 4
East Asia 1.75 13.65 17.52 17.83 20.9 46.9 30
Turkey and Yugoslavia 0.63 2.14 2.86 3.11 10.7 51.3 8
South Asia 1.00 2.35 2.87 2.90 12.4 49.6 10
Hiddle East andNortlh Africa 0.33 1.47 2.1 2.0 15.0 4.2 6
Sub-Sahiaran Afrlca 0.25 006 0.7 0.8 4.9 4.8 5 N
Developed 84,5 289.0 386.0 49.0 1R0.8 71.3 15
TranettAonal a- IL06 6,22 8.56 8.26 18.0 70,8 14
OtEher Western Europe 55,23 188,22 244.61 268.56 10.4 76,2 25
Mor:h A erTce L9,73 56,51 77.42 85.73 8,9 59,L 8
Jiapan 7,66 34.58 51,30 52,63 15.6 93M6 11
Austra LaD Mew Zealand,Soutth Africa 0,84 3.43 4.05 3.92 11.4 22.3 8
Centrally Planned 12.7 32.8 38.7 46.7 5,9 5607 3
World Total 101.8 346.1 457,2 498.9 10.6 60,0 12
a/ As in Table 3.
Sources. IINCAD llandbook, 1976; UN Yearbook of lnternational Trade Statistics, 1975, recent trade tapes
and Yearbook of Indlustrilal Statilstlcs, 1975; price in(lexes from World Bank Enternational. Econoimy
Division dated Oct. 18, 1977; estimates of gross manufacturing outptit in 1973 based partly on data
in Table 2. For lack of alternative price indexes, exports fronm developing countries and CPEs are
dleflated (for the growthl rate calculations) by the Index for developed countries.
- 13 -
In this table and in the previous computations, it is instructiveto observe how little of the world's manufacturing output is exported, evenin the most export-oriented economies, those of East Asia and Western Europe.This share is generally no more than one third even in highly export-orientedeconomies. For example, according to their input-output tables it was 24% inKorea in 1973 and 28% in Taiwan in 1971. I/ In many other regions, as thetable shows, it is less than 10%. How much trade counts as internal isstrongly related, of course, to the size of the country.
The smallness of the share of world output that is traded inter-nationally is due in part to the inherent obstacles to long-distance trade.These consist principally of transport costs and information costs. As aresult of these costs, apart from some natural resource processing industriesthat locate near to raw materials, a majority of industries tend to locatenear final markets. This tendency has doubtless been accentuated by pastefforts of each country to industrialize across a wide spectrum of indus-tries using protection as required. Cost pressures to locate industries nearmarkets are undoubtedly a major reason for the small dimensions of industriesin developing countries. They also mean that protection is hardly needed togenerate industrial development if incomes can be sharply raised.
The limited share of exports in output also comes about, in Koreaor Taiwan, because successful exports (combined with agricultural outputgrowth) have led to a rapid growth of income and market demand. This demand--interacting with the same industrial capabilities that have helped to causeexport growth--has permitted a very rapid expansion of output for the homemarket parallel to the export growth. 2/
Whatever may be the reasons, however, it can tentatively be con-cluded that in most developing countries of ordinary dimensions, even ifexport promotion is pushed to the hilt, exports of manufacturers are not-likely to become much-more than 20 or 30 percent of industrial output narrowly-defined (as it is in Table 6) to exclude natural resource processing. Theseexports of manufactures may be essential to pay for imports of capitalgoods and intermediate inputs to develop fully the economy. They may con-tribute to growth in other sectors and help to free key industries from therigid limitations of the domestic demand pattern. They will allow some
1/ Kwang Suk Kim, "Sources of Industrial Growth and Structural Change inKorea," Korea Development Institute Working Paper, April 1977, Table 3-1and Wan-yong Kuo, "Success of Industrial Growth and Structural Changein Taiwan, ROC," mimeo., May 1977, Table 3-1. The ratio appears higher,over 60%,. in Hong Kong, judging by numbers in a recent World Bank report.
2/1 -This process of rapid industrialization seems to involve a whole hostof "virtous circles" along with learning sequences and favorable dynamiceffects involving scale and specialization as well as learning. However,the benefits of exports and outward-looking policies in contributing toindustrialization are outside the scope of this paper.
14
rationalization of the industrial structure to take advantage of economies
of scale and specialization. But the ratio still means that industrial
development must be built largely around the doaestic market0
In strategies of industrialization, too little attention has been
given to expansion of the domestic markget This involves, among other
things, increasing agricultural output, widespread advances in productivity,
systematic government purchases and procurment, wonetiz-ation of the economy,
improvements in the system of finance and credit, improvemaents in transport
and communications, wide distribution of incoes gains, eDpanded and improved
distribution including increases in the range and quality of products avail-
able0
The table also illustrates some other important relationships0 The
real growth rate of manufactured goods exports from 195-74 appears to have
been in the order of 21% per year in developing East Asia and la America,
18% in the transitional countries of Southern Europe and the Hediterranean,
and 15% in Japan and in North Africa and the Middle Easto Thus, countries in
the upper middle reaches of the development spectru -those recently added to
the developed ranks, transitional countries and the more advanced developing
countries--generally expanded these exports faster than the richest developed
countries at one end and the poorer and least inductrialized countries at the
other. The table also shows that exports of manufactures remained less then
5% of total merchandise exports from Africa and the Middle East in 19739
compared to about 15% in Latin America, about 50% in East and South Asia, and
71% in the developed countries0
In 1973, the developing countries had 50.2% of the world's popu-
lation, about 13% of its GNP, 8.8% of its manufacturing output, and 6.9% of
its exports of manufactures.
The disproportionately large share of the developed countries
and especially Western Europe in world trade in manufactures can be further
illustrated by the following table.
- 15 -
Table 7: SHARES OF WORLD EXPORTS OF MANUFACTURES AND WORLD GNP
BY GROUPS OF COUNTRIES IN 1974(Percent)
Group of Countries Exports of Manufactures GNP
Developed 85 66
Western Europe 56 27
U.S. 14 26
Japan 11 8
Developing 7 14
Centrally Planned 8 20
World Trade 100 100
Source: Exports from UN Yearbook of International Trade Statistics, 1975,
Vol. I; GNP from World Bank Atlas, 1976.
This large share is evidently caused partly by the small geo-
graohical dimensions of many of the Western European countries, so that much
trade counts as international that would be internal in North America, and
partly by the removal of trade barriers and the high degree of economic
integration in the area.
Recent Increases in Developing Countries' Exports
Although worldwide export data are not yet available for 1976 with
manufactures d.saggregated, preliminary estimates for developing countries
have been made based on national statistics. The results, which would
probably change slightly with newly reported data, are as follows. They are
shown together with regional shares illustrating the rising share of East
Asia and the declining shares of South Asia, Sub-Saharan Africa and others.
16
Table 8: ESTI1ATED EXPORTS OF MANUFACTURES FROM DEVELOPING
COUNTRIES IN 1976 COMPARED TO 1965 AND 1970
Retgio Value (Billion Current U.So$)1965 1970 1976 1965 1970 1976
East Asia 1.75 4.87 26.3 38 48 60
Latin America 0.63 1.67 7.5 14 16 17
Turkey and Yugoslavia 1005 1.05 3.7 14 10 8
South Asia 1000 1.48 3.3 22 15 8
Middle East andNorth Africa 0.33 0.70 201 7 7 5
Sub-Saharan Africa 0025 0.43 009 5 4 2
Total 4059 10020 43.8 100 100 100
Sources: D0 B. Keesing and P.A. Plesch, "'Recent Trends in Manufactured and
Total Exports from developing Countries," June 6, 1977, based oan
UN and national statistics.
Here and in most other tables now available, developing countries'
exports of manufactures are slightly exaggerated by inclusion of re-exports
from Hong Kong, Singapore and some Middle Eastern countries and the inclusion
of uncut diamonds (in SITC 667) and a few oLher inappropriate natural resource
products, due to peculiarities of the UN trade classification0 1/
This table helps to show further the huge gains made in 1976 when
these exports of manufactures jmBped by more than $10 billion in one year,
even though international trade prices for developed countries' manufactures
rose by less than one percent in that year0 The strong grouth of these
exports in the recession and recovery bespeak a remarkable mowentmk and an
ability to remain highly competitive in a umak market 0
Even more striking is the fact that three fifths of the 1976 exports
and a larger share of the growth have come from East Asia where they can be
traced mainly to Korea, Taiwan, and Hong Kon80 2/ The relatively poor showing
by South Asia was, everyone seems to agree, caused largely by policies that
1/ The total effect as of 1975 was between 2.5 and 3 billion dollars, offset
slightly by underreporting of manufactured exports in a few countries0
(Only Mexico's exports have been corrected based on developed countries'
import data0)
_I See Table 19 and Annex 34 below0
- 17 -
discouraged exports, but this may not be the whole story even in India, and it
is almost certainly not the main story in some other South Asian countries,the Middle East and Africa. Rather, apart from India these countries have
acquired little generalized industrial capability as yet; their exports of
manufactures have been based all along on a few products related to localnatural resources and/or simple specialties (e.g., Iranian hand-knottedcarpets, South Asian cotton textiles). Hence, their share would probablyhave declined even with optimal policies.
The Matrix of Trade in Manufactures
The matrix of world trade in manufactures (SITC 5-8 less 68) in1976 was as follows.
Table 9: MATRIX OF WORLD TRADE IN MANUFACTURES, 1976(Billion U.S. Dollars)
(of which Centrally World
Exports From /To Developed Europe Developing Planned Total
Developed (of 321 (224) 121 27 469which WesternEurope) (226) (193) (61) (20) (307)
Developing 28 (10) 14 3 45
Centrally Planned 9 (8) 7 34 50
World Total 358 (242) 142 64 564
Source: Composite of UN sources, including macrix in UN Monthly Bullet.ini.of Statistics, February and June, 1978, with adjustments, mainly toinclude Yugoslavia as a developing country.
This matrix illustrates the distribution of exports (and thesources of imports) for each broad group of countries. About 35% of theworld's trade in manufactures takes place within Western Europe and 60%
among developed countries. Developing countries' imports of manufacturesare more than three times as large as their exports of manufactured goods.Nearly 85% come from developed market economies.
Export Growth by Tvpes of Trading Partners
The table below suDarizes the groWth o0 world expovts of °enu=
factures from 1965 to 1974 by typos of trading pa nrgas. Growth has been
most rapid in exports from developing to developed cou trie but enne types
of trade have grouin rapidly.
Table 10: GROWTH OF WORLD EXPORTS OF UMACTURES
BY TYPES OF Th.ADING PART1ERS 1965=1974
Value Real Annual Pereent Distribution
Type of ?artners 5Bilo UoSo$) Growth Rate of Total
1965 1974 1965-7Aj 1965 1974
Developed Countriesin the same Continent 4102 18903 21.4 47 48
Western Europe 34.9 161.6 1.oO 40 41
UoS. - Canada 603 27.7 1004 7 7
Other Trade AmongDeveloped Countries 207 88.3 10.0 24 23
Developed to Developing 20 4 8806 10 2 23 22
Developing to Developed 208 1904 16.1 3 5
Among Developing Countries loB 10.3 13.7 2 3
Within Regions /a 1.3 7.6 13.7
Between Regions 0.5 206 13.8
Total, All Types Above 86.8 395.9 108 100 100
/a Here developing counties are grouped into four regions: 1) East and
South Asia9 2) Hiddle East9 3) Africa, 4) Latin America and Caribbean0
Sources: For 1965, UNCTAD, Handbook of Internarional Trade and Development,
Statistics 1967; for 19749 UN Monthly Bulletin of Statistics,
May 19770 "Real" growth rates computed as in Table 60
Note: There are discrepancies between these be sources in the definition
of developing countries, with Turkey excluded but Israel included in
1963 but the reverse in 1.974; Yugoslavia is excluded in both years.
These problems also occur in other tables using UNCTAD Handbook.
- 19 -
Market Economies' Exports by Destinations
Over a long period up to 1973, the developed countries expandedtheir imports of manufactures faster than the developing countries, liberal-izing their imports very substantially in the process. 1/ As a result,exports from both developed and developing countries have been increasinglydirected to the richer countries rather than the poor ones. This can beillustrated by data from the UNCTAD Handbook. 2/
Table 11: PERCENTAGE DISTRIBUTION OF EXPORTS OF MANUFACTURES(SITC 5-8 less 67 and 68) by Destination
Exports of whichTo/From Year Developing Developed Europe U.S. Japan Total /a
Developing 1955 50.9 45.4 22.6 14.7 0.8 100.01965 38.6 56.7 26.0 23.5 1.7 100.01973 27.4 68.7 22.5 29.8 10.0 100.0
Developed 1955 34.3 59.1 34.3 8.5 0.7 100.01965 24.0 72.0 48.1 10.2 1.6 100.01973. 19.6 76.2 51.8 12.3 2.3 100.0
/a Including CPEs which are not shown here for simplicity.
Source: UNCTAD Handbook, 1976.
From 1973 to 1975, this trend reversed itself, and imports bydeveloping countries grew as a share of the total. The principal reasonsappear to have been 1) the oil price rise and consequent boom leading to arapisd-increase in imports in oil exporting countries, 2) a better economicperformance in the oil importing developing countries as a group than inthe developed countries, which were more affected by the recession, and,closely related to this, 3) sizeable borrowing by the oil importing coun-tries to maintain their import growth. Whatever the reasons, the oil import-ing developing countries accounted for 16.7% of world imports of manufacturesin both 1974 and 1975 compared to 15.22 in 1973. In 1976 their share musthave fallen once again as a result of the recovery in developed countriesand stringent economic management holding down imports in most developingcountries.
1/ Trends in trade policies are discussed in the last section of thispaper.
2/ These data as shown exclude steel (SITC 67).
- 20 -
Table 12: EXPORTS TO DEVELOPFL4 COUNTEIES AS A SHARE OF
EXPORTS OF MANUFACTURES (Percent)
To All Developing CountriesAs a Share of Exports froEg 1970 1973 1974 1975
World 20.5 19So 220g 25.o
Developed Countries 2003 19.9 22.8 26.4
Developing Countries /a 3307 2904 33.6 34.4
To Oil Exporting Countries
As a Share of ExDorts from:
world 3.9 4.6 601 9.1
Developed Countries 3o9 406 6o1 9.o
Developing Countries /a 603 5.2 602 1Oob
/a Includes substantial reexports.
Source: UN Monthly Bulletin of Statistics , ay 1977D and UN Yearbook of
International Trade, 1975. Yugoslavia is counzed here as a develoDed
country.
