Abstract
This first section of this chapter includes a brief overview of trade theories, followed by a presentation of globalisation’s positive effects and its downsides. Section 7.4 explains how the spirit of multilateralism came about and which institutions were created to regulate international trade. Finally, two questions are dealt with: (i) to what extent developing countries benefit from international trade and globalisation, and (ii) what can be done to let developing countries benefit more from international trade and globalisation?
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Maddison, A. (1995) Monitoring the World Economy 1820–1992. Paris: OECD, 37.
- 2.
The text on the Stolper-Samuelson Theorem is largely based upon Protection and Real Wages: the Stolper-Samuelson Theorem, by Rachel McCulloch. In Szenberg, M. (2005) Samuelsonian Economics in the 21st Century.
- 3.
Frederic Benham (1900–1962) sketched a different picture. In 1961 he wrote in Economic Aid to Underdeveloped Countries (London: Oxford University Press): ‘The belief that international trade consists mainly of the exchange of manufactured goods from industrial countries against primary products from the underdeveloped countries is quite wrong. If we exclude the trade of the Communist countries (just over 10 percent of the total), more than half the remainder is trade among industrial countries themselves. Some 10 percent is trade among the underdeveloped countries themselves, and less than one-third is trade between them and industrial countries.’ 43. On page 46 of the same publication Benham argued: ‘All this suggests that the reasons for changes in the export proceeds of any particular commodity can be found only by studying the conditions affecting that particular commodity, and should not be attributed to general fluctuations in the economic activity of the industrial countries.’
- 4.
This observation is confirmed by Paul Cashin and John McDermott: ‘Although there is a downward trend in real commodity prices, this is of little policy relevance, because it is small compared with the variability of prices. In contrast, rapid, unexpected and often large movements in commodity prices are an important feature of their behavior. Such movements can have serious consequences for the terms of trade, real incomes, and fiscal positions of commodity-dependent countries, and have profound implications for the achievement of macroeconomic stabilization.’ Source: Cashin, P., McDermott, J. The Long-run Behavior of Commodity Prices: Small Trends and Big Volatility. In IMF Working Paper, Nr. 01/68 (2001).
- 5.
Krugman, P., Venables, A. Globalization and the Inequality of Nations. In The Quarterly Journal of Economics, Vol. CX, Issue 4, November 1995, 857–880.
- 6.
Bhagwati , J. (2004) In Defense of Globalization. Oxford: Oxford University Press.
Wolf, M. (2004) Why Globalization Works. New Haven: Yale University Press.
- 7.
Lin , J. (2012) Demystifying the Chinese Economy. Cambridge: Cambridge University Press, 4.
- 8.
China is exporting products with a higher productivity than what would be expected of its level of per capita income, meaning that it produces and exports sophisticated goods which are typically associated with high-income countries.
- 9.
In 1980, the US represented 22% of the world economy. To date this percentage is down to 15%. In 1980, all traditional industrial economies contributed 60% of the world’s GDP. To date they contribute some 30%.
- 10.
UNIDO’s Industrial Development Report 2018.
- 11.
Baldwin, R. (2016) The Great Convergence; Information Technology and the New Globalization. Cambridge: The Belknap Press, 14.
- 12.
Ibid., 11.
- 13.
Ibid., 249.
- 14.
Thirlwall, A., Pacheco-López, P. (2017) Economics of Development. Tenth Edition. London: Palgrave Macmillan, 154.
- 15.
‘…for nearly a third of a century incomes of most Americans have been essentially stagnant.’ Source: Stiglitz, J. (2017) Globalization and its Discontents, Revisited. London: Penguin Books, xiii.
- 16.
A Fair Globalization: Creating Opportunities for All. Geneva: ILO 2004, 13.
- 17.
The Economist’s Survey on Globalisation (1 October 2016) noted that the US lost 6 million manufacturing jobs between 1999 and 2006. One-fifth of this drop was due to China’s competition. However, the loss in manufacturing jobs in the US, due to technological advances, predates the rise of China as an exporter. Stiglitz, for example, mentions in Globalization and its Discontents, Revisited: ‘The [American; PdH] steel mills today produce the same amount of steel that they ever have, but with one-sixth the labor force’, xix.
- 18.
