THE EFFECTS OF INDUSTRIALIZATION ON EXPORTS OF PRIMARY- PRODUCING COUNTRIES

SUMMARY The effects of industrialization on exports of primary-producing countries. In the period from pre-war to 1955, the volume of exports from the "semi-industrial" countries (i. e. the industrializing group of primary-producing countries) failed to rise, whereas exports from the "non-industrial" countries (i. e. all other primaryproducing countries outside Western Europe, North America and the Soviet bloc) rose by about 60% in volume. There are two schools of thought about the main causes of this lag in exports from the semi-industrial countries. The first school places emphasis on the defciency of demand by the industrial countries for the products of the semi-industrial countries; the second emphasises a deficiency of supply of exports resulting from the process of industrialization in the producing areas. Recent annual reports of GATT have presented statistical comparisons of the exports of the semi-industrial and the non-industrial countries which appear to support the supply-deficiency argument. The GATT analysis, however, suffers from two deficiences. First, it makes inadequate allowance for variations in world demand for particular commodities; second, it makes no allowance for the influence of relative price changes on the exports of particular countries. The present article attempts to build on the GATT analysis by extending it to include these two additional factors. A special index of world demand is constructed for the exports of each of the semi-industrialized countries, based on the movement in world trade of individual commodities and using the commodity-pattern of exports from each country as weights. Further, an index of export unit values of world trade in the commodity "bundle" of exports from each country is computed and related to the actual export unit value index of each country. Regressions of export volume on the indices of world demand and relative prices show a close correspondence between exports from a given country and the relevant world demand changes (as represented by world trade). The mean co-efficient for the relative price variable is -1.7, but the standard error is high (±0.9). The inclusion of a dummy variable to indicate the presence or absence of sheltered market yielded no significant result, but this was probably because the variable used is a very imperfect indicator of the degree of shelter enjoyed. The inclusion of industrial growth in the regressions indicated that if there is any significant relation between industrialization and exports it is a positive, and not a negative, one. A more detailed commodity analysis shows that the export experience of the non-industrial countries was in total much the same as that of the semi-industrial countries, if the comparison is limited to directly competitive commodities. Finally, it is shown that there is a positive association between industrial growth and the “capacity to import”. The implications of the analysis are (I) that industrialization per se in the period covered did not have a retarding effect on the exports of the semi-industrial countries as a whole; (2) the retardation in their exports was due essentially to the slower rate of growth in demand for their "bundle" of commodity exports than for those of the non-industrial countries; and (3) that the pace of industrialization has itself been heavily dependent on the progress of exports. These generalizations appear to fit most closely the views of the "demand-deficiency" school mentioned above.