Markers for Regional Grouping
Exports of manufactures from developing East Asia are shipped mainly
to developed countries. Elsewhere including South Asia, there are substantial
exports to both developed and developing countries. ECept in Yugoslavia
where exports to C?Es comprisQ 47% of the total, ehe share going to CPMs is
generally very smsll0 1/
1/ The 17% for Africa in the table is partly a reflection of Egypt paying
off debts to CPEs based on military equipment supplied in the past.
- 21 -
Table 13: DESTINATIONS OF EXPORTS OF MANUFACTURES FROMDEVELOPING COUNTRIES GROUPED BY REGIONS
(Value in Billion U.S. Dollars with Percent in Parentheses)
CentrallyDeveloped Developing Planned Total
East and South Asia 21.05 (69) 8.70 (29) /a 0.64 (2) 30.40 (100)
Latia America 3.68 (54) 2.95 (43) 0.18 (3) 6.83 (100)
Middle East 0.81 (32) 1.60 (62) /a 0.12 (5) 2.54 (100)
Africa 1.11 (59) 0.48 (25) 0.28 (15) 1.89 (100)
/a Includes substantial reexports.
Source: UN Monthly Bulletin of Statistics, June 1978.
Trade in Manufactures Among Developina Countries
The matrix of trade among developing countries in 1976, by majorgeographical regions, is shown below based on UN estimates. The principalpoint to note is that trade among developing countries takes place mainlywithin major regions. The numbers in the matrix are exaggerated by theinclusion of over $2 billion in reexports from Singapore, Hong Kong, andsome of the smaller Middle Eastern countries. Excluding these reexportswould substantially reduce the trade within the Asian and Middle Easternregions.
Even if this trade is excluded, exports to other developing coun-tries are considerably larger, relative to their GNP (and thus as a share oftheir markets) than exports to developed countries. The main explanationseems to be proximity: a large share of trade in manufactures takes placewithin broad geographic regions than between them. This appears due primarilyto transport costs and information costs, reinforced by regional preferentialschemes such as comon markets.
Table 14: TRADE IN MUACTIUES AMONG DEVELOPING COUNTRIESBY GE0GAPEICAL RECIONS, 1976
(Sfllion in Ui S Dolk3 )
East and Latin 1idd1p
From/To South Asia America East Africa Total
East and South Asia 4,953 443 24113 1092 89601
Latin America 74 2L639 72 163 2,948
Middle East 172 34 1tD216 182 1" 6O4
Africa 30 24 67 342 483
5 ,229 3D140 3D488 19779 139636
Source: UN Monthly Bulletin of Statistics9 June9 1978.
Structural Change and Diversification in Davelo inS CountKrie2o ermOvts
Along with rapid grouth9 the devsloping countrien' eorts ofmanufactured products have gone through a process of structural change and
diversification9 changing their product coWositiono This process has been
accelerated by increasingly appropriate policies but the uaxderlying ipetus
comes from development itself 9 leading to a growiing ability to coWete
internationally in an ever-lengthening list of preoducts9 proceses azndact4 vities.
These changes are not confined to wm:aufactures-they oEtead to
numerous primary production and processing activities and serices-butthe overall effect has been to increase greatly the share of wnMufactures
in developing countries° exports, as the anet table illustrazeos
- 23 -
Table 15: CHANGING STRUCTURAL COMPOSITION OF DEVELOPING COUNTRIES'NON-OIL MERCHANDISE EXPORTS BY BROAD CATEGORIES
(Percent)
Category 1960 1967 1974 1976 /a
Agricultural Products 72 61 47 43Ores and Minerals 15 17 16 15Manufactures 13 21 36 41
Total /b 100 100 100 100
/a Preliminary.
/b May not add to 100 because of rounding and unclassified transactions.
Source: World Bank, Prospects for Developing Countries, 1977.
Within manufacturing the composition has also shifted because, whilepractically all manufactured exports have expanded, some have increased muchfaster than others. Rapid growth has occurred in exports of the more technic-ally sophisticated products and in finished goods, particularly clothing andshoes, where information and marketing barriers and long distances had to beovercome. The effects on the structure of exports are shown at a very aggre-gated level in the following table.
Table 16: PERCENTAGE COMPOSITION OF DEVELOPING COUNTRIES' EXPORTS'OF MANUFACTURES IN SELECTED YEARS
Product Group 1960 1965 1970 1975
Machinery and Transport Equipment /a 7.5 8.9 14.8 21.9Clothing 1.8 3.0 13.8 17.1Textiles 27.8 25.1 19.9 15.1Chemicals 11.9 11.3 9.8 10.5Iron and Steel 3.6 4.7 5.9 4.0Other Products 47.4 47.0 35.8 31.4All Manufactures 100.0 100.0 100.0 100.0
/a Including electronics.
Sources: UNCTAD Handbook; UN Monthly Bulletin of Statistics, May and June1977; UN Yearbook of International Trade Statistics, 1963, 1967,and 1975. Yugoslavia is not counted here. -
- 24
Within broad product groups as t1l, an enoraious amount of diver-
sification has taken place so that the number of products exported success-fully has multiplied rapidly. 1/ This has been especially true in the
fast-growing product groups0
Developing Countres' Growing Share of World Ezports
Even though other countries' exports of manufactures also greu
rapidly, the developing countries succeeded in increasing their export
shares in most major products as the next table illustrates. Their strong
performance in manufactures contrasts with a declining share in other
nonfuel exports. Note that apart from fuel they had less than one third
of the world's exports in 1975 in each product group shown; in 1976 they
passed this level in clothing, for the first timeo
Table 17: DEVELOPING COUNTRIES' SHARE OF WORLD MERCHANDISEEXPORTS BY PRODUCT GROUP
(Percent)
Product GrouD 1960 1965 1970 1975 1976
Fuel 6005 6301 63.1 7400 75.3
All Other Exports 17.1 14.9 13.0 12.1 1302Agricultural Products 37.1 34o0 31.8 2808 30.9
Minerals 3008 33.9 31.4 32.1 30.6
Nonferrous Metals 2905 28o6 29.0 21.9 25.6
Manufactures 4.0 404 5.1 6,5 7o4
Machinery & Transport Eqt. 007 009 1.6 2.9 3.4
Chemicals 4,0 462 3.9 600 5,3
Other 6,7 8,0 9A6 110 13,1
Iron and Steel 1,4 201 3.3 2.7 4.0
Textiles n.a. naOa 15.5 17,7 20o3
Clothing n.a. n,a, 21,3 3203 38,1
Sources: UN Monthly Bulletin of Statistics, June 1978; UNCTAD Handbook.
Developing countries are defined here to exclude Yugoslavia.
1/ A useful analysis is available in Juergen B. Donges and James C. Riedel,
'"The Expansion of 5knufactured Exports in Daveloping Countries: An
Em&irical Assessment of Supply and Demand Issu-es ,' WeltwirtschaftlichesArchiv, Bank 113, Heft 2, 1977, pp. 250=267.
2/ UN Monthly 3ulletin of Statistics, May 1977; UNCTAD Handbook.
- 25 -
Differences in the Composition of Developing Countries' Exports by Destination
There are substantial differences in the composition of developing
countries' exports of manufactures by destination, as illustrated by the
table below.
Some products such as clothing and electronic equipment go mainly
to developed countries. Capital goods are sold mainly to other developing
countries (although the statistics here are distorted by reexports). Textiles
and chemicals are the other leading items in trade among developing countries.
Table 18: PRODUCT COMPOSITION OF DEVELOPING COUNTRIES' EXPORTS
TO DEVELOPED COUNTRIES VS. OTHER DEVELOPING COUNTRIES, 1976 /a(Percent)
- To Percent
To Other Going toDeveloped Developing Developed
Product Group Countries Countries Countries /b
tiachinery andTransport Equipment 19.0 30.7 54.2 /c
Textiles 12.1 17.0 52.2
Clothing 25.5 6.1 87.3
Chemicals 6.2 13.4 45.5
Iron and Steel 3.4 5.9 52.3
Other Manufactures 33.8 26.9 71.9
Total 100.0 100.0 64.7
/a Yugoslavia is counted here as a developed country; Mexico's border
assembly (primarily electronics) is not included.
/b Taking into account exports (not shown) to centrally-planned economies.
/c Over 80 percent for electronics and electrical machinery; much lower
for other products.
Source: UN Monthly Bulletin of Statistics, June 1978.
Here some explanations may be in order. Reasons for these sub-
stantial diff-erences almost certainly include the following:
(1) World markets for ready-made clothing and electronic equipment
are overwhelmingly located in the richer countries. In theseproducts and a few others (e.g., shoes, toys, sporting goods)
developing countries' industries are set up to supply these
markets, and sell mainly there.
(2) In bulky and/or standardised producer goods such as chem.cals,
steel, building mterials,, cotton yarn and heavy equiponnt,
developing couatries export to each other based on transport
cost advantages from proximAty, using output in esess of
their domsstic needs to mnet deficits in neighboring
countries.
(3) In machinery, ukotor vehicles and cons uoar goods (ego , cotton
fabrics), the developing couatr-iez products tend to be
better suited to one another's factor supply conditions and
income levels than are products froim richer countries, so
that they my trade uith each othcr by preference0
(4) Interchanges of complex products (and some others) are often
facilitated by comwon arkret accords9, otably in Latin
America, involving exchanges of protection and preferential
treatment, and also by common languages and cultural ties
from shared colonial or ethuic heritageo0 Trade in machinery
is especially sensitive to these iufluences, whether it is
office machinery exchanged aaong branches of a multinational
corporation in Brazil, Argentina and !1Gexico or textile
machinery traded among people of Chinese origin from Hong
Kong or Taiwan to (e.g.) Indonesia.
Country Concentration of Exports
Exports of msnufactures come mainly from a sumll number of devalop-
ing economies 9 and the degree of concentration has not diminished over time0
If anything it has increased recently due to rapid export growth from Korea,
Taiwan, and Hong Kong' between them they accounted for over1 48% of the
total in 1976 compared to 43% in 1974. But ovea in 1974, seven middle-income
economies supplied over 70% of the total.
The reasons for this concentration age probably to be founded in
1) the small number of developing countries that have practiced export-
prowoting policies and avoided a strong bias o£ incentives aSainst exports
of manufactures for a sustained period9 2) thts liited number of developing
couneries that nave the commrcial and industrial experience9 umnagerial
knownhow, skills, educational levels, politlical stability, institutional
infrastructure, transport and cougmnications facilities9 etc0 , to become
successful exporters without mch help from foreign corporations (whether
manufacturers or buyers), and 3) a convergence of views among businesses
in developed countries based partly on follow-theQleader, risk-averse be-
havior and partly on low wages, regarding preferable sources and industrial
locations in developing countriesKoreae, Taizan, and Hong Kong generally
qualify on all counts 0
In anv case, the leading exporters in 1965 and 1975 were as
follows:
- 27 -
Table 19: LEADING DEVELOPING-ECONOMY EXPORTERS OF MANUFACTURESIN 1965 and 1975
Value -CumulativeCcuntry or Territory (Mil. Current U.S. Dollars) Percent Share Share
1965 1975 1965 1975 1975
Hong Kong (includingreexports) 989 5,590 21.5 15.8 15.8
excluding reexports n.a. 4,464 - - -
Taiwan 187 4,303 4.1 12.2 28.0
Korea 104 4,136 2.3 11.7 39.7
Yugoslavia 617 2,903 13.4 8.2 47.9
Singapore (includingreexports) 300 2,233 6.5 6.3 54.2excluding reexports n.a. 1,286 - - -
Brazil 124 2,192 2.7 6.2 60.4
India 809 1,961 /a 1i.6 5.6 66.0
Mexico (including border) 166 2,090 3.6 5.9 71.9
Argentina 84 723 1.8 2.0 73.9
Malavsia 68 664 1.5 1.9 75.8
Pakistan 190 /a 571, 4.1 /a 1.6 - 77.4
All Developing Countries 4,590 35,280 100.0 100.0 100.0
/a Including what is now Bangladesh (exported 178 in 1975).
Sources: UN and national trade statistics; see Annex B.
Of the leading oporrte,soS0 (esgoD Yugoslavia, Singapore, Hong
Kong, Argentina) are only slightly behind the E:ansitiongl countries of
Southern Europe and are not far fromA being devz.loped countries by many
indicators, while others such as Taiwan, Korea and Brazil are beginning to
achieve remarkably versatile and flezible industrial capabilities, so that
they9 too, can be expected to reach the ranks of the industrialized countries
in the not-too-distant future0 Obviously zpaorts of 2snufactures come minly
from the most industrialized and versatile developing economies.
Similar concentration has exis ted all along: three economies sup-
plied over half of the total in 1965. On the whole, statistics for leading
exporters attest to the powerful momsntum that can be achi@aved in exporting
manufactures if policies remain favorable and countries build on their
experienced
Growing Numbers of Successful Exporters of Manufactures
Despite the continuing concentration of erports, within the rapidly
growing export total, an increasing number og countries have achieved signi-
ficant manufactured exports0 The number of developing economies with manu-
factured exports above specified dollar levels (in 1974 prices) is shown
below.
Table 20: NITUIBERS OF DEVELOPING COUNTRIES TITH EXPORTS OF MkNUFACTURES
OVR SELECTED VALUES LYi CONSTANT 1974 U.S. DOLLARS
Exports Over 1965 1970 1974
$2 Billion 1 6
$1 Billion 3 5 8
S500 Killion 4 9 12
$200 Million 9 12 22
$100 Million 14 20 30
$50 !Million 21 37 40
S25 Million 36 44 51
Source: UN trade statistics frow Arnnex B and estimates; prices are assumed
here to have risen in parallel to those of developed countries'
exports of manufactures.
It is remarkable that the number of successful performers has
grown so rapidly when exports are wsasured in constant dollars as they
- 29 -
are in this table. Evidently a wide array of countries are making strong
gains in exporting manufactured products, partly due to increasingly wide-
spread efforts in this area, and partly as a reflection of successful develop-
ment.-
Domination in Many Product Groups by "Powerhouse" Middle-Income Exporters
Exports come mainly from a few experienced and relatively advanced
economies, especially in the more complex products and in finished manufactures
where product design and delivery must be closely tailored to customer demand,
as in clothing or shoes. By contrast, the less developed and smaller exporters
do relatively better in standardized semi-finished products, such as textiles,
chemicals, leather, and a wide range of (other) processed natural-resource
products.
These contrasts can be illustrated statistically by defining eight
"powerhouse" middle-income exporters with relatively great industrial and/or
exporting experience--Korea, Taiwan, Hong Kong, Yugoslavia, Brazil, Mexico,
Singapore and Argentina (in approximate order of their 1976 exports excluding
reexports). The following table shows the shares of the top three and six
suppliers from among these eight, in selected product groups for which data
are convenient. The one other country that is often a significant exporter
even in the complex products in India; its share is also shown in the table
for comparison.