Economics of Development, 499.
- 19.
The Growth Report, 7.
- 20.
Milanovic, B. (2016) Global Inequality, a New Approach for the Age of Globalization. Cambridge: The Belknap Press, 30.
- 21.
Rodrik , D. (2011) The Globalization Paradox. New York: W.W. Norton, 52. On page 53, Rodrik adds that the resources used in international exchanges must be valued at their social opportunity costs rather than at their market price only. If economics were only about profit maximization, it would be just another name for business administration. However, economics is a social science, and society has other means of cost accounting besides market prices.
- 22.
Ibid., 60.
- 23.
Between 1929 and 1934, the volume of world trade declined by two-thirds between. By the way, contrary to conventional wisdom, tariffs constituted a significant barrier to international trade during the first wave of globalisation (1870–1914).
- 24.
Dosman, E. (2008) The Life and Times of Raúl Prebisch, 1901–1986. Montreal: McGill-Queen’s University Press, 380.
- 25.
The Globalization Paradox, 72.
- 26.
Michalopoulos, C. (2017) Aid, Trade and Development; 50 Years of Globalization. London: Palgrave Macmillan, 36.
- 27.
I benefitted in describing Prebisch’s role from Dosman’s biography The Life and Times of Raúl Prebisch, 1901–1986.
- 28.
The February 1962 issue of Fortune magazine described Prebisch as follows: ‘…doctrinaire…perhaps the most influential—but not necessarily the soundest—political economist in the hemisphere, with an engaging, volatile personality and a mind as agile as it is capricious…one of those politically minded economists who tailor their economics to fit their objectives.’
- 29.
The Life and Times of Raúl Prebisch, 396–397.
- 30.
Ibid., 417.
- 31.
Dosman noted that Prebisch had used the term NIEO for the first time in October 1963, so even before UNCTAD. It gained clarity and precision as he spread his gospel in every possible forum he was invited to; a gospel few wanted to hear, by the way.
- 32.
The Life and Times of Raúl Prebisch, 434.
- 33.
Ibid., 501.
- 34.
Ibid., 501–502.
- 35.
Michalopoulos presents a different picture: ‘The GSP turned out to be less than it had been touted to be at its inception. It was important for some products, for some countries and for some of the time. …Because it was a voluntary scheme, it meant that developing country suppliers were less certain about market conditions than under contractual arrangements involving bound tariffs in GATT. ’ And on page 184 he adds: ‘They [GSP preferences; PdH] typically exclude ‘sensitive’ products, which are often the very products of export interest to developing countries.’ Source: Aid, Trade and Development, 39.
- 36.
Perhaps this is giving UNCTAD too much credit. After all, IMF decisions are only made by the IMF Board. SDR is an international reserve asset created by the IMF in 1969 to supplement its member countries’ official reserves. In practice, particularly developing counties make use of SDRs. They see them as a cheap line of credit.
- 37.
Ibid., 47.
- 38.
‘The collapse of the International Tin Agreement and the International Coffee Agreement in 1989 were due in large part to the setting of too high intervention prices and free riding. By 1996, the economic provisions in all major commodity agreements had either lapsed or failed and new market-based approaches to guard against price fluctuations started to be explored and used.’ Source: Aid, Trade and Development, 48.
- 39.
Economics of Development, 519.
- 40.
With the exception of an agreement on higher minimum trading prices for agricultural grains and an international wheat agreement providing for 4.5 million tons of wheat available to the most deserving nations.
- 41.
In the past there were five international commodity agreements for sugar, tin, rubber, cocoa, and coffee. All broke down in the course of time. Ironically, the only agreement that survived is the EU’s Common Agricultural Policy, which is not particularly helpful to developing countries.
- 42.
Making Globalization Work, 77.
- 43.
‘I heard many stories from delegates [of developing countries at the WTO; PdH] to the effect that they had been pressured to sign the Marrakesh Agreements by the EU and the US or else—meaning lower bilateral aid levels; and that some had not even understood what they were signing.’ Source: Aid, Trade and Development, 158.
- 44.
Ibid., 38.
- 45.
Ibid., 153.
- 46.
