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Trade

The Past and Future of Export-led Growth

Ihssane Loudiyi's picture

by Shahid Yusuf

The history of development since 1950 is remarkable overall but it offers only a few outstanding success stories. These are based on the experience of a small handful of European and East Asian economies among which Germany, Finland, Japan, Korea, China, Malaysia, Thailand, Taiwan (China) and Singapore are the notable ‘high achievers’. Each sustained two or more decades of sustained rapid growth between 1955 and 1997. From among them, only China has continued forging ahead at near double digit rates since 2000. All the others have slowed.

An analysis of this unique body of experience yields five stylized facts which together underpin a particular model of development. The questions being asked insistently following the financial crisis of 2008-09, are: whether the export-led growth model can continue to shape the strategies pursued by the elite group of high achievers and also of late starters aspiring to emulate the performance of the East Asian economies? Or, whether changing global circumstances in the early 21st Century have rendered the model obsolete for most if not all economies and demand a fresh approach differentiated according to specific country circumstances?

Don’t Blame Mother Nature

Otaviano Canuto's picture

by Otaviano Canuto

As my World Bank colleague Milan Brahmbhatt and I observed in a recent note, primary commodity exports remain crucial for most developing countries. When one takes a simple average across developing countries (i.e. attributing each country an equal weight) for 2003-07, commodities still show up as accounting for over 60 percent of merchandise exports, with half of the group featuring a commodity export dependence of over 70 percent. Chart 1 shows different degrees of primary commodity dependence across regions.


Source: Brahmbhatt & Canuto (2010)

Changing Development Paradigms

Raj Nallari's picture

This global crisis in not only about financial market failures but also government failures in several countries as reflected in failure to contain the housing bubbles and credit booms, bad regulations, and lack of supervision and enforcement). Both in advanced and developing countries, there are second thoughts on open markets, private ownership of nationally ‘strategic’ industries (autos, banks), and movement of transnational financial and industrial firms, and migrant labor. Trade and financial protection is on the increase as countries that have been less reliant on exports and foreign capital are weathering the storm better. In this semi-open global environment, would export-led growth strategy be combined with industrial policies to protect domestic industries, and/or emphasize resource-dependent growth, where possible?

Before we respond to these questions, it will be useful to focus on what went wrong in economics in 2007-08. Some economists are re-inventing economics to respond to such a query.

OECD-World Bank Innovation and Growth Book Now Available

Ihssane Loudiyi's picture

Innovation is crucial in long-term economic growth, even more so in the aftermath of the financial and economic crisis. Making innovation-driven growth happen requires action in a wide range of policy areas, from education and science and technology, to product and labor markets and trade. The OECD and the World Bank are joining forces to work more closely on innovation, particularly insofar as this issue is a crucial factor in the success of development policy, notably in middle-income economies.

The Doha Trade Round is Worth Fighting For

Otaviano Canuto's picture

November marks the eighth anniversary of the Doha Development Agenda– the first multilateral trade negotiation under the auspices of the World Trade Organization.  But what started as a real opportunity to help poor countries prosper through trade, for some it has now become a lost cause. But Doha doesn’t have to be a metaphor for failure. We can still save it and make it work. After all, if we can’t fix Doha, how can we hope to address much greater challenges that confront us, such as climate change?

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