Table 21: SHARES OF THE THREE AND SIX LEADING "POWERHOUSE" MIDDLE-INCOME
EXPORTERS IN DEVELOPING COUNTRY EXPORTS BY PRODUCT GROUPS IN 1974(Percent)
Combined Shares of Leading India by
Product Group Three Six Comparison
Clothing 73 81 3
Textiles 35 47 16
Electronics and Electrical Machinery 60 86 2
Other Machinery and Transport Equipment 45 72 5
Footwear 61 83 2
Iron and Steel 55 74 6
Chemicals 27 45 3
Leather -34 -35 45
All Manufactured Exports 43 63 6
Note: "Powerhouse" middle-income exporters are defined here as eight
countries or territories: Korea, Taiwan,- Hong Kong, Yugoslavia,
Brazil, Mexico, Singapore and Argentina.
Sources: UN trade-statistics, Keesing-Plesch report of June 6, 1977
and supplementary estimates.
- 30 -
As these and other data shou the ost succesaful export diver-
sification has been achieved in a swall handful og developing countrieswhich are nou approaching transitional statuo. In this regard it uy be
imporrant to remember that the ranks of ths developed countries havz
broadened to take in seveeal new mewbers in the lavt 25 yavs. The "powaer
house" exporters are among the leadanRS candid-tc to joint these ranks
next. Further analysis would show that structKral changos in :'cji f have
also continued at an impressive pace in traVnnWtonal Countries and thosetransformed into developed economies within recent decades such as Japan,
Italy, FinlandD, Ireland, Israel, Spain9 GreSoCe Portugal 9 Cy,rus and
Malta. Successful transformation and diversiimtiou have been Sreater
in. transitional and semi-industrial countriscoat least in regard to
exports of mnaufactures--than in industrial contr=iev ona on end of the
development spectrum and the poorer 9 least indu3trialized countries on
the other.
Export Performance bv Developinag Countries More Maa
Another way to look at the situation is to define developing
countries narrowly to exclude 1) all markct ecconRieds with per capita GNP
above $19300 in 1975 and 2) four countries under that level with relatively
developed industrial sectors: Brazil, Nerico, Taiauz and Koreza I/ As a
minor point, to add further realism, uncut diamonds (orth nearly S0O25
billion9 practically all from Africa) can be excluded; they find their way
into the usual definition (SITC 5-8 less 68) through a quirk in the trade
statisticso Some of the other "amnufactures" also counted up to nowb aeX
also simple natural resource products, particularly in chemicals9 but no
further adjustment is made for thema
Based on this more arrow definition of developinag countries,
exports of manufactures (without uncut diaymnds) totalled only abouat $ 703billion in 1974 and $8o5 billion in 1976 as follows;
i/ The first condition already excludes- Hong Kong9 Singapore9 Yugoslavia9Argentina9 Iran9 Venezuela9 etc0
- 31 -
Table 22: EXPORTS OF MANUFACTURES IN SELECTED YEARS, BY REGIONS,
FROM DEVELOPING COUNTRIES NARROWLY DEFINED
(Billion Current U.S.$)
Region 1965 1970 1974 1976 (Est.)
South Asia 1.00 1.48 2.87 3.3
Turkey, Middle East andNorth Africa .17 .59 1.56 1.6
East Asia .17 .33 1.35 1.9
Latin America .16 .42 1.02 1.2
Sub-Saharan Africa .09 .18 .49 0.5
1.59 3.00 7.29 8.5
Source: UN and national statistics, based mainly on Donald B. Keesing and
Phi Anh Plesch, "Recent Trends in Manufactured and Total Exports
from Developing Countries", World Bank Economics of Industry Division,
June 6, 1977. See also Annex B.
For this narrower definition (in which India is still the big
industrial exporter) the growth of these exports has been slower than for
the wider definition, about 9.3% per year from 1965-74, thanks to sluggish
growth in South Asia. In other regions the growth in real terms has been
remarkable, in'the order of 15.5% per year.
Exports from these countries are predominantly semi-finished and
simple products. Among the top twelve suppliers in this group, textiles
made up 36.3% of their exports of manufactures and clothing 9.7%. By way
of comparison, for the eight "powerhouse" middle-income countries discussed
earlier, clothing comprised 17.4% of exports and textiles only 11.1%.
Exoorts of Manufactures by Income Level
Further analysis shows a very strong relationship between per
capita exports of manufactures and income levels; as part of this relation-
ship, exports of manufactures are practically nonexistent in countries at
the lowest income levels.
To study this relationship systematically it has been found use-
ful to use OECD countries imports of manufactures from developing countries
as a measure of the latter's export performance, because national export
data tend to be unreliable, unavailable or out of date in the less industrial
32
and 1OL1i: tE inccie couatTieo The fo11oui,o th1 iAethatE eReQr;1s. Not mh uaa,h cet be givea to g eazact p&tez at thehighe2l incalze levelo oince the deinition of developing countries isquites erbitrry at thosc lvels e i1le in the lee ldd1e ls@le, resi12tsare sensitive to the ezact intarv&lo choccia. AmczhGz uijoo qxmificationiguot also be entered: recent inrco62 lavel1e i- T e, Tzium, etc. Erezamh highe@ thsu thoe goo uich they laxched thoiK QZPOIrt SS@ess0o
- 33 -
Table 23: EXPORTS PER PERSON OF MANUFACTURES FROM DEVELOPINGTO OECD COUNTRIES IN 1974, BASED ON OECD IMPORT STATISTICS,
AS RELATED TO INCOME LEVELS IN THE DEVELOPING COUNTRIES
Region and Per Capita Developing Countries' Exports to Exports to OECDGNP Level (U.S.$) Population (mils.) OECD ($ mils.) Per Person (s)
All Regions
125 or less 205.0 148 0.59130 - 265 968.2 1,742 1.80270 - -530 336.0 4,215 12.54540 - 850 132.8 4,413 33.23860 - 1,200 182.5 3,649 19.99
1,200 - 1,600 79.8 1,985 24.00Over 1,600 31.7 4,949 156.12
Sub-Saharan Africa
Under 265 173.1 170 0.98Over .265 126.5 152 1.20
South Asia 794.2 1,515 1.91
Others Under 265 205.9 205 0.99
All Under 265 1,173 1,890 1.61
All Under 530 1,509 6,105 4.05
All Under 1,200 1,824 14,167 7.77
All Developing Countries /a 1,936 21,101 10.90
/a Excluding small territories and Oceania.
Sources: OECD, Imports by Commodity; population and GNP from World BankAtlas, 1976.
- 34 -
The relationships illustrated in chis table raise tantalizing
questions. How much developmsnt is necessary befoore exports of ianufac-
tures begin to "take off" successfully? Does experience provide a fair test
since the low-incoms countries have biased their policies against exports?
Would India (not to mention Sri Lanka) be already out of the ranks of the
lov-incom countries if it had pursued erport-promoting polciies? This seems
not at all unlikely, especially since export performance has much to do with
exchange rates which in turn help to set GNP levels In international compari-
sons. Where would Korea be in GNP per head if it had followed policies
similar to those in India or Sri Lanka?
Looking at the numbers country by country, Haiti appears the most
encouraging example of a low-income country doing well, with $93 million in
exports of manufactures to OECD countries in 1974. Its location doubtless
helps, but it is also almost the only very poov country that has strongly
promoted these exports. However, none of the Sub-Saharan African countries
has achieved much in the way of exports of manufactures to OECD countries,
not even those with middle-level incomeso
The relationship between GNP per head and exports of Lmnufactures
to OECD per head turns out to be very strongly significant in log-linear
regressions taking individual countries as the observations0 Interestingly,
for developing countries with $120 to $1,200 per capita GNP, a dummy variable
for population over 15 million is also 2osit±vel related to exports of
manufactures per head despite the usual negative relationship between trade
dependence and country size0 1/ This fact amnng others suggests that large
economies of scale (and cumulative experience) of one kind or another in
production, exporting and related activities, are involved in successful
exports of manufactures0 2/ These econowies of scale and experience may
occur at least as much in managerial, marketing and related functions-
information gathering, technology acquisition and improvewmat, product design,
quality control, risk taking, financial operations, etc0 as in production0
I/ These regression findings will be reported at some point in the future0
As explanatory variables, population density (positive effect) and a
dummy for oil exports (negative effect) can also be added but improve-
ments ia results are mainor.
2/ The cases of Hong Kong, Singapore, etc., do not rule this out for three
reasons 0 First, large multinational corporations have played a central
role in successful exports from economies smaller than Hong Kong's0
Second, Hong Kong and Singapore embody ;ech "hidden" experience from
the pre-revolutionary industrialization of China and from the entrepot
trade, which involved exporting of manufactures0 Third, Hong Kong's
success has been built in large part around the marketing and intermediary
efforts of some veryr large exzBritish colonial trading companies
(Jardine Miatheson, ecc0 ) and other large businesses, of European
and Chinese ownershipo In this and perhaps other ways (e.g., overseas
and China connections, GNP of $70 5 billion in 1975), Hong Kong is not so
small 1
- 35 -
Whether a developing economy can take advantage of these economies probablydepends on how its enterprises are organized as much as on its size.
Export Price Trends for Developing Countries' Manufactures
There are no reliable overall indexes of the prices received bydeveloping countries for their exports of manufactures. The UN has recentlyproduced a unit value index for their manufactured exports broadly defined(SITC 5-8), but the series appears to be dominated by trends in nonferrousmetals and other standardized processed commodities. For what the numbers areworth, the index for developing countries compares to that for developedcountries as follows, dropping sharply in 1975.
Table 24: TRENDS IN UN INDEXES QF UNIT PRICES FOR EXPORTS OF MANUFACTURES(1970 = 100)
Group 1960 1965 1973 1974 1975 1976
Developed Countries 84 89 133 162 182 183
Developing Countries 78 86 141 173 167 176
Ratio Developing/Developed 93 97 106 107 92 96
Source: UN Monthly Bulletin of Statistics, June 1978.
There are grounds for suspecting that textiles, clothing, elec-tronics and other labor-intensive specialties of developing countries havedeclined in price relative to other manufactures in both sets of countries, inthe 1960's and 1970's alike. This may come about not only because of ease ofentry, fierce price competition, and technological advances, but also becausethere has been a shift over time toward locations with cheaper labor, firstin the developed countries and then in the developing ones. Another reasonmay be that through learning, scale economies and "catch up" processes, costsfall especially rapidly in developing economies at certain phases in thedevelopment process particularly when exports from manufacturing industriesare expanding rapidly.
Evidence for declining relative prices in developing countries'exports come in part from wholesale price indexes of the developed countries.Textile prices have lagged behind other prices everywhere. 1/ In the UnitedStates the wholesale price of apparel rose only 47.1% in nearly thirty years
1/ Indexes for leading countries are .published regularly in, UN MonthlyBulletin of Statistics.
36
from 1947 co 1976, while the general price level more than doubled0 1/ UOSOdata show that prices have declined relative to the overall price level in
other developing country "specialties" as wEll. Prices of houe electronicequipment, for example, have declined absolutely through the 1970's.
Table 25: TRENDS IN U.S. WHOLESALE PRICE INDEX BY PRODUCT GROUP(1967 - 100)
Annual Rateof Increases
Product Grouo 1970 1971 1972 1973 1974 1975 1976 1970=76 (%)
All Products 1104 113.9 119.1 134.7 1601 174.9 183.0 808
Industrial Projects 11000 114.0 117.9 12509 153.8 171.5 182.4 8o8Textiles & Apparel 107.2 10806 113.6 1230g 139.1 137.9 14802 5.5
Apparel 11100 11209 114.8 11900 12905 133.4 139.9 3.9
Footwear 113.0 116.8 124.5 13005 1400 14708 158.9 508Home Elec. Equipment 93.6 9308 92.7 91.9 93.1 93.5 91.3 -0.4
.Household Appliances 105.3 107.2 107.6 1O8o5 117.9 13203 139.2 4.8
Electrical Machinery 106.4 109.5 1104 112.4 12500 140.7 146.7 505
Source: U.S. Department of Commerce , Survey of Current Business , December 1972,December 1974, January 1976, October 1977 O
The other main evidence comes from a few leading exporters of manu-factures. Their unit value and terms of trade indexes have fluctuated quitedifferently from those of leading developed country exporters of manufactures 0
One reason for this is almost certainly the t&orldwide price competition throughwhich prices are typically determined by demand and supply, and ultimately by
costs in low-cost sources of supply, 2mh as in priEary commodities 0 Pricesbecome depressed in a recession as suppliers coapete to stay in business and
hold onto market shares even if this means operating without profits: U.S.textile producers (among others) took large losses in 1975. 2/ These pricepatterns contrast sharply with those in many other manufacturing industrieswhere administered prices prevail and are raised in the face of an inflation
and recession together. However, there have been significant differences
in the patterns of price increases in individual economies.
1/ To be precise, wholesale prices of all goods rose 109.8%. See statement
by Lazare Teper, director of research of the International Ladies'Garaent Workers' Union, "The Background and ShortcoAings of the Multi-
fiber Arrangement and the Bilateral Agreements Concluded Under ItsProvisions1 , " before a Special Task Force of the Subcommittee on Tradeof the 'days and Means Committee of the U.S. House of Representatives,May 11, 1977.
2/ Cotton International 1976, D. 22.
- 37 -
Table 26: NATIONAL EXPORT PRICE (UNIT VALUE) INDEXES AND TERMS
OF TRADE INDEXES IN LEADING DEVELOPING COUNTRIES
COMPARED TO INDUSTRIAL COUNTRIES AS A GROUP
Description of Index
Price Index - All Exports 1970 1973 1974 1975 1976
Industrial Countries (1970-100) 100 137 171 191 193
Korea (1970-100) 100 126.5 160.2 148.4 165.8
Taiwan (1970-100) 100 138.9 183.1 172.2 176.4
Hong Kong (1973-100) 74 100 121 117 129
implied (1970-100) (100) (135.1) (163.5) (158.1) (174.3)
Price Index - Manufactured Exports
Industrial Countries (1970-100) 100 133 162 182 183
Korea (1974-100) 77/a 92.8 100 96.4 n.a.
Terms of Trade Index - All Products
Industrial Countries (1970-100) 100 98.6 86.8 89.7 89.4
Korea (1970-100) 100 93.6 76.2 68.6 78.2
Taiwan (1970-100) 100 90.6 80.7 79.2 81.1
Hong Kong (1973-100) 95 100 92 94 100
/a 1971.
