Introduction
Many developing countries are putting more emphasis on producing and exporting manufactured commodities rather than primary commodities. These countries are also securing new markets for their commodities. A recent detailed study conducted by the World Trade Organization reveals that developing countries have reduced their dependence on exports of primary commodities and made significant progress in exporting manufactured commodities within the last three decades.
According to the World Trade Organization report, the experience of some developing countries likes Bangladesh and Costa Rica implied that being small, landlocked or least developed does not hinder a country from being an exporter of manufactures. The economies of developed countries are relatively open. They experience a lot of intrinsic problems in seeking diversity for their exports.
These problems include shortages of skilled manpower, limited domestic resources, poor economic infrastructure, geographical separation from major trading partners and, therefore, higher cost of transportation. However, developing countries are now key players in international trade. In the year 2006, these countries contributed 30 percent of the total world exports (Friedman, 2007).
Contrary, the export share of developed countries reduced with the share of the United States falling from 14 percent to 9.6 percent. Japan also suffered a reduction in her export share by falling from 8.6 percent to 5.4 percent. The importance of developing countries as an import demand source has increased as well. This gives a reflection that there is an increase in availability of foreign exchange as well as a purchasing power. It is also a faster growing middle class and has a large demand for imported goods.
The European Union imports to china increased more that three times between 1996 and 2006, as its imports from Russia, Central Asia and Eastern Europe tripled. Developing countries also got a 38 percent import of the total exports of the United States in 2006, which is up as compared to 30 percent ten years earlier. On the other hand, European Union’s exports to Japan and other developed countries grew a relatively skimpy 30 percent and 80 percent respectively.
One major reason why developing countries shifted to manufactured export from commodity exports is the emergence of south-south trade. For a period of almost two decades now, investment and trade have increased both in the richer countries of the north and in the countries of the south. For example India and China remarkably increased their imports from SSA and MENA, partly as a result of increasing commodity demand.
According to Murray (2004), the growth of south-south trade has been a major reason behind increasing attractiveness of developing countries as foreign direct investment destinations, both to access the big and extensive domestic markets in host countries and as platforms of exports for multinational corporations. Developing countries contributed about 43 percent of world foreign direct investment flows in 2008, a remarkable rise from 31 percent in 2007.
The effect of these changes to international trade
Developing countries that are successful have always tracked export led policies of economic growth, shifting from export of primary commodities to manufactured goods. Due to this, many developing countries of today have dwelt more in exportation of manufactured goods. China exceeded both Japan and the United states in 2006 and increased its share from 3.2 percent to 9.8 percent in a span of ten years. The portion of manufactured goods has also gone up in other developing countries.
Mainly because of higher prices, and also due to new natural resource discoveries and increased effectiveness in production, developing countries also raised their exports of chemicals and mineral fuels. Maintaining the current trend, the value share of exports in developing countries will go up from 31 percent of today to 70 percent after four decades. The share of China will go up from 7.5 percent to 23 percent, while that of India will shoot to 6.3 percent from 1.1 percent (Vietor, 1994).
In contrast, the share of the developed countries will reduce, with that of Japan dramatically falling from 5.3 percent to a mere 2.3 percent while that of the United States falling to 7 percent from 9.5 percent. The role developing countries will thus increase significantly. The imports of China from the European Union and the United States will contribute to 3.2 percent of the world’s total after four decades. This represents more than twofold increment in its significance as an export market.
Conclusion
An extensive growth world trade, as well as observed increases in effectiveness, innovation and human welfare are likely to be experienced by developing countries in the coming decades. The shift made by developing countries in exporting manufacture goods is having an adverse impact on the export shares of the industrialized countries. As illustrated in the paper the economies of the developing countries are expected to grow as those of developed countries stagnate or decline.
References
Bhagwati, N: (1987). International Trade: Selected Readings: MIT Press.
Caves, E: (1990). World Trade and Payments: – An Introduction: McGraw Hill
Friedman, M: (2007) A shift in Exportation Trends of Developing Countries: Oxford University Press
Murray, C: (2004). The pure theory of international trade and investment: London
Vietor, H: (1994). Contrived International Trade Competition: – Harvard Univ. Press.
Watson, P: (2005). A History of Thought and Invention from developing countries: Harper Collin