Trade and the Less Developed Areas

How important international trade is for the less developed nations is indicated by the fact that it frequently accounts for 20 percent or more of their total economy as against 8 percent for the economy of the United States. Indeed, trade is much more important to them than aid. Total exports of the less developed areas amounted to $31 billion in 1960, while the total flow of financial assistance from the industrial nations (including private foreign investment) amounted to $8 billion.

Despite these facts, very little is being done either within the less developed nations or through various aid programs to encourage their exports. Indeed, there is a disturbing trend toward policies which actively work in the opposite direction. The failure to stress the importance of international trade is serious, since unless these nations can expand it they cannot achieve their aspirations for accelerated development and for a rapid growth in living standards.

Consequently, it is pertinent to: (1) review the role which exports have played in the development process; (2) examine critically the argument that a developing nation should now concentrate its efforts on local industrialization and play down its traditional trade in food and industrial raw materials; and (3) consider what could be done through commodity agreements or other policies to promote exports from the less developed nations.

In recent years there has been a significant change in the composition of the trade between the industrial and less developed nations. The traditional pattern, and the dominant one until the end of World War II, involved an exchange of primary products (food and industrial raw materials) from the less developed nations for manufactured consumer products from the industrial nations. The United Kingdom, many continental European nations and Japan supported their industrial development by trading textiles, flour, shoes and other consumer products for such primary products as cotton, cocoa, sugar, hides, copper and jute. In such a trading system, it was difficult for local manufacturing to get under way in the less developed nations, though a start was made in the 1920s and 1930s.