Sources: DM4F, International Financial Statistics, January 1978; Census
and Statistics Department, Hong Kong External Trade, July 1977;Bank of Korea, Economic Statistics Yearbook, 1976; UN Monthly
Bulletin of Statistics, June 1977.
3° -
One other implication of these series is that the growth rates inthe volume of developing countriesD exports o0 mnu actures, other than non-ferrous metals 9 may have been even higher then Tables 3 and 6 above wouldimply, to mske up for declining terms of trade relative to developed coun-tries manufactures 0
Developed Countries' Import Growth by Product Grou
Developed countries' rapid Import grozsh from the developing counatries9 and the latter's successful diversification of exports9 can be illus-trated by the following table. In the svevn years from 1967 to 1974 thedeveloping countries made enormous strides in exporting to thae developedcountries. Clothing and electronic exports led the way but there werestrong gains in other products as well0 En real terws the volumE of thesetrade flows must have nearly quadrupled withi2 this seveonyear period0In electronics the growth mast have been roughly twenty-fold, in clothingabout seven-fold0 Nominal dollar values grew by ten tieso or more in foote'eear, nonelectrical machinery, transport equipment, instruments and othermetal products0
This rapid growth of exports aimesd directly at the developed coun-tries' markets would surely not have been possible without strenuous effortsby businesses from these countries themselves, to overcome the supplybarriers .
Even if this and the other broad explanations already put forwardare correct 9 much remains to be explained and better understood in regardto 1) the timing of this growth9 i.e., special reasons for a "bunching' ofexport expansion and industry shifting into a short period from 1966 or 1967to 1973 or 19749 and 2) the particular selection of industrial processesthat moved0 This last is all the more intriguing because within theengineering sectors a mjority of the export increase came from a narrowselection of manual assembly processes0 Principal among these were theassembly of sewiconductors and other electronic components and the assemblystages of production in a swall number of electronic products headed by TVsets and radios0 I/
In regard to the timing of this big expansion push9 severalpoints are worth noting0 They have to do ainly gith the timing of influ=-ences that have already been mentioned0
(1) The process would hardly have gone so far without thestrong export-promotion efforts in Taiwan and Koreathroughout the 1960's and the creation of Nexicanborder zones 9 not to mention other e2port-oriented policyshifts in developing countries in the mid and late 1960's0
/ Evidence is given in an unpublished study by Phi Anh Plesch on develop°tng countrtes' exports of electronics and electrical machinery0
- 39 -
Table 27: DEVELOPED COUNTRIES' IMPORTS OF MANUFACTURES FROM DEVELOPINGCOUNTRIES BY PRODUCT GROUP IN 1967, \1973 AND 1974
(Million U.S. Dollars)
SITC Product Group Narrower Coverage /a Broader Coverage /b Percent Share1967 1973 1973 1974 1974
84 Clothing 537 3,435 3,709 4,776 21.8
85 Footwear 65 549 589 792 3.6
61,83 Leather, Leather Goods 148 716 738 721 3.3
65 Textiles 758 2,521 2,588 2,981 13.6
63,82 Wood Products,Furniture 181 1,174 1,269 1,167 5.3
5 Chemicals 398 946 1,013 1,638 7.5
72 Electronics, Elec-trical Equipment 157 2,305 2,405 3,446 15.7
71 NonelectricalMachinery 66 515 564 884 4.0
73 Transport Equipment 44 375 518 511 2.3
67 Iron and Steel 127 586 676 1,066 4.9
69,86 Other Metal Pro-ducts, Instruments 64. 461 493 795 3.6
66 Nonmecallic MineralProducts 322 719 738 707 3.2
MiscellaneousManufactures 375 1,597 1,643 2,400 11.0
Total 3,242 15,899 16,937 /c 21,893 /c 100.0
/a Fifteen leading industrial countries' imports not including imports from
Yugoslavia.
/b Sixteen leading countries' imports (with Spain added), including imports
from Yugoslavia.
/c Imports by 24 developing countries (including these 16) totalled $17,397
million in 1973 and $22,599 million in 1974.
Sources: Keesing-Plesch reports of May 5, 1976 and June 6, 1977, based on
U.N. Commodity Trade Statistics, Series D.
- 40 -
(2) Trade liberalization in the developed countries received a
Emjor further impetus in the later 1960's and early 1970's,
with the Kennedy Round tariff cuts1, offshore assembly provisions
in UOSO and some European tariffs, and a generally very favorable
policy environments for imports from developing countries (pre-
ference schemes were enacted , etc.), solidifying and reakfirv=
ing a cowmitm-nt to keep wsrkets open. Thus, fir= could
promote developing country sources of supply with little risk
and a trend forwavd improving tariff treatm2nt0 The growth of
clothing imports w6 i fostered by gaps in developed countriese
quota protection up to 1972-73 in regard to products made
from manmade fibers and woolo
(3) Another important combination of influcnces must have come
froin wages and exzchange rate ternds in devzloped countri-es0
U.S. imports were stimulated by ovevaluztioa of the U0 S0
dollar up to 1971 and increases in IT.SO twi½n.rfm wages. 'iean-
while favorable trade balances and induszvial advanc-es in
Japan and Contiaental Wester:n Ruro*, kEd i:o rapid ind eases
in money wages t-hrcVc 0 A futUO.ia s c.r ccunwedi in
thcir dollar wase rates through cnr" adjuLtils l t ar
1971. As a result: of these wage arnd U.S .djustrers
labor became inv expensive at IeFrt e:bsoleii:ly, Tlz,ti-ve to
devzlopiag countr:ies' labor 9 but af: th,- O iKi, c ehe oi:sr
leading developed counrlMies cased t, ce logb .. reas,- 1This uperend in3 wages bacaia si.rou- £Yov. vl.e Lwlrd'-10 0 s.,
(4) TJ.he growth of exports received an aEnded 7.oos' a. ree.lt of
the overheatins" of the worK,d econcn;' 'l:. :e'.
in the 1966-69 period as a resu).x n£ the . ir - !ietna..
and then i,.xch =re strongly i. 1T/2;Y'Y , r osulJ f t.he
clilx of a building boomi ad a sre, o.e ss:Fee3 0 j.qni.d..i,7,as a side effect of exchange vatse t L;buet.e (veinig gold
holdings and causing an outa4'rd rush of 0l uSno dollar!s iuto
Eurodollars and other countri,es' reve-ies)0 TZe.<.;l %ur:odollavs
abundant, financing was easy to olatair- fora new bui.uncs veWnWtures
overseas. Exports becawm saleable froWoR tmaKginal desel1:;)inb
country supp-iers when world demand peaked 0
(5) It is difficult to avoid an imprescia- thliat developments
internal to the electronics industry caused that industry
to search feverishly for low-wage locations for assembly
processes, beginning about 1967=68. By that tiwes integrated
circuits and other semiconductor devices, though not exactly
'gmature" products , had becoun standardized and a vigorous
price competition had broken out amng the many firim trying
According to a private coumnication from Bela Balassa, "beEween 1971 and
1976 manufacturing wages increased 46 percent in the United States, 130
percent in Taiwan , and 116 percent in Korea in ter-ms of U.S. dollars."
Yet with differences in the order of 10 to I the absolute contrasts over-
whielm such catchup effect0
- 41 -
to stay in this promising industry. A fierce price-cutting
competition also emerged in consumer electronics, especially
in mass-output items such as transistor radios and TV sets.
The fluidity of the situation and the narrowness of profit
margins forced procedures to take bold risks to stay in the race.
This situation was almost certainly aggravated by cutbacks in U.S.
defense spending, first on technically sophisticated research and
later on weaponry: electronics companies lost much of their
military market.
Further clarification of why these processes moved and, more
important, which ones are moving now and are likely to move in future,
will have to await further research. 1/ On the whole this list carries
an impression that such export growth is likely to be more subdued in coming
years.
market Penetration in Developed Countries
Imports of manufactures by developed countries are still very small
relative to the size of the market. Even in clothing the developed countries'
combined market was at least $60 billion in 1973 (in prices somewhat inflated
by protection). 2/ Here by then the developing countries' share must have
been 6 to 7 percent.
In the industrial countries' markets for all manufactures combined,
the developing countries' share must have reached one percent for the first
time very recently, probably in 1976. In 1973, at world prices, developed
countries' gross output of manufactures, narrowly defined to match the trade
classification, must have been at least $1,900 billion. 3/ Apparent con-
sumption (gross output plus imports minus exports) was a little less, but
still probably over 100 times imports from developing countries of $17.4
billion. However, data are insufficient to permit a reliable comparison.
An indirect indicator of this market penetration is a ratio shown
in the next table, imports from developing countries as a percent of GNP.
Although GNP from manufactures, narrowly defined, would be around one fourth
1/ Some interview research in this general area is planned under a new
World Bank Research project, RPO 67-68, "Key Institution and the Expan-
sion of Manufactured Exports," although this research is more heavily
concerned with marketing and related aspects of exports by indigenous
firms.
2/ Gross output of clothing in these countries was about $56 billion
based on the industry statistic definition which is not the same as
(and on balance covers less than) the trade definition. Imports net
of exports were over $3 billion. The industry figure is from U.N.
Yearbook of Industrial Statistics, 1975.
3/ The main uncertainty here is now much European gross output data should
be adjusted upward to achieve an appropriate estimate of shipments.
- 42 -
of GNP in a '"typical" industrial onxknt ecmoiory groes output and apparentconsuption of manufactures (being perhapo 207 tiw-ee output) would be abouttwo thirds of GNP 0 Therefore the rneht ohare would generally be about50% greater than the ratio shoon: for enEple9 , if iLporKt are 006% of GLNPthey are probably equal to roughly 009Z of thke rket fog wBnufactures0
A move accugate (although etill rough) e irten can be tEde inmost individual coungtes taking into account grooo output and trade inaEnufactures, levels of pgotections, etc. The follouing table containssuch estimtes 9 which smut be considered only approrimite, particularly inEuropean countries where it is difficult to knou how to adjust gross output.
Table 28: IORTS FROi DEVELOPXNG COULMES AS A S OF GNP IN1974 AND AS AN ESThPED SHAE 0F APPPAEPNT CONSUMPTION
OF aUM1ACTURES IN 1973, I9 SELECTE DEVELOPE COUNTRIES(Percent)
As a Share of:Country Nianuf acturinm
GNP Consum iOn(1974) (1973)
Naee Zealand 1q57 losAustralia 1.11 1l5United Kingdom 0088 1l3Netherlands Oo82 1 6Norway 0079 lo9West Germany 0072 10United States 0.69 1l 1Ireland O.68 O.9Sweden 0.66 10QSwitzerland 0064 2soeoBelgiumoLuXmbourg Oo58 Oo9Japan 0.57Canada O.34 O.9Denmagk 0054 14Italy 0.49Austria 0.42 0.7France O.32 005Spain 0.22 O°4
Sources: UN, Comdir- Trade Statigtics, Series D; World Bank Atlas9 1976;and estimates taking intgo account dalta in UN, Yearbook of IndustrialStatistics, 1975; World Be&t World Tables 9 1976; UN, Yearbook ofInternational Trade Statistics, 19759 and9 in a rough way9 GATTtables (etc.) on protection in inductrial products.
- 43 -
In many individual products, the developing countries have achieveda very significant penetration of the market. Conversely, however, in a vastmajority of manufactured products their share of the market is still only asmall fraction of-one percent.
Here are some examples of high market penetration. In cottonfabrics by 1973, judging by data in metric tons, outside the U.S. (where theshare was about 6.3%) the developing countries had captured 12.1% of themarket in the developed countries; the highest shares were reached in theUK (27.3%) and Netherlands (25.272). 1/ In black-and-white television sets,imports- from all sources supplied 78% of the U.S. market by number of sets,while imported radios were 89% of the total sold in 1974 according to theElectronics Industry Association. 2/ The developing countries seem to havesupplied slightly over half of the total imports in these products. 3/ InWest Germany already by 1971 imports from the Far East (including Japan)supplied 99% of all pocket radios and 18% of all portable radios sold. 4/
A Case Study in Market Penetration: Clothing and Textiles in the U.S. Market
As an illustrative case study of market penetration, it may beuseful to look more closely at the biggest case of all, imports of clothingand other textile products into the U.S. market. These imports reachedover $3.6 billion in 1976. 5/
Before looking at the numbers it is essential to summarize thehistory of U.S. quantitative import restrictions (quotas) in these products.From 1961 to 1971, imports of cotton textile products from developing coun-tries and Japan were subject to bilateral quotas, but imports of textileproducts made from other fibers were not restricted. As a result, developingcountries concentrated on exports of clothing made from man-made fibersand (to a minor extent) wool. The U.S. reacted in March 1972 by negotiating
1/ Computed from data in OECD, Textile Industry on OECD Countries 1974-751976, and UN Commodity Trade Statistics, Series D.
2/ Electronics Industries Association, Electronic Data Book, 1977 edition;this apparently includes radios and TV sets imported in unfinishedform, and finished in the U.S..
3/ Judging by seven-digit U.S. import data cited in Phi Anh Plesch's un-published study. In radios and television receivers the share was 52%;in other television apparatus it was 78%.
4/ Commission des. Communautes Europeennes, Les Conditions de la Demandedans CEE. Produits Electro-Mecaniques et Electroniques, Vol. I, April,1974, based on a German study.
5/ See Table 32 below.
- 44 4
bilateral greeesnczs retroactive to October 1D 197l, first with a minorsupplier (Malaycia) and then with Japan, Hong Kong Korea and Taiuan.These agreements set up quotas for all three fibers together0 This systemhas since been in force with minor changes and has been entended to severalother suppliers.
As the nest table shows9 before this easure was taken, imports of
textiles and apparel froma all sources grew rapidly from about 6G of the U.S.market (by fiber weight) in 1964 to more than 9%Z Most of the increase camein man=made fibers where the grouth was relentlosso then the new three-fiber
quotas were introduced9 two asjor things happened. Host impovtant 9 thequantitative growth of imports was halted and their Emrket shared declined.At the saws time importEs shifted froa onn-aide fiber to cottoa textileproducts, evidently because as a group, the East Asian suppliers had a largercost advantage in these products0
Table 29: .RATIO OF U.S. IPORTS FOR CONSUPTION FROM ALL SOURCESTO APPARENT DOMESTIC HARKET OF TEXTILES AND APPAREL PRODUCTS
BY FIBER WEIGHT9 1964'1976(percent)
Hmn-Made Fiber Cotton 3 Hain Fibers /a
1964 l.6 6Zo 6.21965 2.2 7c7 6.81966 3.1 10.2 8.21967 3.3 9.4 7.51968 3.6 l0.6 7.91969 4.5 1105 80o1970 5.8 11.2 9oO1971 6Q6 11.6 9o11972 6. 14.G 9.61973 5.3 14.5 Go61974 408 14.o 8.71975 5o3 15o8 9o01976 5.8 19.1 10.6
a/ Including wool where developing countries are ouly a winor source.Man'=made fiber actually wakes about 25% maore fabric per pound offiber than cotton; taking this into account would reduce theseratios o
Source: U.S. International Trade Couissoon The HistoY and CurrentStatuo of the Multifiber Arranaement, January 19789 Table 20
Looked at in another set of physical unitne equivalent square yards9
imports since 1972 have increased only modestly in apparel and have declined
on balance in textiles, despite Multi Fiber Arrangement provisions for anannual increase in overall quotas (where they exist) by at least 6%. peryear.
