The Politics of International Economic Relations by Spero Joan Edelman. Hart Jeffrey A

The Politics of International Economic Relations by Spero Joan Edelman. Hart Jeffrey A

Author:Spero, Joan Edelman.,Hart, Jeffrey A.
Language: eng
Format: epub
Publisher: Taylor & Francis Ltd

The New Order for the 1980s

Trade between the developed and developing countries underwent several changes that altered the politics of North-South trade in the 1980s. Despite the predictions of experts that the world faced a future of ever-diminishing raw materials, the soaring commodity prices of the mid-1970s turned out to be a cyclical phenomenon. If anything, the long-term trend seemed to be a decline and not an increase in the growth of world demand for raw materials. In the 1970s and 1980s, rates of growth of GNP in the developed countries fell from the rapid rates of the 1960s, thus slowing demand for commodities. Demand also declined as output in the Northern states shifted from manufacturing, which requires raw materials, to services, which use far fewer raw materials (see Chapter 3). The dramatic rise in prices in the 1970s encouraged conservation, greater recycling, and the substitution of traditional materials by synthetics or by technology and energy-intensive materials. This decline in demand growth combined with a new capacity created by investment during the commodity shortages of the 1970s led to excess capacity, oversupply, and weakening of prices.61

Prices of non-oil commodities of developing countries fell by 24 percent between 1980 and 1986. They recovered somewhat, rising 14 percent between 1986 and 1988, but then fell again by 16.6 percent between 1989 and 1993.62 From 1985 to 1992, the terms of trade fell by 10 percent for the low-income developing countries, by 4, 2, and 0 percent, respectively, for the lower-middle, middle, and upper-middle income developing economies.63 From 1980 to 1986, the industrial countries' terms of trade improved by 9 percent.64

The decline in commodity prices seriously affected the poorest of the developing countries who still relied heavily on commodity exports. For example, the value of Zambia's exports, over 90 percent of which are copper, declined by over one-half between 1980 and 1985. In the same period, Liberia's export earnings, largely from iron ore and rubber, and Bolivia's earnings, largely from tin, declined by nearly 40 percent.65 Although cyclical factors may boost demand for certain raw materials and while certain developing country exporters may benefit from shifts in demand for commodities, commodity power will not be an effective bargaining tool for the South.

While many of the poorest developing countries were caught in the collapse of commodity prices, others were developing strong manufacturing capabilities and increasing their exports of manufactured products. In the 1970s, export-oriented industrialization policies of a number of developing countries began to bear fruit. Lower labor costs in labor-intensive industries, such as textiles and shoes, and production innovations often acquired from the North, as in the case of steel, enabled certain developing countries to compete successfully in Northern markets.

From 1970 to 1992, the share of manufactured goods in exports from the developing countries almost doubled, reaching 52 percent of the total value of their exports in 1986, up from 27 percent in 1970.66 By 1993, Southern manufactured exports accounted for 32 percent of world manufactured exports.67 Southern manufactures also came to represent a large share of Northern imports.


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