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Lecture 8
Don DeVoretz
Trade as a Handmaiden of
Growth ?
An Overview
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QUESTIONS:
• 1. How does trade affect rate and structure
of LDC Growth?
– Structure:
• x’s/GDP =%,
• % of mfg x’s. % of ag x’s
• 2. What are conditions for Trade to act as an
impetus to growth ?
– What were the historical conditions is Canada
?
3
More Questions
• 3. What are conditions for Trade to act as an
impediment to growth ?
– Income and price elasticities of demand
• 4. What is the best set of commercial
policies to follow to achieve growth through
trade ?
– Outward looking indices
• convertibility, effective tariff rates
4
Final Questions
• 5. How do you measure the trend in export
and import prices ?
• 6. Should LDC's join DC's in trade unions ?
– What has happened to Mexico and Chile in
Nafta ?
5
Trade: Facts and Figures
• Facts:
– Is there a story here ?
– Is Trade a Handmaiden of Growth or Not ?
• Growth in International Trade after 1970 (billions $1980)
– Year
1970
• World Exports: 312
• % Developed 72%
• % LDC’s
17%
1980
2,002
66%
28%
1986
2,113
69%
20%
1990
3,187
75%
17%
1995
3,555
77%
15%
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B. Several Trends emerge
• Ten fold increase in 25 years
• Underdeveloped rise and fall of share owing to
mineral and oil prices.
• Cartels don’t work in long-run, OPEC, tin, coffee,
cocoa, etc.
• Within the developed-underdeveloped grouping is
great variance;
– .NICS’s South Korea, Hong-Kong, Singapore and Taiwan
versus.India and ROW
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NICS Patterns
– Mfg. X’s as % of total X’s
– 1965
1975
– Taiwan 46
83
– Korea
52
77
– HK
92
97
– Singapore 29
40
– Brazil
5
23
– Mexico 14
30
1990
93
94
96
73
53
44
%Total Exports
1965
1975
26
34
9
24
56
49
81
178
6
8
3
8
GDP
1990
51
32
50
132
6
19
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C. What Do we Learn from NICS ?
• Mfg is key. Why?
– .Income and price elasticity of demand
» [D(P*Q)/(P*Q)]/ [D( Y/Y)/(Y/Y)]> 0
– Business cycles can affect you
– Exchange rate depreciation is often key to
stability and growth
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End of Show
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