- 45 -
Table 30: U.S. IMPORTS OF TEXTILE PRODUCTS IN EQUIVALENT SQUARE YARDS1972-1977
(Million SYE)
Total Apparel Other
1972 6236 2226 4010
1973 5125 2090 3035
1974 4410 1937 2473
1975 3828 2077 1751
1976 5138 2578 2561
1977 5160 2621 2539
Source: U.S. House of Representatives, Subcommittee or Tradeof the Committee on Ways and Means, Background M4aterialon the Multifiber Arrangement, January 20, 1978.
U.S. data also reveal market penetration patterns in some of theleading products, based once again on data in physical units-this timenumbers of each item imported and produced. Imports have enjoyed theirgreatest success in sweaters, shirts, blouses, coats and jackets, and a fewother items. Here again, however, the penetration process has been largelyhalted since 1971.
Meanwhile, imports from developing countries have trended upwardboth in value and as a share of total imports. Displacement of other sup-pliers has been particularly striking in clothing, where imports from develop-ing countries roughly doubled their share from 41% of the market in 1967 toover 80% in 1976 and 1977.
- 46 -
Table 31: NAPT P1-TNE.TIO OVER T XOiORTS AS A PERCENT 0F
IMPORTS PLUS PRODUCT-1OM OF SO 4CTED TEXTILE AND CLOTxHNG
ITES IN TE UNITED STATES, 1967=1975
(Rs2ed on NPaubers of Phyoic&l Units)
Product 1967 1968 1969 1970 1971 1972 1973 1974 1975
TextilesBroadwoven Fabrics 4.9 409 506 56 601 7.1 6.7 6.5 5.9
Knit Fabrics 09 0.8 100 2.1 409 2.7 1.6 037 06
Cotton Yarn 4.0 5.4 301 205 301 3.9 2.8 1.8 18
Cotton Sheets 500 5A3 5.3 4.4 5o4 4.8 4.8 2.6 2.9
Blankets 0.8 101 1.2 104 103 104 102 09 nra.
ClothingSkirts 4.4 5.6 509 7.5 lOoO 9o2 4.9 4.8 9.5
Dresses 3o5 405 507 607 8.6 704 602 606 7.2
Knit Shirts, Bllouoee,T-Shirts 11o2 1107 1503 16.7 21.2 21.8 21o5 22.4 2607
Woven Shirts 1701 20o1 250O 28.3 29.9 25o3 2207 23.9 2609
Coats, Sport CoatE9,
Jackets 8.0 1100 15.8 18.6 20.8 21.8 22.8 2108 22.7
Trousers, Slacks, Shorts 9ol 1103 13.8 1467 17o9 18o4 1708 14.6 17.6
Suits 09 lZ6 2to 4.0 4o9 5.7 6.2 10.6 11.3
Sweaters 24.8 34.3 41o9 4105 47.0 43.6 42o8 43.8 47,7
Pajamas and Nightweagr 56 701 9.8 9.3 8.9 Go2 3.8 308 3.7
Body Supporting Gsvrients 8.8 110 1105 1465 1609 1907 20.1 2204 250O
Underuar 0.6 0.8 lo1 1.9 3.1 2.5 2.2 2.0 1M9
Hosiery 0.5 0o6 06 3.2 2o2 1.6 1o6 2.1 106
Gloves and M'ittene 1O8 1208 13.5 14.7 1206 1462 17.3 20.3 21,9
Source: U0 S. Departent of Comerce, Cotton Wool 0and Man'Kade 'Fiber Tey-tiles
and Apparel: U0 S. Production, imports and Import Production aatio2,
Dec2ber, 1976o
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Table 32: U.S.IMPORTS OF CLOTHING AND TEXTILES FROMDEVELOPING COUNTRIES, 1967-1976
Percent of Total Impbrts Value (million S)
ClothinR Textiles Clothing Textiles
1967 41.2 39.9 267.0 323.91968 47.1 35.4 403.3 340.61969 47.9 37.7 545.7 388.71970 51.7 29.6 655.6 384.01971 60.4 28.5 917.9 396.41972 64.0 33.6 1,204.7 512.51973 68.1 36.6 1,476.4 578.21974 74.3 45.4 1,726.2 738.71975 /a 78.9 40.8 2,020.3 497.41976 /a 80.4 44.4 2,922.9 726.3
/a Including Israel and South Africa but excluding Turkey. For1974, this coverage results in percentages of 74.7 and 46.1,and values of 1,741.2 and 743.6; in other words this makes verylittle difference.
Sources: UN Commodity Trade Statistics, Series D; UN World TradeAnnual (for 1967 and 1970); U.S. Bureau of the Census,Highlights of U.S. Export and Import Trade, FT 990,December 1974, 1975, 1976.
As this table shows, in the nine years after 1967 the value ofclothing imports from developing countries grew in current dollars to eleventimes its initia-l level. Since the U.S. pri-ce index for clothing only rose--by 40% (as shown previously in Table 25)-, in "real" terms these importsmay have increased as much as eight-fold. In textiles "real" growth wasmuch slower, to about 1.5 times the initial level. Presumably the exportersconcentrated on clothing partly because there is a higher value added toeach "square yard equivalent" in the quota. It is also very interesting tonote that despite multifiber quotas, from 1971 to 1976 the current value ofclothing imports more than tripled.
It seems clear that these years witnessed a systematic upgradingof developing countrv exports of textile products to the U.S. market. Thisupgrading presumably included improvements in quality and in the mix ofexports, and additions-to the functions performed by indigenous enterprisesin producing, marketing and distributing garments. In the five year span1971-76, the value of these exports rose 2.8 times. Meanwhile, U.S. wholesaleprices rose by 24%. in clothing and a little more in other textile products;the developing countries' share of the U.S. import market rose by somewhatover one third; and the fiber weight of U.S. imports from all sources
- 48
probably rose only oliEhtly. With no i2pEonsat in the q"alit3y a
etc., of these p:orts, thece leet anaibe@rs ou8sgot that theiz value in
1976 would have been leoo than double the 1971 fiSure. Thue, there must
have been an increace ina the oedee of 50% in thsir avera@e value relative
to fiber weight.
Eap1lovent Trendi in Developed Countriea
P'otectioni1t oppocition to ilEpozts froy developing contries
has been strengthened by the depreneed isaployient ctulation in the developed
countries as a reoult of the -raot receesion since the 19700 s. Econoiay-vide
uneaploywent expanded sharply in 1974 and especially 1975 and has reained
abnormally high in 1976 and 1977D in practically all developed countries; in
early 1977 it tas GotignAed at 16.3 million, or 505% of the labor force in
the OECD countriesa an a roup, 1/ The following table is ba$ed on statistics
from a subset of countrieo uhich have the best data.
Table 33: EC00YUJfflDE UNEMPLOYMENT IN SW,EEN DEVEL0PED COUNTRIES
1965 1970 1973 1974 1975
UnemployAent (Thousando)
Twelve European Countries /a 19574 1D838 29120 29346 39611
U.S. and Canada 39646 49583 4E,824 5D601 8 ,527
Japan 390 590 670 740 19000
Australia 61 75 108 133 257
Total, Sixteen Countries 561 7 0880 13395
Unemployenut Rate (Z)
Twelve European Countries /a 205 205 206 2.7 4.2
U.S. and Canada 405 5.0 500 5.6 8.4
Japan 0.8 1.2 103 1.4 109
Australia 103 14 19 2.3 4.4
Total, Sirteea Countries 3o7 4.0 4.0 4.4 6o7
/a Austria, Belgiu, De2n{nErk, Finland9 I 0 Gesrany9 Ireland9 Italy 9 Nether'
lands9 Norvmy, Spain, S'itzerlani9 United KingdG-e0
Sources: ILO Yeorbook of Labour Statistics9 1974 and 19760
11 IMF Survey9 January 99 1978. This includes Turkey0
- 49 -
The depressed. employment situation has been caused partly by trendswithin manufacturing, which employs about one fourth of the labor force. Forall the developed countries together, employment in manufacturing totallednearly 70 million in 1973 and 1974, of whom over 60 million worked in manu-facturing narrowly defined to correspond to the trade definition. 1/ In theperiod 1965-74 employment in all manufacturing grew at 0.9% per year, heldback (in a sense) by labor productivity growth at 3.8% per year. For leadingbranches the employment and productivity trends were as follows.
1/ With South Africa and transitional countries excluded the larger total twould be roughly 65 million, based on data from UN Yearbook of IndustrialStatistics. 1975.
Tcib21 3b
mpllonent In DeveRoped CountrIes' PanufacturIn,1 rmnchrm, L965, 2n973 and 1974
Emp1oyment Indenest of Change Labor Annuml Growth 1YletIndustrmal 3rnnch (Thousand) (1970A100) ?roductdW1t S965-L974
7 1IO65 19733 21S974 ____o__n
loodD Bevex3Sec Tobacco 6D53g 97 99 go 3.0 O.L
Tents i1ea 5D1236 1105 94 91 4.7 D6
C2lothAng, LD rthe, 1ootw@nr 4D590 96 101 99 0.9 0.3
Chemicnr2m ?mtroamuDm Konotc Troducto 6D6216 09 102 204 b.n 21.7
Banoc IMai o bss ,9 L10 .0 0.2
ma~nl 027D16 21as .02 11.lS 3L5Y
0@ 3D133i5 °n°& °n °n °°ma
TotaL m C:CuSa uC 6(0323 ID Lei 2 OR101 0 20
SouRccm: UeN Y booh of 3nrurnni AotAcz1 219752/ mac1udao 2Ecalm4,nd9 H&21 ond South Africa butRnc21urdmo Spnnn, D 0rrace, CyiGrD o nrnmd1 rnel.
- 51 -
As this table helps to show, employment in textiles as distinctfrom clothing declined throughout this period. 1/ This downtrend appearsto have been caused by sluggish demand and exceptionally high productivitygrowth, due to technical changes involving automation, reorganization, newequipment and new fibers and fabrics. Imports cannot be blamed for thesluggish demand since throughout the period, the developed countries havemaintained a strong positive trade balance in textiles (SITC 65), despitenet imports in certain products and countries. 2/ Similarly in food productsand basic metals the effects of increased imports from developing countrieshave been unimportant. However, increased imports from poorer countries haveseriously aggravated the situation in clothing, footwear and leather products,where employment began to trend downward from 1970, despite exceptionally slowlabor productivicy growth, and then dropped sharply in 1975.
For an incomplete set of developing countries for which numbers areavailable, manufacturing employment fell from 66.9 million in 1974 to 63.5million in 1975 and 63.4 million in 1976. 3/ Employment in 1976 was abovethe 1975 level in North America, but below it in Western Europe and slightlybelow it in Japan and Australia. Branches suffering downtrends prior to 1974appear to have been especially hard-hit. In Europe rapidly increasingimports of clothing contributed significantly to-the job layoffs.
Employment Effects of Imports from Developing Countries
Although precise estimates are difficult to make, it is clear thatthe number of jobs eliminated in developed countries, as a result of importsfrom developing countries, has been small relative to the layoffs caused bytechnical progress and faltering demand. For example, in West Germany about50 times more jobs were lost in the period 1962-1975 through growth of laborproductivity as were eliminated through growth of imports from developingcountries. 4/ In the developed countries as a group, over 5 million people
1/ The lines between textiles and clothing are somewhat different inproduction and trade statistics.
2/ The United States is among the countries with a positive balance.Japan has the largest positive balance by a wide margin, with Italynext; West Germany has the largest imports.
3/ UN Yearbook of Industrial Statistics, 1975 and UN Monthly Bulletin ofStatistics, November 1977.
4/ Frank Wolter, "Adjusting to Imports from Developing Countries: TheEvidence from a Human Capital-Rich Resource-Poor Country," in HerbertGiersch, editor, Reshaping the World Economic Order: Symposium 1976,Tubingen, 1977, Table A-6, showing 182,800 jobs lost from these importsvs. 6,531,100 from changes in labor productivity. This includesimports from Spain, Greece, Israel, etc.
° 52 -
were added to the rands of the uneuployed in 1975 alone when deumad faltered.This is at least 20 timzs gveater than the iWact og imports from developingcountries in any year up to now, judging by etizmte2 given below.
Indeed, the net coploymant imact of these imports is not neces-sarily negative at all. In the first place, the developing countries gener'ally spend the proceeds, adding to employweag in developed countriezs e%portindustries0 Secondly, under norml policy conditious, the Srowth of tradeleads to an increzse of real incowme, which in turn causes expanded demand inboth the public and the private nectors. If this second 5mchanism is notoperating properly, however, the nGt job impact will generally be negative,because iWorts displace low-uage jobs involving relative aore workers, whilean equivalent valge of enports creates higheK-uaGe jobs in sa9ller numbers0Even so9 the net employment loss in considerably less than the gross displace-ment.
As an order of magnitude, available inforvmtion suggests thatgross cumulative displacemsnt of jobs in developed countries 9 as a resultof imports of manufactures from developing councries, must have been in theorder of one mdllion jobs through 19769 or perhaps slightly mare0 No onehas objected to a rough estiemted in an earlier szudy that in 1975 prices, atleast 520,000 worth of imports would be required to displace one worker 0 I/
After all 9 the value added equivalent would probably be $7-890009 of whichwages would constitute-at most $5-690009 which on average was no mre than oneyear's unskilled wages in the major importing countries. Developed countries'imports from developing countries mst have been somewhere in the range from$27T30 billion in 19769 in 1975 prices (slightly more in currgent prices), sothat by this rule groso cumulative job displacevnnt could have been as hiigh as105 million ($30 billion divided by $20,000)0 However, ir is likely that theratio of $20,9000 of imports for0 one job would only hold true in the mostlow-skiled, labor-'intenive manufactures such as clothing, cotton textileo,
footwear and electronic assembly products. As an ovegall average teakin othertypes of imports into account, it probably requires at least $25,000 inimports to displace one job. Thus the total displacement is probably not umchover one million. 2/
Against this must be s(et soE estiwate of the jobs created in ezOports. Total enports of mqanufactures to developing countrree are severaltims larger than imports from them (see Asnex A) amd undoubtedly involve
1/ World Bah, Trade Li beration and Export PromoEtion, 1977.
