There have been in recent months a spate of reports and other publications providing data on global economic growth, trade, and industrial development, which have highlighted the arrival of the developing countries as a group, as a major player in the global economy. Much of the data show the developing countries as a group out-performing the industrialised economies. A 'new geography' of global economic activity and trade has been pronounced. The classic colonial/imperial division of labour it is claimed, no longer holds true. The South is no longer a vast reservoir and source of untapped raw materials, with which to feed industrial development in the North. And in exchange the South no longer remains a market for these manufactured goods produced in the North, which they themselves cannot produce.
A new geography of economic activity!
How significant have been the changes? Is there indeed a 'new geography' of trade? What are we to make of these claims? Are they far-fetched or do they reflect a new reality that has overtaken us, almost unnoticed? In responding to these questions I would like readers to bear in mind constantly that, impressive as the performances have been, as we shall see, the gaps in incomes, capacities, capabilities, knowledge, science and technology, R&D, between the North and South are huge and widening. Average per capita GDP in the North, at about US$27,000 last year was 20 times higher than average per capita GDP in the developing countries. Overwhelmingly the leading global transnational firms (TNCs) are located in the industrialised countries. It is these firms that represent the cutting edge of economic achievement. Indeed as individual enterprises, many of these TNCs have larger volumes of sales than total expenditure in most developing countries. In many instances the foreign sales of just one of these firms can be several times larger than the total value of all exports from either Africa or India.
With that reality check, let us highlight some of the data that have occasioned the claims for a new global division of labour. In the mid 1980s the South accounted for 20 per cent of world trade, today this has grown to 30 per cent. The share of manufactures in the South's exports has risen from 20 per cent in 1980 to 70 per cent today, with a value of about US$1.5 trillion. The United States for the first time last year has imported more from the developing countries than the industrialised economies.
Also last year 40 per cent of its exports went to the developing countries. Japan and the European Union (EU) had similar strong trade ties with developing countries. Japan sent one-half of its exports to the developing countries, while the EU sent one-third of its exports (not counting intra-EU trade) to the developing countries.
The rise of industrial development
in the South
One of the most striking areas of change has been the phenomenal growth of the manufacturing sector and industrial development in the South. In 1980 the manufacturing sector accounted for 14 per cent of GDP in the South, but by 2000 this had reached 24 per cent of GDP. Between 1980 and 2000, the annual rate of growth of manufacturing value-added world wide was 2.6 per cent, and for the developed countries it was 2.3 per cent. However, for the developing countries it was 5.4 per cent. This figure is more than double the former rates of growth. This was truly a spectacular performance.
More importantly I believe is the major structural shift that has occurred in the nature of the manufacturing sector in developing countries. Internationally, manufacturing is classed into four broad categories in ascending order of complexity and sophistication namely, 1) resource-based manufacturing 2) low-technology manufacturing 3) medium-technology manufacturing and, 4) high-technology manufacturing. Between 1980 and 2000, the production of medium and high-technology manufacturing in the South had risen from 41 per cent to 53 per cent of total manufactures.
Meanwhile the share of the less complex and sophisticated categories had fallen. Thus the share of resource-based manufactures declined from 37 per cent in 1980 to 31 per cent in 2000 while that for low technology manufactures fell from 23 to 16 per cent over the same period.
Not only did the manufacturing sector and industrial development grow at a rapid rate in the South, but the South also participated strongly in the trend towards the globalisation of manufacturing production value chains. As a result overall their exports of manufactures grew at a faster rate than the growth of the manufacturing sector itself.
For a short period in the early 1980s this did not hold true, because of the global slowdown in economic activity during that time. Consequently, between 1980 and 2000 the share of the developing countries in global manufacturing exports had doubled, rising from 13 per cent to 27 per cent. It should be noted that the industrialised developed economies still remained the dominant player in the global market, as they accounted for 70 per cent of the total global exports of manufactures.
Weakness: uneven
performances in the South
These figures taken as they stand represent a staggering achievement. The main limitation they suffer from as evidence to support the thesis that a new division of labour has arrived, is that most of these gains were highly concentrated in East Asia, including China. Thus, East Asia's share of global manufacturing exports rose from 6.8 per cent in 1980 to 18.4 per cent at the end of the millennium. This latter figure represents 70 per cent of the developing countries' share of global manufacturing exports in 2000, as compared to its share of 52 per cent in 1980. By way of comparison, Latin America and the Caribbean (excluding Mexico) saw its share decline from 2.7 per cent in 1980 to 2.2 per cent in 2000. In Sub-Saharan Africa its already small share of 0.7 per cent declined further to 0.6 per cent.
The performance of East Asia was not only confined to its rising share of global exports of manufactures, but the manufacturing sector in East Asia itself rose from 29 per cent of its GDP in 1980 to 54 per cent by 2000. This was by any standard a rapid rate of industrialization.
By way of comparison, the Latin America and Caribbean region, which had the highest level of industrialization for all developing countries in 1980 when its share of manufacturing in its GDP was 47 per cent, had by 2000 fallen to 22 per cent.
The growth of the developing countries and their creation of a new division of labour has been, therefore, heavily contingent on the exceptional performance of the Asian tigers and the Chinese dragon.
As we shall see next week China has become a 'major workshop of the world.' It has been the highest gainer of all. And, with its recent accession to the WTO, it holds the key to the future of all developing countries and their efforts to indeed create a new global division of labour.