Sachs, J., Warner, A. Economic Reform and the Process of Global Integration. Brookings Papers on Economic Activity, 1 (1995). According to the authors, a country is closed if at least one of the following criteria applies: (i) an average tariff higher than 40%; (ii) non-tariff barriers covering more than 40% of imports; (iii) a socialist economic system; (iv) a state monopoly; or (v) a black market exchange rate premium in excess of 20%.
- 47.
The Globalization Paradox, 167.
- 48.
Wickstead, M. (2015) Aid and Development. Oxford: Oxford University Press, 168.
- 49.
The Great Convergence, 99.
- 50.
For example, they enjoy the freedom to undertake policies that limit access to their markets or provide support to domestic producers or exporters in ways which are not allowed to other members and they are provided with more time to meet their obligations or commitments under the WTO agreements. Michalopoulos rightly wonders why countries like Singapore and China, registered as developing countries by the WTO, would really need preferential treatment for their exports to penetrate developed country markets. Source: Aid, Trade and Development, 135.
- 51.
Ibid., 137.
- 52.
Collier, P. (2007) The Bottom Billion. Oxford: Oxford University Press, 183.
- 53.
Ibid., 187.
- 54.
Aid, Trade and Development, 227. On page 321 it is mentioned that trade powerhouses like Brazil, China, South Korea or Singapore are all considered ‘developing countries’ based on WTO’s self-selection principle.
- 55.
The Globalization Paradox, 154–155.
- 56.
Stiglitz, J. (2002) Globalization and its Discontent. New York: W.W. Norton, 245.
- 57.
Altenburg, T., Lütkenhorst, W. (2015) Industrial Policy in Developing Countries, Failing Markets, Weak States. Cheltenham: Edward Elgar, 102–103.
- 58.
Aid, Trade and Development, 140.
- 59.
Rodrik, D. (2011) The Globalization Paradox; Democracy and the Future of the World Economy. New York: W.W. Norton, 83.
- 60.
Ibid., 200.
- 61.
Ibid., 204–205.
- 62.
‘The unfettered proliferation of regional and other PTAs [preferential trade agreements; PdH]—‘termites’ in the language of Bhagwati…ostensibly consistent with WTO provisions—is undermining the edifice of WTO rules based on the MFN principle, and thus weakening the second leg on which the WTO stands.’ Source: Aid, Trade and Development, 297–298.
- 63.
Aid, Trade and Development, 147. The recently re-negotiated NAFTA deal would increase American GDP by 0.35% and employment by 0.12%, according to the United States International Trade Commission.
- 64.
I worked six years each in Bolivia and Zambia. Bolivia is a member of MERCOSUR, and of Comunidad Andina de Naciones (CAN ), of which Colombia, Ecuador, Peru, and Venezuela also form part. Bolivia benefitted from CAN, in that it became a prominent soy bean exporter to other member countries, in particular to Colombia. Then, there was ATPDEA, the so-called war-against-drugs trade agreement between the US and Bolivia, in which, in exchange for the eradication of coca plants, Bolivia gained preferential access to the American market for textiles, leather, and timber. It should be noted that, in the past, Bolivia made much more money from the illegal coca production. Despite all these trade agreements, Bolivia is still a raw materials exporter: in 2017, fuels, ores, and gems together accounted for 71.3% of Bolivia’s total export.
Zambia is a member of COMESA, together with 18 other African countries. Zambia also belongs to the 14-member Southern African Development Community (SADC ) which established a free-trade agreement in 2008. The establishment of a single market through the merged COMESA, the East African Community (EAC) and SADC was launched in 2015. Zambia has also duty-free and quota-free access to the EU market under the Everything but Arms (EBA ) scheme. It is also eligible for American trade benefits under the Africa Growth and Opportunity Act (AGOA ) which provides duty-free and quota-free access to the US market for most goods, including textile and apparel. Like Bolivia, Zambia has not been able to move its exports from raw materials to manufactured goods: in 2017, copper still accounted for 75.7% of Zambia’s total export. This is what Thirlwall and Pacheco-López observe: ‘The general experience of regional trade agreements in developing countries has been disappointing because they have been inward-looking and protectionist, with trade diversion exceeding trade creation.’ Source: Economics of Development, 485.
- 65.
Globalization, Growth and Poverty; Building an Inclusive World Economy. Washington: World Bank Policy Research Report, January 2002, 5.