2/ This estiwmte would appear roughly consisteut with the estimate citedby Uolter for West Germany, and Tith an estifmte for the U.S. that14,000 jobs per year were displaced direczly by rapid import growthfroma 1964-75; see Charles R. Frank, Jr0, goreiSa Trade and DoJesticAid, Washington, D.C.: Brookings Institution, pp. 36-37O
- 53 -
many more jobs than are lost to the imports. Even in their trade withdeveloping countries of Asia (other than the Middle East), the richer coun-tries' exports of manufactures are over twice their imports. But, of course,most exports to developing countries are made possible by developed countryimports of fuels and other primary commodities, rather than manufactures. Fortheir imports of manufactures alone, if it is assumed that one job was createddirectly through added exports for every two jobs lost through imports, thecumulative effect of these imports over many years must have been to eliminatein the order of half a million manufacturing jobs. This would be not quite 1Xof the total number of manufacturing jobs in developing countries as of 1974,and would put the effect in the range of 3-4% of the total unemployment of15-16 million since 1975. 1/ Viewed slightly differently, half a millionworkers would be. less than 0.2% of the total labor force in developed countries.
This does not take into account more indirect employment effects,which would probably be positive or neutral on balance. They would occur inseveral ways. First, there would be employment changes in industries supply-ing imports into the export and import-competing industries. Here it isdifficult to guess which inputs would be more labor-intensive. Second, therewould be multiplier effects around the shrinking and expanding industries.Jobs would be created indirectly in the vicinity of the successful exportindustries, and diminished in the vicinity of plants forced to close as aresult of imports. Again the next effect is unclear. 2/ Finally if "macro"policy instruments are working properly, the higher income made possiblethrough efficient specialization would presumably lead to greater investment,public expenditures, etc., offsetting any negative net effect at the "micro"level. Even if policy instruments work badly there may be some net effectin this direction. 3/
Whatever may have been the total effects, the negative effects havebeen centered in a few industries. In clothing, total employment in develop-ing countries was about 3.5 million in 1973-less if one excludes the SouthernEuropean countries (Italy, Spain, etc.) where market penetration has been
1/ Counting France and other coutnries not included in Table 33 above.
2/ Possibly the high-wage machinery exports work spends less and savesmore of his income than the low-wage clothing worker left jobless, sothat fewer jobs are created until the savings are invested. But higherincomes also lead at the margin to higher consumption of services,which may be more labor-intensive that production of goods; and thedisplaced worker may still spend out of (2.g.) unemployment compensa-tion.
3/ This is admittedly an intuitive and fuzzy argument. However, analyzingthe interaction of micro and macro-forces is not one of the areas inwhich modern economics is crystal clear and operationally reliable,so that the difficulty may not lie entirely with the author's analyticaldeficiencies.
slight. W3ith developing countries supplying 6 to 7% of the mnrhet in 1973 (asestismted earlier)9, the cumlative job d:splacent at that point B9gt havebeen in the order of 200,000 to 250,000 Yowhorso ThIe5 ioports have sinceexpanded rapidly, especially in Euvope, so thzt t.he cumulative number of jobsdisplaced must now be in the range froe 300,000 to 5001,000 Electronicspresumably ranks second to clothing,, ith a cross job displaceeunt in theorder of half as large, or 150,000 to 250,,000 Textiles and foot ur ouldbe next. Positive effects throuah crports EuSt comn in quite differentindustries, notably those producing mschinery and equipment0
An unprecedently large employment egfect mEust have occurred in theyear 1976. Imports from developing countgies jumped in constant 1975 pricesby somethina like $6 billion to $8 billionz, probably displacing 300,000 to4001,000 workers in one year0 The net d plaeQment must have beea at least150,,000 jobs0 This would mean that about 1% of the unemaployed yorkers wereunable to find jobs in the depressed labov mrket, of 1976, due to theseadded imports. Another fractiou of 1% uould havc found jobs, if importsfrom developing countries have stayed at their 1973 peegecession levelsinstead of growing in both 1974 and 19750 Por the three years direct grosslabor displacement 9mst haw beea at least 3% of the peak uneWloyment, withnet displacement much smaller0
In political terms this groes eff:ect my be more important than thenet effect0 After all ,, workers displaced may sell be aware of the role ofimports in eliminating their jobso Other e'orhers Esy also blame imortsr±ghtly or w'rongly. Th ee uill include cases in which jobs wer-e displacedby imports from other developed countries,, where factories closed because ofother reasons (falling domestic degmand) after being under pressure fromimports , and where jobs were lost that appeared indirectly linked to in-dustries closed by imports,9 for example, in towns hurt by factory closings.By contrast, DorkemS whose jobs uere savzd by the vesulting exports uouldgenerally be unaware of the connection and would appreciate the imports from
devGloping countries1 , if at all1 , only as consuamErso0
E99lOyument Effects in Developing- Countries
For syuEtry >it miasy ba msoful to look briefly at employennt at theother end , in the developing couatries0 Qgre available data are highlyincomplete, although they cover factory ealoymeat in moot wnjor developiagcountries0 Based on these incomplete (and in so3 eases out°of-date) sta=tistics, the total for 1973 twould be in the order of 24-25 million1 or abouttwo=fif ths as many as in the developed countries0 Factory labor productivitymust have been on average a little less tha oa@ third of what it was in thedeveloped countries1 , but varied widely amona countriees
If UN indexes can be balieved1 , in th@ developing countries manu-facturing employwent grew from 1965-74 at 4.GZ and labor productivity at 2.1%.By branches the indexes give the follozing picture 0
- 55 -
Table 35: EMPLOYMENT AND LABOR PRODUCTIVITY GROWTH INDEVELOPING COUNTRIES' MANUFACTURING BY BRANCHES, 1965-74
Average Annual Rate of Growth (%.)Employment Labor Productivity
Food, Beverages, Tobacco 3.8 1.9Textiles 2.9 1.3Clothing, Footwear, Leather Products 5.8 -0.4Wood Products and Furniture 4.5 -0.2Paper and Publishing 4.5 3.2Chemicals, Petroleum, Plastic Products 6.5 1.3Non-Metallic Mineral Products 4.9 3.1Basic Metals 7.2 -0.4Machinery, Transport Equipment, etc. 6.5 3.9
All Manufacturing 4.6 2.1
Sources: UN Yearbook of Industrial Statistics, 1975.
The direct plus indirect employment effects of export of manu-factures from developing countries are larger and more generally positive thanthe job displacement effects in the developed countries. Reasons include thefollowing:
(1) In developing countries export demand tends to be apositive addition to total aggregate demand. Thus,the jobs created are additional to those needed tomeet domestic demand. Added jobs are created indirectlyby increased demand for inputs, and multiplier effectsare generated as workers spend their wages. The result-ing foreign exchange earnings lead in many cases toadditional investment linked with imported equipment,creating jobs in construction. As output comes onstream from the investments, demand expands further.Of course, there are also leakages: added importsare required to provide inputs for the exports, andconsumer goods are purchased abroad along with investmentgoods. But these merely help to limit the expansion.
(2) The number of jobs created directly is larger than thenumber displaced in developed countries, to the extentthat labor productivity is lower in developing countriesso that more workers are required to produce the sameoutput. Here the picture is mixed and varies from oneexporting region to another.' In some "offshore assembly"plants multinational companies find productivity higherthan in their home countries, and in others it maybe about the same. Yet in many auxiliary tasks such as
ingapgant tr sortationz m Tg2eturers find it economicalto substitute labor for capital equipwnst, and frequentlylocal plants cannot match developed country standards ofefficiency. In eztreme cases such as handlooma tentiles,exports are produced using non-factory methods with very lowproductivity.
(3) In addition to exports to developed COUntrieS, one ca perhapscount employment generated by exKporto to other Emrkets, in-lcluding other developing countries0
There have been attetes to estimate the eaployb3msnt effects inindividual economies such as Korea and Taiwan, suggesting that the effectshave been in the order of one million or unre jobs in each0 1/ All suchestimates are hedged with numerous qualificationSo
For the developing countries as a group, it seex2s likely thatdirect additions to factory employmnnt have been in the order of 2 or atmost 3 million 2/==not a smsll number cowpared to about 25 million factoryworkers in all developing countries 0 This is roughly confirmed by recall-ing by way of comparison an estimate earlier (in Table 6 above) that in19739 10% of developing countries' manufactures were exported0 Since theathe proportion has been rising0
The number of jobs created is clearly very smnll relative to thetotal labor force in developing countries 0 Even if one takes into accountall the multiplier effects and the handloom weavegs and construction workers9
1/ With the help of input-output tables9 Wan-=yong KuoD in "Sources ofIndustrial Growth and Structural Change in Taiwan9 ROC,` NIay 1977DTable 199 estimates Taiwan's ewploymant in all sectors due to alltypes of exports at 3409000 in 1961, 714D000 in 1966 and 191389000 in1971 For the kmnufacturing sector alone her estigmteS are 929000 in1961, 208,000 in 1966 and 518,000 in 1971O Nanufactured exports haveincreasingly predominated. David C0 Cole and Larry Eo Westphal, in"The Contribution of Exports to Employm-ent in South Korpaa,` mimesoO,January 1975, use an input-output table to estimasts employwent as aresult of Korea's anufactured expgots valued at $646 million in 1970oThey found direct employment of 2259000 plus indirect employment of293,000 (including 67,000 manufacturing jobs) for a total of 518,000including 292,000 in manufacturing0 Given the huge absolute increasesin exports in both economies (Koreas grew in value over ten times fromE1970 through 1976) these estimates imply gach larger numbers today0
2/ Within industries output per worker is almost certainly above averagein export=oriented plancs9 at least when valued at wiorld prices, al°though this may be offset by exports being concentrated in the mostlabor-intensive branches. Labor productivity on average is probablyat least half that of developed country industries displaced 0
- 57 -
probably in the order of 5 to 10 million jobs have been created, adding
perhaps 1% to total employment in a labor force of several hundred million. 1/
These job-creating effects must have been concentrated in a few geographic
regions--East and South Asia, and few parts of Latin America and the Mediter-
ranean.
What Causes Protectionism Today?
The above analysis suggests a few possible reasons why mounting
pressures of protectionism are triggered in developed countries by imports
from developing countries, even though their shares in overall markets for
manufactures remain very small. The imports have been known to expand
rapidly in narrow product lines, and are felt to have significant employment
impact, more than they do in fact, particularly in a depressed labor market.
No doubt an extrapolation of their rapid growth can be quite frightening
for industrialists and employees in the threatened industries.
Other influences may also be at work. Of these the following
are particularly noteworthy.
(1) Unions and threatened manufacturing industries are
upset by the combined effects of technical progress(particularly automation), slow demand growth, profitsqueezes, and increased imports from all sources.Imports from developing countries are one of the few
irritants for which relief can be successfully sought,
under the rules of the game.
(2) Even where penetration rules are not high, the penetra-
tion normally comes in the most price-sensitive andprice-competitive manufacturing products where theremay be a strong price effect holding down wages and
profits. It is striking in this regard that textile
and apparel prices have declined strongly comparedto other prices, as have electronics prices. For theeconomy as a whole, there may be significant wage and
price-depressing effects as a result of the links
among markets, especially for unskilled-labor.
1/ Confirming that this is no exaggeration of the order of magnitude,
William G. Tyler, in "Manufactured Exports and Employment Creation in
Developing Countries: Some Empirical Evidence," Economic Development
and Cultural Change, January 1976, presents estimates derived from
input-output tables of eight countries (India, Egypt, Taiwan, Yugoslavia,
Mexico, South Korea, Brazil, Philippines) totalling 5,141,000 for dates
ranging from 1960 to 1970, based on direct and indirect employment to
'produce exports of manufactAres. -His estimates -of 516,000 for Taiwan(1969) and 309,000 for Koyea (1968) are conservative compared to those
cited above; but he finds much larger employment effects in India
(2,181,000 in 1964/65) /and Egypt (932,000 in 1969/70).
(3) Labor displacement effects are greater thn panetrationrates because the sccessful peneration comes in themost laborxineensive products and displaces the osiot labor-intensive proceeses. Some of the 8fgted labor farce isnot only poor but poorly organized, hence not very effectivepolitically, but unionized plants are strongly affectedand can make their case besed on the social impact on peoplewho are unskilled and hve nowhere else to go.
(4) Geographically the induztries affected are widely disbursedand are important in the local econscalc of lmany of the townsin which they are found, hence they cam zeert pressrtwe throughntuerous political Heprsetaties aving started in thecities (clozhing) or suburbs (electroiics) they have partlymoved out to small towas in loUwaae rUral areas 0
(5) The current unve of protectionisE is directed mainly againstJapan and a handful of the most successful developing countryexporters headed by Korea, Taitan, and Hong Kong, followed byBrazil. These economies are no longer viewed as waak andbackward0 The strength of the pressure is caused by therecognition that the East Asian countries near Japan arenow emerging as formidable competitors. Except in textilesthere is 11-ttle thought of restricting the smaller developingcountry exporters, unless they are used am bases for ezportsby Japan and the others.
(6) The rising protectionist wave is in large measture a reactionagainst trade liberalization in devcloped countries, a processthat has gone surprisingly far since the 1950's.
Trends in Protection
From the 1950's up to the 1975 recession there has been a cleartrend toward reduced protection. Tariff cuts in the Dillon and (especially)Kennedy Rounds bit quite deep, bringing waighted-average nominal tariffson finished and semi-finished industrial products doun to a range of 8 to 9percent. 1/ The Tokyo Round might ell cut the level by 2 or 3 points moreover the next ten years0 KDst of the tariff cuts have been binding andirreversible0 Meanwhile, the European Cowmunity has been extended, andacquired several types of associate mmbersD, So that almost all of WasternaEurope has or will soon have tariff-free trea@ent along with a long listof developing countries 0 At the same tioe, the United States and WestGermany, among others, have created spccial off-shore assembly provisions
1/ The highest import-weighted nominal arifgf in any oajor product groupwas 25b in clothing, based on GATT computations0
- 59 -
in their tariffs giving duty-free treatment to the value of components producedin the importing country but assembled abroad. All the major industrialcountries have adopted Generalized System of Preference schemes, givingduty-free treatment to many products from developing countries, though some ofthese countries are usually excluded. Japan has undergone a major liberali-zation of its imports, leading to a rapid rise in imports from developingcountries starting from a low base.
