CBM 122

• Over the past several decades, the economies of the world have become increasingly linked, through expanded international trade in services as well as primary and manufactured goods, through portfolio investments such as international loans and purchases of stock, and through direct foreign investment, especially on the part of large multinational corporations
• Foreign aid has increased much less in real terms and globally has become dwarfed by the now much larger flows of both private capital and remittances
• The South needs the North, and increasingly the North needs the South: 'United Nations Development Programme, Human Development Report, 2013'
• However misguided the old model of blanket protection intended to nurture import substitute industries, it would be a mistake to go to the other extreme and deny developing countries the opportunity of actively nurturing the development of an industrial sector: 'Report of the High-Level Panel on Financing for Development (Zedillo Commission), 2001'
• The upshot is an agricultural trading system in which success depends less on comparative advantage than on comparative access to subsidies: 'Kevin Watkins and Joachim von Braun, 2002–2003 IFPRI Annual Report Essay'
• For some people, the term globalization suggests exciting business opportunities, efficiency gains from trade, more rapid growth of knowledge and innovation, and the transfer of such knowledge to developing countries, facilitating faster growth, or the prospect of a world too interdependent to engage in war
• For other people, however, globalization raises troubling concerns: that inequalities may be accentuated both across and within countries, that environmental degradation may be accelerated, that the international dominance of the richest countries may be expanded and locked in, and that some peoples and regions may be left further behind
• In some of the smaller countries, a substantial percentage of the economy's income is derived from the overseas sale of agricultural and other primary products or commodities such as coffee, cotton, cacao, sugar, palm oil, bauxite, and copper
• Because the markets and prices for these exports are often unstable, primary-product export dependence carries with it a degree of risk and uncertainty that few nations desire
• The long-term trend for prices of primary goods is downward, as well as very volatile
• Some African countries, including Burkina Faso, Burundi, Central African Republic, Gambia, Niger, and São Tomé and Príncipe, received 8% or less of their merchandise export earnings from manufactures in 2011
• Some developing countries have been receiving at least two-fifths of their export earnings from one or two agricultural or nonfuel mineral products
• Out of 141 developing countries, 95 are more than 50% dependent on 3 or fewer commodities for their export earnings
• Despite strength since 2002 and some rebounding after the 2008 crisis, the long-term trend for prices of primary goods is downward, as well as very volatile
• None of the above African countries received more than 2% of their export earnings from fossil fuels in 2011
• Some other countries such as Nicaragua have similarly low manufacturing export shares
• For 40 countries, the production of three or fewer commodities explains all export earnings
• Out of 141 developing countries, 95 are more than 50% dependent on commodity exports, and in most sub-Saharan African countries, the figure is 80%
• In 2011, Venezuela, Yemen, and Algeria each received 97% of their export earnings from fossil fuels, and Nigeria and Iran each received 89% of their export earnings from fossil fuels
• High reliance on oil and other fuel exports has brought substantial, if often hidden, economic costs and political distortions
• An outsize oil sector often acts as an enclave in the economy, benefiting relatively few citizens, yet resulting in reduced exports from other sectors of the economy that might do more to benefit development in the long term
• Export dependence also extends to services, notably tourism, which is "exported" when foreign visitors purchase domestically produced services
• A sudden loss of income from service exports can be as devastating as the loss of other export revenues, as happened in 2011 in the Middle East and North Africa region during and after the conflicts associated with the "Arab Spring"
• In Egypt, tourist arrivals fell by 32% in 2011, and tourist expenditures correspondingly fell from about $51 billion to about $43 billion, and remained at depressed levels
• In 2011, tourism revenues in Tunisia fell by nearly 30%
• Such experiences also illustrate the benefits of diversification
• For a majority of developing nations, import demands exceeded their capacity to generate sufficient revenues from the sale of exports for much of the post–World War II period, leading to chronic deficits on their balance of payments position
• Severe deficits on current and capital accounts have led to a depletion of international monetary reserves, currency instability, and a slowdown in economic growth
• These austerity measures may have further exacerbated the slowdown in economic growth and the worsening of poverty and unemployment in much of the developing world
• A chronic excess of foreign expenditures over receipts can significantly retard development efforts and greatly limit a low-income nation's ability to determine and pursue its most desirable economic strategies
• Many indebted countries went into surplus as they paid down some of their debt, and a pattern of trade surpluses has strengthened for many, though by no means all, developing countries
• Developing countries have sought to avoid repeats of the crisis conditions of Latin America in the 1980s, sub-Saharan Africa in the 1980s and 1990s, and East Asia in 1997–1998
• The sudden collapse of export earnings during the 2008 financial crisis provided a glimpse of the dangers
• This pattern of trade surpluses carries its own risks, as it means that developing countries are effectively exporting capital and leaves economies vulnerable to a sharp correction when the large and chronic U.S. balance of payments deficits are reversed
• By opening their economies and societies to global trade and commerce and by looking outward to the rest of the world, developing countries invite not only the international transfer of goods, services, and financial resources but also the developmental or antidevelopmental influences of the transfer of production technologies; consumption patterns; institutional and organizational arrangements; educational, health, and social systems; and the more general values, ideals, and lifestyles of the developed nations of the world
• The impact of such technological, economic, social, and cultural transfers on the character of the development process can be either consistent or inconsistent with broader development objectives
• Whether it is best for developing countries to look primarily outward and promote more exports, to emphasize looking inward and substitute domestic production for imports, or to be simultaneously and strategically outward- and inward-looking in their international economic policies cannot be stated a priori
• Individual nations must appraise their present and prospective situations in the world community realistically in the light of their specific development objectives to determine how to design the most beneficial trade strategy
• Although participation in the world economy is all but inevitable, there is ample room for policy choice about what kind of participation to promote and what policy strategies to pursue
• WTO membership comes with prohibitions or restrictions on some policies, but there remains a great deal of scope for policy choice for developing countries