- 66.
Olson, M. Big Bills left on the Sidewalk: Why Some Nations are Rich, and Others Poor. In The Journal of Economic Perspectives, Vol. 10, No. 2 (Spring, 1996), 15.
- 67.
Global Economic Prospects and the Developing Countries. Washington: The World Bank; 2002.
- 68.
Rodrik, D. (1998) The New Global Economy: Making Openness Work. Policy Essay No. 24. Baltimore: Johns Hopkins University Press.
- 69.
Stiglitz, J. (2006) Making Globalization Work. New York: W.W. Norton.
- 70.
Greenaway, D., Morgan, W., Wright, P. (1998) Trade Reform, Adjustment and Growth: What Does the Evidence Tell Us? In Economic Journal, 108 (450): 1547–1561.
Greenaway, D., Morgan, W., Wright, P. (2002) Trade Liberalisation and Growth in Developing Countries. In Journal of Development Economics, 67(1): 229–244.
- 71.
Economics of Development, 498.
- 72.
Perspective on Global Development; Rethinking Development Strategies. Paris: OECD, (2018), 1.
- 73.
Ibid., 5–6.
- 74.
Dollar, D., Kraay, A. (2002) Growth is Good for the Poor. In Journal of Economic Growth, 7 (3), 195–225.
- 75.
The World Bank’s World Development Report 2000/2001 already reflected the Bank’s stance of putting the reduction of poverty at the centre of its activities.
- 76.
Milanovic, B. (2005) Can We Discern the effects of Globalization on Income Distribution? In World Bank Economic Review, 19(1): 21–44.
- 77.
Economics of Development, 503.
- 78.
Ravallion, M. (2006) Looking Beyond Averages in the Trade and Poverty Debate. In World Development, 34 (8): 1374–1392.
- 79.
The Great Convergence, 105–108.
- 80.
Milanovic, B. (2016) Global Inequality; a New Approach for the Age of Globalization. Cambridge: The Belknap Press, 11.
- 81.
It is projected that the global middle class will grow in numbers from 1.8 billion in 2009 to around 3.2 billion in 2020.
- 82.
Global Inequality, 20.
- 83.
Ibid., 22.
- 84.
Global Inequality, 20.
- 85.
Lang , V.F., Mendes Tavares, M. (2018) The Distribution of Gains from Globalization. IMF Working Paper, WP/18/54.
- 86.
Ibid., 27.
- 87.
Ibid., 38. However, Lang and Mendes Tavares warn that the results of the regressions undertaken should be interpreted with caution; among others, because they are based on a dataset that had not been subjected to scholarly scrutiny.
- 88.
Globalization and its Discontents, Revisited, 363.
- 89.
It should be mentioned that the export interests of developing countries were also damaged by protectionism of other developing countries.
- 90.
Making Globalization Work, 96.
- 91.
Economics of Development, 518.
- 92.
De Haan, P. (2006) Development in Hindsight; The Economics of Common Sense. Amsterdam: KIT Publishers, 51–52.
- 93.
The Distribution of Gains from Globalization.
- 94.
As for TPP, China is pushing the Regional Comprehensive Economic Partnership as an alternative to TPP.
- 95.
The Globalization Paradox, 275.
- 96.
‘Apple became emblematic, paying a tax in the United States that was far, far below the 35 percent of its income that is the official tax rate by taking advantage of loopholes in the United Sates tax code and routing of its profits through Irish subsidiaries.’ Source: Globalization and its Discontents, Revisited, 362.
- 97.
Luce , E. (2017) The Retreat of Western Liberalism. London: Little Brown, 83.
- 98.
Special Report on Migration, The Economist, 16 November 2019, 3.
- 99.
The Globalization Paradox, 268.
References
Altenburg, T., & Lütkenhorst, W. (2015). Industrial Policy in Developing Countries, Failing Markets, Weak States. Cheltenham: Edward Elgar.
Baldwin, R. (2016). The Great Convergence; Information Technology and the New Globalization. Cambridge: The Belknap Press.
Benham, F. (1961). Economic Aid to Underdeveloped Countries. London: Oxford University Press.
Bhagwati, J. (2004). In Defense of Globalization. Oxford: Oxford University Press.