By 1975, not only tariff barriers but also nontariff barriers wereweak. In the developed countries as a group, outside textile products aboutone and-half percent of all imports of manufactures (narrowly defined) fromdeveloping countries were subiect to quantitative import restrictions. 1/In leading industrial countries, protective'nontariff barriers were practic-ally absent (with only minor products affected) except for a residual ofadministrative and special obstacles which were most serious in Italy andFrance. 2/ Ever since trade within Europe became liberalized, these specialobstacles have included bilateral quotas limiting a number of specificimports from Japan. The Japanese are used to such discriminatory treatmentand export successfully despite it. In their country, the Japanese claim inturn to have practically no quantitative restrictions in manufactures narrowlydefined except in footwear and leather products. 3/ Other developed countriesencounter difficulties in selling manufactures in Japan, but the problemsappear to center in marketing, customer preferences, financial arrangementsand links among firms more than in administrative barriers created by thegovernment.
Textille products up to 1976 presented a mixed picture. In mostdeveloped countries other than the United States, up to'1976 or 1977 quanti-tative restrictions-under the Multifiber Arrangement (MEA) remained quiteincomplete and not very effective except in narrow product categories. MostEuropean countries did not fully use their powers under MFA, but allowed arapid increase in imports. Even in the United States, as earlier tables show,a considerable increase took place in the value of imports -of textiles andclothing, despite serious quota regulations.
In addition to not being fully applied, the MFA in its early yearhad a permissive side that helps to explain the agreement by developing
1/ This number is based on data given by Ingo Walter, "Nontariff Barriersand the Export Performance of Developing Economies," American EconomicReview, May 1971, and does not include transitional countries such asSpain and Greece, nor food and other natural resource processing.
2/ Standards, though not meant to be protective, act as barriers in somecases, for example, in exports of electrical equipment and appliances._to countries such as West Germany, Sweden and Switzerland.
3/ Where spec'al treatment is used to protect goods produced by the once-desp!sed, disadvantaged Eta caste.
- 60 -
countries to cxtent the Agrangeenag for fougr mEe years from 1978 through
1981 QuotaS under the BA generally grow yevr by yerg. Although this growth
way be negligible in narrow product atEovries 9 there is supposed to be an
overall increase in physical quota coilrngs asvagtint at least 6% per year. 1/
Rules also alloai considerable yearto-yeaer fleidbility for the u-porter in the
time patte of mseting quotasO. Without this * protection aight have
been aore severe and continuing market accoso would hEave become Eore uncertain.
In short, by 1975 protectioa in manfetures had fallea to a low
level, providing little protection in the rsecneion0
The New Wave of Protectionism
Recently9 since about 1975076, in the wsods of the World Bak's
World Development Rpoort 1978 (p. 15)9 'Thege has been a marked increase in
protectionism and pressures for further asures age stron . The protec'
tionist measures have entailed the use of a wide vagiety of devices9 for
example, 'orderly marketing arrangemonts and new iRport quotas; price
floors on imports, as in the case of steel and agricultural products; new
'voluntary' export restraints; 'couutearvrilinx dugti,es-' adEinDstrative
obstacles to imports; and subsidies to domestic industries to sustain levels
of production in excess of those justified by demand0 There have been
calls for the control of msrket shares on a reglimal or uorldwide basis and
for extending protection to a widgr arrny of productgs0 "
This new wave of protectimism has been setrongest n Europe9but has been felt in almost all the developed countries0 Emcepe in a few
industries=oteiles, footwear9 and clothing in perticularKthese neu
barriers up to now have been aimed mors ag Japan than at developing coun-
tries. However, all outside competition has been hurt by large subsidies in
several European countries to these industrias and to others such as steel
and shipbuilding, aimed at waintaining e loycŽ despite large losmes,
which have been charged to the taxpayers0 Kozazyhile9 in actuality og in
threat, a number of restrictive mzeures are bLuEi aimld at developing
countries9 mainly at taiwan, Korea9 HongS Kog and/or Brazxil
Up to now the most serious of theso new reotrictions9 from the
point of view of the developing countries9 have c ome ia te2=tilss and clothing.
Here the European CoEaon Narket has imposed new quotas for the years 1978
through 1982 that "do not wsrely limit ggroth bUt actually reduce imWort
levels. For three leading suppliers (the Republic og Chiain, Hong Kong, and
the Republic of Korea) 9 quotas for 1970 are well below their actual 1976
trade levels in several major product eategories0 All the soiaificant and
potentially significant exzporters have seen their SCope fog eKpanding
exports severely restricted by quotas that grow only slowly froa past trade
.i The new version of NFA accepted in later 1977 allaos for temporary
divergences frota this pattern by betual agreement of the countries
involved.
- 61 -
levels, usually by between 0.5 percent and 4 percent a year, compared withthe previous norm of 6 percent per year. The new agreements also establishlow "trigger levels" for further quotas that limit the scope for diversifi-cation of exports into new products. Restrictive new quotas have beenimposed by other importing countries such as Australia, Canada, Norway, andSweden, while the United States, in its new bilateral agreements, has heldthe quotas of its largest suppliers at the same level in 1978 as in 1977." 1/Already in 1977-78, as a result of the new protectionist measures, developingcountry exports of textiles and clothing appear to be flat or down in realterms, and are losing market shares, while prices of. import-competingproducts have been boosted in developed countries. 2/ As a result, accordingto field interviews, investments in these industries are being cancelled orcut back in some of the poorer developing countries.
Meanwhile, in footwear new quantitative restrictions againstleading developing country suppliers have been imposed, among other places,in Australia, Canada, France and the United Kingdom, and orderly marketingagreements have been negotiated by the United States. In steel, the UnitedStates has gone over to a system of minimum import prices, making it verydifficult for developing country exporters to break into the U.S. market.The European Community is in transition from a temporary system of minimumtrigger prices to a quota system. There have been increases in Europeanrestrictions on consumer electronic products, notably including quotas inthe U.S. on imports of monochrome TV sets, while the U.S. has introduced"monitoring" of color television set imports from Taiwan. In addition tothese principal measures, there have been a variety of new nontariff mea-sures--countervailing duties, emergency quotas, etc.--in a number of otherproducts, such as fabricated steel products, and much noise in favor ofprotection, cartelization and/or "organized trade" in petrochemicals, syn-thetic fibers, and an assortment of other products. A few processed agri-cultural products such as beef and sugar have also been affected.
In this political climate, threats of protection along withprotection and subsidies rank as major obstacles to trade. Meanwhile,recently GATT estimated that 3 to 5 percent of world trade had been affectedby new nontariff measures in the last three years.
There may be more protection to come. And in addition to new overtmeasures such as those noted, developing countries are being warned througha host of signals: public pressures for protection, new French initiatives,restrictions against Japanese exports, and (no doubt) behind-the-scenesdiplomacy. Nevertheles, the threatened actions are in most cases mild.
1/ World Development Report 1978, p. 15.
2/ Based on analyses by Phi Anh Plesch (not yet published), and pressreports, e.g., The Economist, November 11, 1933.
The uaminge ien9iae fg2'O a hGo c utd lndcev aboug thedangers in this neu wauvG of pro @ction a'e uell founded in soon ways,, butthe facts are widely wisundegetood, aia it is widoly thought that thetotality of enistirig rvesictionas io Ere seRioua than in really the cseg,up to now. Obviously, a '"trads wcK avztong the lQedinE dGveloped couriebreaking douu the e2isting libeal Evade u ould be ea disater fovall concerned including the dnvelopinr3 That dangeri my be ve-=ote only because it is well understood0 The other direct dnager is thatincreasingly serious restrictions bill bhe iescd against GOi0 of the de-veloping countriEso ezporc-s. Eee the dsnge is likely to be only =odast.Countries such as Moveas Brazil or -e-co h eo considerable bargaining powterand their economies already hnve fach floibility so that trEde rE@sgtrictionscan slow but not stop theig advencoo
Feghaps the oDst sevious thgrea fgom the neie wave of protsctioaisiais that it ti<ll do much indircet &dasge in developig coilntrias by leadingthaee awey from (or causing thege not to adopt9) ewor oientd policies.Unfortunately, this dmage can no be donsae on the basis of oisiaforTPtionand poor advice, even if the eGw vnve og poftection goes no gurther.
ANNEX A
DEVELOPING COUNTRIES'IMPORTS OF MANUFACTURES
Imports of manufactures by developing countries have trended upwardyear by year in real terms, reaching $129 billion in 1975. 1/ Of this total,86% or over $111 billion were supplied by developed countries. This was 5.8times the trade flow in the opposite direction, which was $19 billion inexporters' statistics. 2/ This represents an unusually high ratio due tothe recession on the one hand, and the oil boom on the other. In 1973 thisratio was 3.7.
The share of machinery and transport equipment (SITC 7) in the totalis usually in the neighborhood of 50% or a little higher, reaching 55% in1975. This is also roughly true for each developing region. In 1975 thisshare was 56% in Latin America, 48% in East and South Asia, 58% in the MiddleEast and 57% in Africa and Oceania.
Thanks to the oil boom, the latter two regions are now close to thefirst two in the value of their imports of manufactures. Each of the fourregions imported over $300 billion worth of manufactures in 1975.
The developing countries' share of the developed countries' exportshas jumped from about one fifth in the early 1970's, and slightly less thanthat in 1973, to over one fourth in 1975. In real terms developing countries'imports of manufactures from our sources rose by 70% and their imports fromdeveloped countries increased by 66% in the 1970-75 period; these numbersimply real growth rates in the order of 11% per year. Judging by what hashappened to total imports, this growth must have slowed somewhat in 1976.According to IMF figures, total imports by developing countries rose in valueabout 10% from $191.6 billion in 1975 to $211.1 billion in 1976. 3/
The following table summarizes some of the relevant statisticalseries, based on UN trade matrixes.
1/ Here and throughout this annex, Yugoslavia is counted as a developedrather than a developing country: if it were counted as developing, thenumbers would be higher.
2/ These statistics understate the exports to developed countries, becausethey exclude Mexico's border exports and understate some other flows.
3! They have grown further in 1977.
A1N APogo I
Table A 1: DEVELOPXM COUMIS' XNPORTS 07 NOPAC'1 S
1970 197L 1972 1973 1974 1975 1976
Total Value (Current Doll8oo) 3900 43O3 30.6 63,7 10409 12909 14201Machinery & Transport Rquip:int 19,5 22.4 26.5 3352 5309 7007 81.3Chemicals 5,2 5,0 6.3 9.4 1509 16.3 1603Oth@r 14,3 1354 173 2461 33o1 42.7 44.5
Froma Developed Countriro 32.3 3702 42.7 5706 3007 111.3 12102!Machinery & TranGport Equi3zQnt 17.3 20.1 23.7 310b 4505 64,0 73.6Chemicals 4,3 3.0 3,8 5,1 1306 14.0 13.7Other 110 12.1 13.2 13,1 29.6 3303 34.1
Total by RegionLatin America 12.9 13.3 16.0 2003 32.3 35,4 35,5East & South Asia 11.9 13.3 1531 21.7 30,0 31,9 34oGMiddle East bo9 5,3 7,7 1Oo9 19.3 32,1 3905Africa & Oceania 9.3 10.6 11.3 15.3 2209 30.3 3203
From Developed CountrieoLatin America 11.3 12,2 1641 17,6 2.00 3008 30,3East & South ksia 9.0 11.3 1203 1704 2467 25.0 28.0Middle East 3.6 4,6 6.2 3,3 1509 2706 33.3Africa & Oceania 9.3 10,6 101 13,3 20,0 27,1 28,9
Tocal Value (Connetane 1970 Dollaro) 3900 4104 44,0 5317 640A 71,4 77e7Machinery & Tranoporz Equipent 1905 2103 23,5 26$5 31,4 3308 446,
From Developed Countrico 32,3 3354 37A0 43,3 54,3 61,2 66,2Machinery & Trnaport EZqtdpzat 17,3 19,1 2100 23,6 20,1 35,2 40,1
By Comparison (Current Dolinro)Developing Countries' spoirtoof Manufactureo 9,0 9,6 14,7 23,0 31,1 32,4 41,6
Developed Countrieo' Empartnof Manufacturee 161,4 103,9 213,4 23O.9 300,4 421,9 472,0
N4ote: Yugoolavia iL counted hcao no 8 dov CeUnggy, not S dvelopin Ono.
