Diversification of production structures and exports has traditionally
been seen as the key to fast development. Indeed, this has been taken so
much for granted, that for much of the past half century the debate among
economists has been not so much about the desirability of this goal, but
of the policies required to achieve it. Marketist neoliberal economists
have argued that the best way is through liberalisation, deregulation and
greater integration of domestic markets with world markets, while
structuralist economists have emphasised the need for domestic structural
change assisted by trade restrictions which promote industrialisation.
In either case, the need to
enter new forms of production, to diversify away from traditional exports,
and ideally to enter high-value manufacturing production, has been taken
for granted. But some new research (discussed in the latest Trade and
Development Report produced by UNCTAD) suggests that even this may not
be as unproblematic as it appears, and that product diversification in
itself ensures neither more dynamic exports not even higher incomes from
such activities.
On the face of it, developing countries as a group have achieved an
impressive degree of production diversification over the past two decades,
and this has also been reflected in export performance. From the early
1980s, merchandise exports from developing countries having been growing
much faster (at 11.3 per cent per annum) than the world average of 8.4 per
cent.
More
significantly, there has been a bug shift in developing country exports,
away from primary commodities (whose share has fallen from 51 per cent in
1980 to only 19 per cent in 1998) and towards manufactured goods, which
now account for more than 80 per cent of their exports. What seems most
promising is that the largest increase has been in the increased exports
of manufactures with high skill and technology intensity, whose share
jumped from 12 per cent of total developing country exports in 1980 to 31
per cent in 1998.
Despite all these apparently
positive signs, however, there is no evidence of improved income shares
for developing country exporters. In fact, the Trade and Development
Report 2002 argues that “while the share of developing countries in
world manufacturing exports, including those of rapidly growing high-tech
products, has been expanding rapidly, the income earned from such
activities does not appear to share in this dynamism.
This becomes apparent from a comparison of shares in exports and value
added in world manufacturing. While developing countries as a group more
than doubled their share of world manufacturing exports from 10.6 per cent
in 1980 to 26.5 per cent in 1998, their share of manufacturing value added
increased by less than half, from 16.6 per cent to 23.8 per cent. By
contrast, developed countries experienced a substantial decline in share
of world manufacturing exports, from 82.3 per cent to 70.9 per cent. But
at the same time their share of world manufacturing value added actually
increased, from 64.5 per cent to 73.3 per cent.
This means that developed countries moved up the value chain much faster,
and that developing country exporters have continued to face problems in
translating export volume growth into income growth. The problem is
compounded by the fact that developing countries remain net importers of
manufactured goods, indeed they have become more so. Imports of
manufactured goods have continuously outpaced exports of such goods for
developing countries, unlike developed countries. Meanwhile, manufacturing
exports have consistently exceeded the value of manufacturing value added,
once again the opposite of developed countries.
How can we square
this with the evidence on product diversification and entry into dynamic
exporting sectors that was mentioned above ? After all, developing
countries have been increasingly active traders in what are seen as the
most dynamic sectors of the world economy : computers and office
equipment; telecommunications, audio and video equipment; semiconductors.