Cashin, P., & McDermott, J. (2001). The Long-Run Behavior of Commodity Prices: Small Trends and Big Volatility. IMF Working Paper, Nr. 01/68.
Collier, P. (2007). The Bottom Billion. Oxford: Oxford University Press.
De Haan, P. (2006). Development in Hindsight; The Economics of Common Sense. Amsterdam: KIT Publishers.
Dollar, D., & Kraay, A. (2002). Growth Is Good for the Poor. Journal of Economic Growth, 7(3).
Dosman, E. (2008). The Life and Times of Raúl Prebisch, 1901–1986. Montreal: McGill-Queen’s University Press.
Greenaway, D., Morgan, W., & Wright, P. (2002). Trade, Liberalisation and Growth in Developing Countries. Journal of Development Economics, 67(1).
ILO. (2004). A Fair Globalization: Creating Opportunities for All. Geneva: ILO.
Krugman, P., & Venables, A. (1995, November). Globalization and the Inequality of Nations. The Quarterly Journal of Economics, CX(4).
Lang, V., & Mendes Tavares, M. (2018). The Distribution of Gains from Globalization. IMF Working Paper 18/54.
Lin, J. (2012). Demystifying the Chinese Economy. Cambridge: Cambridge University Press.
Luce, E. (2017). The Retreat of Western Liberalism. London: Little Brown.
Maddison, A. (1995). Monitoring the World Economy 1820–1992. Paris: OECD.
McCulloch, R. (2005). Protection and Real Wages: The Stolper-Samuelson Theorem. In M. Szenberg (Ed.), Samuelsonian Economics in the 21st Century.
Michalopoulos, C. (2017). Aid, Trade and Development; 50 Years of Globalization. London: Palgrave Macmillan.
Milanovic, B. (2005). Can We Discern the Effects of Globalization on Income Distribution? World Bank Economic Review, 19(1).
Milanovic, B. (2016). Global Inequality; A New Approach for the Age of Globalization. Cambridge: The Belknap Press.
Olson, M. (1996, Spring). Big Bills Left on the Sidewalk: Why Some Nations Are Rich, and Others Poor. The Journal of Economic Perspectives, 10(2).
Ravallion, M. (2006). Looking Beyond Averages in the Trade and Poverty Debate. World Development, 34(8).
Rodrik, D. (1998). The New Global Economy: Making Openness Work. Policy Essay No. 24. Baltimore: Johns Hopkins University Press.
Rodrik, D. (2011). The Globalization Paradox; Democracy and the Future of the World Economy. New York: W.W. Norton.
Sachs, J., & Warner, A. (1995). Economic Reform and the Process of Global Integration. Brookings Papers on Economic Activity, 1.
Special Report on Migration. (2019). The Economist, November 16.
Stiglitz, J. (2002). Globalization and Its Discontent. New York: W.W. Norton.
Stiglitz, J. (2006). Making Globalization Work. New York: W.W. Norton.
Stiglitz, J. (2017). Globalization and Its Discontents, Revisited. London: Penguin Books.
Survey on Globalisation. (2016). The Economist, October 1.
The Growth Report; Strategies for Sustained Growth and Development. (2008). Washington: World Bank.
Thirlwall, A., & Pacheco-López, P. (2017). Economics of Development (10th ed.). London: Palgrave Macmillan.
UNIDO. (2018). Industrial Development Report 2018. Vienna: UNIDO.
Wickstead, M. (2015). Aid and Development. Oxford: Oxford University Press.
Wolf, M. (2004). Why Globalization Works. New Haven: Yale University Press.
World Bank. (2001). World Development Report 2000/2001. Washington: World Bank.
World Bank. (2002). Globalization, Growth and Poverty; Building an Inclusive World Economy. World Bank Policy Research Report. Washington: World Bank.
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2020 The Author(s)
About this chapter
Cite this chapter
de Haan, P. (2020). Trade, Globalisation and Development. In: Whatever Happened to the Third World?. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-39613-8_7
Download citation
DOI: https://doi.org/10.1007/978-3-030-39613-8_7
Published:
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-030-39612-1
Online ISBN: 978-3-030-39613-8
eBook Packages: Economics and FinanceEconomics and Finance (R0)