Sources: UP Monthly Duilloin o0 Sistien, JtRO 1973, UN Y7cnboeh ofIntegatiouwal TVad Stnagiogico 1973,
ANNEX B
MANUFACTURED EXPORTS OF DEVELOPING ECONOMIES FROM1965 TO 1977 BY COUNTRIES AND REGIONSA/
(Million current U.S. dollars)
Value of Exports in SITC 5-8 Minus 68R{egion and Economy 1965 1970 1971 1972 1973 1974 1975 1976 1977
East Asia/Pacific
lBong Kong (incl. reexports) 989.1 2,329.1 2,672.8 3,233.2 4,682.4 5,444.6 5,590.1 7,859.3 8,911.2llong Kong (excl. reexporta) 1,949.4 2,213.5 2,635.0 3,636.8 4,337.1 4,463.6 6,480.3 7,253.2Korea (Republic) 103.8 640.5 872.8 1,358.8 2,709.8 3,775.4 4,136.1 6,746.8 8,498.1Taiwan 186.6 1,139.7 1,636.4 2,462.3 3,674.3 4,630.4 4,303.4 6,921.0 7,934.1Singapore 300.4 427.6 583.3 892.5 1,598.6 2,316.8 2,232.6 2,920.3 3,496.4Malaysia 67.8 151.7 123.3 161.4 346.5 547.4 664.4 798.5Thailand 12.1 38.6 65.0 117.3 255.4 347.9 332.0 510.6*Philippines b/ 65.8 78.4 78.6 94.1 219.6 236.0 258.9 396.8New Caledoni5r 84.4 145.3 135.5Macau 37.1 42.7 68.3 89.7 96.6 123.4 207.3Indonesia 10.9 11.9 16.4 29.4 58.8 59.2 75.0 119.0Fiji 0.4 5.5 6.1 7.3 11.3 13.2 10.6 10.5Papia-New Guinea 2.4 3.7 20.9 21.2 16.8 23.7 16.8
Western Samoa - 0.1 0.4 0.7 0.3Dem. Kampuchea 0.7 0.6 0.5 0.6New llebrides - 0.2 0.5 0.1 0.1 0.1 - - -Vietnam 0.4 1.0 0.1 0.1 8.6Tonga - 0.1 0.1 0.1 0.2 0.2 0.1Iaos 2.2 - - - 0.5
TotaJc/ 1,625 4,530 5,720 7,925 12,700 16,480 16,765 25,280
1?8ge 2
Q4eAuoln and Economy 1965 n970 2971 1172 MI73 1974 1975 1976 R107
SotatAh Asia
ffndAa dI 009.0 2D051.2 DD092.9 LJ5320.3 LD560.7 2,03R.3 1D960.0 2D 02.7pakletar- 90.2 425.0 0 3690.6 391.5 592.9 579.09 571.0 677.2 653.3Banlasdealr- 04.4 R54.4 171.6 217.7 070.7 220.3Suit Lznka 3.4 4.0 7.L 27.6 M9G0 32.1Bal ui a 0.5 1.6 3,0 3.5 14.0 14.0 4.0
Tot8Da Dn10O5 21400 nD560 L 630 2D360 2,070 2 D735 3D740
Birazil Dl 121.0 362.5 441.2 740.0 11D216.0 1,920.7 2.92.3 2O332,4 3,04m.1PienlcEp 165.$ U 572.3 724.2 n D0R.n I a 140 2,275.0 2,00009 2"326.5
ArgenAn 8b1.4 245.0 262.09 393.6 730.L 957.3 722.5 975.5JaMM,atc L3.52 21o5 25.3 O M70, 10.1 4L5.0 41O4 344.6
Co11ombla 33.0 50O3 °0.4 272.2 307o3 397.0 305.5 303,0VeatezueLa 10,0 40.1 430 9 5b4.7 7Y0 136.0 115.2'Ta-ILaAdad and Vbao 27.0 62.0 71.0 6004 70.2 ROM. RL0.0 121.0 M03A6
BaOealatac 27.0 3MO, 45.7 6Y.0 606 00,5 0905 07.5Gatatema,ag 26,0 R1.3 70.1 0664 L?7, 152.09 154,
EI Salvador 32.2 65.5 730. 03.0 L40.59)o-mAnfctn RepauKt1 2.0 7.3 0.6 57.0 07,2 e0s. 120.0COtil4a Rica 26.5 43.2 40.1 54.0 73.5 R19.2 2n10.CR,ae R25.0 .50.6 40.2 44.2 44.5 LO7.0WetLhrland AnTi1lea 13.9 35.0 29.0 3Y75 54.2 00,7 72.4 65.4NIcragauL 6.4 20.3 20.2 34.3 43,0 70.0 6302 07.3Barbados 0.0 11.3 L1.0 15.3 21.3 26.7 20.0 37.1blalLA 0. 6 12.3 1.5 14.3 2409 30.0D'elctt - 12,4 11,2 25.0 20,6 51,A8miiduraa 5.6 13.7 5.R 6.2 14.3 20,5 32.2 390.4Ecuiador 3.3 3.3 6.5 13.2 21.5GtAlyanla 4.5 4.1 4.7 6(. 7.6 0.0 30.2 34.7Paraplay 4.6 5.4 I7.R 9.3 16.1 17.3 10.RtlrtigliLdy 3.0 55.6 117.7 5.1 L14.2 69o.6
Page 3
Rogion and Economy 1965 1970 1971 1972 1973 1974 1975 1976 1977
HartiniqRY. 1.2 1.9 1.6 4.1 5.1 6.8 5.9 6.9 8.t
Sulrinam - 3.5 ' 2.4 3.2 3.6 1 80.7 95.8 118.8 130.5
Antigua 2.7 1.7 1.5 3.6 *3.8
Pananma 0.6 1.7 2'.3 2.4 6.3 13.4 13.5
St. Lucia 0.3 1.4 ' 1.8 2.6 3.4
Belize 1.0 1.3 2.3 3.7 4.8 4.5
Guadeloupe 1.3 0.9 0.7 0.9 1.7 2.0 2.9 4.2 4.7
French Guiana 0.4 0.2 0.2 0.6 - 0.4 0.5 1.2
BI'olivia - 6.7 5.4 1.4
Total 655 1,845 2,105 3,170 4,880 7,380 7,310
Southern Europe
hpain 380.2 1,273.4 1,769.6 2,467.3 3,200.0 4,561.4 5,372.5 6,025.2 7,203.0
YVigoolavia 616.7 1,001.6 1,149.1 1,409.1 1,917.5 2,524.3 2,903.3 3,382.5
Israel 276.3 539.9 679.1 847.2 1,108.8 1,388.1 1,452.1 1,854.7
Greece 43.6 222.1 202.2 310.7 537.1 904.9 1,003.0 1,252.3 1,372.0
Portugal 347.3 592.8 697.0 871.9 1,281'3 1,591.6 1,355.5 1,198.0 1,385.0
Turkey 10.9 52.5 81.5 123.7 221.5 337.0 326.3 465.7
Hita 11.6 22.7 31.0 50.4 74.8 96.4 117.2 167.2 220.5
Eyprus 3.8 5.2 7.5 9.2 13.2 18.3 57.0 94.8 135.2
Total 1,690 3,710 4,620 6,090 8,355 11,425 12,590 14,440
North Africa'and West Asia
Kuwait 16.5 48.7 114.5 166.4 243.9 544.5 732.0 428.2
Egypt 122.9 206.6 220.3 255.5 283.4 398.6 477.4 386.0
Lebanon 18.5 119.3 164.3 235.5 347.2
Iran 57.5 96.4 134.6 186.3 218.9 255.7 208.2
Hurocco 23.1 47.2 73.8 90.3 129.9 192.7 192.2 202.2
Tunisia 22.6 34.9 35.5 47.0 83.9 205.0 168.1 202.9
Algeria 28.5 63.4 71.8 58.6 60.3 82.7 96.3 47.5
Syria 16.4 22.1 22.9 38.3 54.7 62.8 72.4 107.8
Balra in 39.0 47.2 54.1 86.9 173.2 185.7 200.0
.lo)rdan 5.1 11.3 12.1 20.6 23.0 37.6 48.1 71.5 101.2
-Qata;^t - - 10.6 12.6 30.9 48.6
T83a 4
eAl!! and Econonmy 1965 1970 1971 1972 l97 3 1974 1975 1976 MM72
A ra' 6.6 10.5 1211 1197 22.9 20.4 7.0 4b7AghiainAstan 0.9 9.2 127 M.5 29.6 24.4 21.4DewicTatic Yemen 7.7.1969)Yemeni t03 0.11 0.7 0.0
335 600 ooo ID Lso DLD500 2D200 2D220
'ropic~a AZrica
Aabuo11a 32.3 0. 2 60.6 03.0 91.3 R11O4.Sler1ra Leone $1.7 610.1 60.0 72.0 @00ol 06. 7boAZatre 27.2 40,.2 49.0 64.R 5103 54.1Sec1egal 30 3¢0.2 20.5 36.9 b 42. 53O0 146.0Xvoiry CoaT l1b.o7 20.0 25.3 45.5 65.0 02.1 12.1330 a 1116.0 153,21K(eiiya L2.7 25.0 2906 311.2 44.0 59.5 60.2 YSo1 111601Cameroon 6.3 119.2 20.0 21.6 32.3 42.4 4bY2 40,5BoTeawana 25O4 20.0 44.4 4b30.ITanazanla 23.3 29.6 3170 21.4 30,0 b3.0 40.1 30.5eCongo 2173 0.0 o13.5 20,11 21, 110o2 20.1 23,o
Gabon R0.~~~~13 10. MO3.3 11.511, 0.4 1111.
[ladeaffi,car 40. 1091.0 0.11 115 22.0 112.4MAPelerDa 10.2 0.2 0,3 112.0 n6,0 15.7 111.46 10UtunSon 5.1 2,6 3.05 6.4 6.3 0.4 4.5 130 0.4(Gham §5.0 2.3 3,5 6.3 234 904 0.0NeurDtmntA 0.6 0.1 1.5 6. L1.2 2.1 1.0U.DQbenDaj CZ3 4,4 5.3 5.0 4.0 4.0
Mi,DZ&EMblqUe 1.2 14I.1i 0.2 5.L 0.2 0. ?TEa w 064 S.1 4.1 5.0 5.0 111.0 5.4 5.2
iaurf@ttz I 11.0 2.1 4.6 11.4 25,0 35.4a D 6)0.4 3,4 3.2 3,5 4.0 1.11 4o3 112R
11u8o 113 3.11 110o.1 2. 6 4.3 6.2 21.3BLenCe I (0.0 3.4 2.6 3.11 3,5 T1.1M:htA5pa 0.11 11,6 11.0 205 5.6 4 .0) 15.3 I(5.0Sudan 0,2 0.9 110 2.6 11,2 11.3 3,0
Page 5
Region and Economy 1965 1970 1971 1972 1973 1974 1975 1976 1977
Zambia 1.4 1.3 2.3 2.4 2.9 3.3 2.9
Upper' Volta 0.6 0.8 1.0 1.7 1.3 2.9 2.7Rwanda - - - 0.9 0.5 0.6 - -
Niger 0.6 0.9 1.0 3.3 4.2 5.7 7.6
Uganda 0.9 0.6 0.6 0.7 .0.7 0.5 0.1 -
Chad 0.2 0.5 0.5 1.2 1.2 1.1
Somalia 1.6 1.5 1.3 0.3 0.7 0.4Cape Verde Island 0.1(1969) - - - - 2.6
Burundi 0.4 0.5 0.5 0.3 0.6 0.5
Gambia
Total 255 435 525 680 670 780 910
South Africa 401.0 737.8 750.1 839.1 1,259.3 1,467.4 1,448.8
CRAND TOTAL 5,965 13,420 16,065 21,580 31,725 42,600 43,980
a/ Manufactures are defined in terms of SITC 5 to 8 minus 68. Totals throughout this table Include all econoates for whichdata in any year are'not available using estimates. Data for several countries (Singapore, Kuwait, Lebanon, Jordan,
etc.) include substantial reexports.
b/ Mostly exports of SITC 671.5 (Other ferro-alloys).
c/ Excluding Hong Kong's reexports.
d/ Includes exports from what is now Bangladesh in 1965 and 1970.
e/ Bangladesh figures from 1971 to 1974 are based mainly on exports of jute manufactures and leather. New series starts
in 1975 with manufactures defined in terms of SITC 5 to 8 minus 68.
f/ Data for 1970 thirough 1976 includes interior Mexico's exports (based on national statistics) as well as Haqulladora's
exports (using U.S. statistics of imports from Mexico under Tariff Items 8'06.30 and 807.00).
/ New series starts in 1972 with the inclusion of aluminum oxide (SITC 513.65) as manufactures.
It/ New series starts in 1973 with the inclusion of aluminum oxide (SITC 513.65) as manufactures.
i/ E'xclides manufactured exports from Bahrain (almost entirely reexports).
Sou,rce: UN, Yearbook of International Trade Statistics, UN, Commodity Trade Statistics, series D, and
spec. s.ources c4tcd in prcvious tables.
RECENT PAPERS IN THIS SERIES
No. TITLE OF PAPER AUTHOR
284 Pakistan: Forestry Sector Survey S. Draper, A. Ewing.J. Burley, G. Grayum(consultants)
285 The Leisure Cost of Electric Power Failures M. Munasinghe
286 Shadow Pricing and Power Tariff Policy M. Munasinghe, J. Warford
287 Wages Capital Rental Values and Relative S. Guisinger (consultant)
Factor Prices in Pakistan
288 Educational Reform in the Soviet Union: I. Blumenthal,
Implications for Developing Countries C. Benson (consultants)
289 Petroleum and Gas in Non-OPEC Developing R. Vedavalli
Countries: 1976-1985
290 Major Reforms of the Swedish Education System A. Heidenheimer (consultant)
291 Industrialization, Technology and Employment - T. Rawski (consultant)
China
292 Development and Income Distribution - Zambia C. Blitzer
293 World Potash Survey W. Sheldrick, H. Stier
294 The Economic Dimensions of Malnutrition.in M. Selovsky
Young Children
295 The Technology of Rural Development J.P. McInerney (consultant)
296 The Financial Cost of Agricultural Credit: C.D. Datey (consultant)
A Case Study of Indian Experience
297 Agricultural Sector Planning Models: A.C. Egbert
A Selected Suary and Critique
298 Textbooks and Achievement: What We Know S.P. Heyneman.J. Farrell,A. Sepulveda-Stuardo(consultants)
299 An Economic and Social Analysis of the C. BruceChao Phya Irrigation Improvement Project II Y. KimAro
__o 'TITE OF PAPER
300 Two-suiss of flcQvG1oprgpc ±z S°Saboa A,-ic S. Ap?nwy1 o Joha3gOF (Ceouzxlgang)
301 ThQ LLt2GdClte SectolZ Unap loyiega EF31d1 Tho YI.F. Stoow1JlOmg°Ougput Conflict, A Mslti-QIfzg3 Wodol Y. Tai3 R (coza1lUanf)
302 ThQ Eco9aofic Theoey of th 0 F0O)ohold ea d . Zseg D0 Qezip-tovofty
Nwauesan of Mur rifion and noazpeR Becigh
py'oCgaas
303 TradQ Awrictiono anOd lntQentagowal PwicQ N. DUO
lsaeebility E. Wt2g
304 InaTasovenm}ental Fiscal RQGIZPio&ao ix DQWQ09iSo R. Bigd (eoioulEaut)
Cotgriaz
305 A Pwogaia Aproach to Fogti'a1± @cme A. CO
PlEannn A. mwcolQ
306 The Faoeiga E.=hgnge Gap, Groruth ad X. De9
Sumtegey in Tugkny: 1973-1983 S. abisou
307 The Iportance of Risk in Agricultural PI W P. RgQ119 R. NoKtoO
C0 '>nvde(cousdatan)
308 Guidlin1e@s; foP School Locgltioza PlaimtS GO Uld (Consaltant)
309 Grweth and Poverty &a Developing ± Ouatgic's Co sallan NE CagogN
310 T@ae-@e Training and6 Student: ALchOc-Y}cg ig 'E. PQEv-oD L. Sian
LCos9 Developed Counties E. Wounn (eogo9u08g9-)
311 Op Economic POWOQR Supply Q1--l Oabiiy N. Nn ahoH. ColPSego (eooulaszOan)
312 ata-tIdustry Trade cad thn g Bo 3aa
Devloulpin Couatrieo Ina tho Wbrld 1Ecoa~E
313 Eol oritio Po1ici±s D. V99as
314 The Chaingina Cowopsitioa of Deoelopine Comggy H0R.Cho ry
Enorto D. Meaocia
315 U'bann Growth and Econolc DzEchnReN. C hoa
Siho1
