Dependence
Dependence
In recent years, many developing countries have decried their dependence, realizing that they are too dependent on the sale of one primary commodity and/or too dependent on one country as a customer and supplier. Because LDC economies are small, they tend to be much more dependent on a given industrial country than the industrial country is dependent on them. Mexico, for example, depends on the United States for over 60 percent of its imports and exports, whereas the United States depends on Mexico for less than 5 percent of its imports and exports. Mexico can thus be much more adversely affected by U.S. policies than the United States can be affected by Mexican policies. This sort of dependence by an LDC on an industrial country has led to a widespread belief that dependence will retard the LDCs development.25 Fear of dependency has led many LDCs to try to change their production and trade patterns, as reflected in the opening case on Sri Lanka.
Figure 4.3 shows that in 21 of the 22 industrialized countries (all except Iceland) the leading export accounts for less than 25 percent of total export earnings. Among the developing countries, however, 57 percent are dependent on one commodity for at least 25 percent of their export earnings. A selected list of high-commodity dependencies by LDCs is given in Table 4.3.
The developing countries are also more dependent on one trading part-
ner than are industrial countries (see Fig. 4.4). The trading partner on whom
the developing country typically depends is almost always an industrial coun-
try (some examples are shown in Table 4.4). Only one of 22 industrial coun-
tries (CanadaJ_conduct£^ (the United
States) and only 23 percent of industrial countries depend on their leading
trading partner for over 25 percent of their exports. Seventy-five percent of
LDCs depend on their leading trading partner for more than 25 percent of
their exports.
Although theorists and policymakers wishing to lower dependency have proposed a number of different approaches, they all propose that LDCs intervene in the foreign trade markets. As shown in the introductory case, Sri Lanka has attempted to diversify its exports by developing nontraditional products that its policymakers believe can ultimately be competitive in world markets.
Trade Strategies Among Developing Countries
in earlier discussions we emphasized that most LDCs depend on the export of primary products. The manufactured goods they export are usually mature products requiring high inputs of unskilled or semiskilled labor. While these distinctions are true in an overall sense, they nevertheless obscure some differences among groups of developing countries. For those countries that do export manufactured goods, the type of good and country can be placed into one of three categories. Countries in the first group—Hong Kong, Singapore, Taiwan, South Korea, Israel, Portugal, and Greece—lack natural resources and have concentrated on exporting mature labor-intensive products. They have all emphasized marketing, design, and information about foreign markets as a means of becoming competitive. Countries in the second group—Yugoslavia, Argentina, Brazil, Mexico, and Turkey—have natural resources, which they can use for further processing into manufactured goods, and domestic markets that are large enough to support scale economies. These countries have had success in exporting capital goods, chemicals, and other intermediaries. Countries in the third group—India, Pakistan, Egypt, and Indonesia (large poor nations)—have developed exports of standardized intermediate goods such as textiles, plywood, and cement that are not typical labor-intensive commodities.
In recent years, many developing countries have decried their dependence, realizing that they are too dependent on the sale of one primary commodity and/or too dependent on one country as a customer and supplier. Because LDC economies are small, they tend to be much more dependent on a given industrial country than the industrial country is dependent on them. Mexico, for example, depends on the United States for over 60 percent of its imports and exports, whereas the United States depends on Mexico for less than 5 percent of its imports and exports. Mexico can thus be much more adversely affected by U.S. policies than the United States can be affected by Mexican policies. This sort of dependence by an LDC on an industrial country has led to a widespread belief that dependence will retard the LDCs development.25 Fear of dependency has led many LDCs to try to change their production and trade patterns, as reflected in the opening case on Sri Lanka.
Figure 4.3 shows that in 21 of the 22 industrialized countries (all except Iceland) the leading export accounts for less than 25 percent of total export earnings. Among the developing countries, however, 57 percent are dependent on one commodity for at least 25 percent of their export earnings. A selected list of high-commodity dependencies by LDCs is given in Table 4.3.
The developing countries are also more dependent on one trading part-
ner than are industrial countries (see Fig. 4.4). The trading partner on whom
the developing country typically depends is almost always an industrial coun-
try (some examples are shown in Table 4.4). Only one of 22 industrial coun-
tries (CanadaJ_conduct£^ (the United
States) and only 23 percent of industrial countries depend on their leading
trading partner for over 25 percent of their exports. Seventy-five percent of
LDCs depend on their leading trading partner for more than 25 percent of
their exports.
Although theorists and policymakers wishing to lower dependency have proposed a number of different approaches, they all propose that LDCs intervene in the foreign trade markets. As shown in the introductory case, Sri Lanka has attempted to diversify its exports by developing nontraditional products that its policymakers believe can ultimately be competitive in world markets.
Trade Strategies Among Developing Countries
in earlier discussions we emphasized that most LDCs depend on the export of primary products. The manufactured goods they export are usually mature products requiring high inputs of unskilled or semiskilled labor. While these distinctions are true in an overall sense, they nevertheless obscure some differences among groups of developing countries. For those countries that do export manufactured goods, the type of good and country can be placed into one of three categories. Countries in the first group—Hong Kong, Singapore, Taiwan, South Korea, Israel, Portugal, and Greece—lack natural resources and have concentrated on exporting mature labor-intensive products. They have all emphasized marketing, design, and information about foreign markets as a means of becoming competitive. Countries in the second group—Yugoslavia, Argentina, Brazil, Mexico, and Turkey—have natural resources, which they can use for further processing into manufactured goods, and domestic markets that are large enough to support scale economies. These countries have had success in exporting capital goods, chemicals, and other intermediaries. Countries in the third group—India, Pakistan, Egypt, and Indonesia (large poor nations)—have developed exports of standardized intermediate goods such as textiles, plywood, and cement that are not typical labor-intensive commodities.
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