associated with a decline in the price competitiveness of a country’s manufacturing or agricultural sectors. An increase in revenues from ...
associated with a decline in the price competitiveness of a country’s manufacturing or agricultural sectors. An increase in revenues from those primary exports could strengthen the national currency to the point where the country’s other exports become too expensive to compete on world markets. Concerns over this problem lead some countries to develop proposals by which the revenues from extractive industries would be directed to export-diversification projects. Investing in alternative sectors, it is hoped, can help sustain growth, diversify risk, and ensured that non-renewable natural resources are more of a blessing than a curse. Promote inclusive and sustainable industrialization and, by 2030, significantly raise industry’s share of employment and gross domestic product, in line with national circumstances, and double its share in least developed countries. Support domestic technology development, research and innovation in developing countries, including by ensuring a conducive policy environment for, inter alia, industrial diversification and value addition to commodities. Two of the eight targets under Sustainable Development Goal
9: INDUSTRY, INNOVATION Build resilient infrastructure, promote AND INFRASTRUCTURE sustainable industrialization and foster innovation II. TRADE AND DEVELOPMENT 13 This does not mean that a country ought to do whatever it can to reduce the size of its primary sector, or to inflate its tertiary sector. What it does suggest is that there is a well-established pattern to the process of economic development, with countries upgrading the complexity and sophistication of their production from the most basic and fungible goods to the more distinct and differentiated activities. They need not eliminate their primary sectors, which may continue to play important roles even in the most advanced economies. An efficient primary sector, be it based on agriculture or other raw commodities, may be vital to a country’s food security, its exports and its supplies to other industries. How important is manufacturing to development? There is no doubt that most developed countries today went through a progression by which industry gradually eclipsed agriculture and was then eclipsed in turn by services. The data illustrated in table 2 also imply that the manufacturing sector tends to follow an arc as a country develops. The association between manufactures and development is so common that the term “industrialized” is still used as a synonym for “developed”, despite the fact that services are now five times larger than manufactures in the average developed country. The Sustainable Development Goals call for the promotion of inclusive and sustainable industrialization in developing countries, as well as the advancement of industrial diversification and value addition to commodities. It is nonetheless worth noting that there are some developing countries that were once devoted principally to primary products and now have large services sectors, typically in tourism and associated fields. Some of those countries have little experience with manufacturing, either now or in the past, and in many cases their historical attachment to industry consisted largely of apparel production. That industry was artificially distributed throughout the world by a system of import quotas in the latter half of the twentieth century but has been greatly consolidated in the years since the quotas were lifted. The services sector is not the only main economic activity in Jamaica but has been the driver of economic growth in the last 20 years. With the exception of the 1990s, the growth rate of services outpaced both agriculture and industry. Trade Policy Framework: Jamaica (2015) These are among the many issues for which each country’s experience and prospects will vary. A TPF needs to provide detailed information on the evolution and current status of a country’s primary, secondary and tertiary sectors. Due consideration should be given to the arc of development for specific industries in each of these broad sectors, based on the answers to a series of questions. Are there sunset industries in which the country has lost competitiveness? If so, is that the consequence of inexorable processes (e.g. the depletion of a natural resource), thus implying that the country should prepare for a phase-down in those operations? Or is the industry in the doldrums for identifiable and reversible reasons, thus implying that wise investments can be made in revitalizing its prospects? Are there important sunrise industries on the horizon, and what might be done to facilitate or promote new investment and productivity in these areas? Most important of all, are there steps that the country can take in trade and other areas of public policy that can help to ease the transition or reverse the decline, and to accelerate the development of industries that are on the rise? A TPF should devote as much attention to the tertiary sector as it does to the primary and secondary sectors. Services are important not just as potential earners of foreign exchange, but as vital contributors to the competitiveness of other industries. Producers in the primary and secondary sectors can quickly be stifled if they do not have access to high-quality and affordable services in transportation, banking, and legal services. In devising a TPF, countries should consider not only the development of their own tertiary sectors, but also the contributions that foreign providers of services can make to the development of their primary and secondary sectors. Restrictions in this area can, in some cases, be just as self-defeating as barriers to the importation of raw materials. Moving from the descriptive to the prescriptive, what types of policies might be most appropriate for countries that have differing mixes of these sectors? It might be comforting to imagine that devising an appropriate trade and development strategy by calibrating the ends and means of policy to the relative size of mining or manufacturing, but the differing experiences of specific countries suggests instead that this is a sui generis process unique to each economy. Consider the case of Panama, where the economy in general and the services sector in particular have done well in recent years. Panamanian growth over the last
14 TRADE POLICY FRAMEWORKS FOR DEVELOPING COUNTRIES: A MANUAL OF BEST PRACTICES decade has more than double the regional average, and is reflected in numerous services associated with the external sector (e.g. the Panama Canal, the Colon Free Zone, ports, air transport, and tourism). One might well imagine that this success story points to the importance of fostering the tertiary sector and promoting the economic transition, and yet in this specific case, the TPF implied that some degree of rebalancing was in order. The report stressed that the shares of the manufacturing and agricultural sectors have declined, to the detriment of the working poor in both urban and rural areas. Panamanian policymakers now consider it desirable and feasible to stimulate the exportation of agricultural and manufactured goods with high levels of domestic value added. That will, according to the TPF, favour the laggard primary and secondary sectors, while also aiding areas outside of the country’s interoceanic corridor. Achieve higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus on high value added and labour-intensive sectors. Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro, small and medium-sized enterprises, including through access to financial services. Two of the 12 targets under Sustainable Development Goal 8: Promote inclusive and sustainable economic growth, employment and decent work for all DECENT WORK AND ECONOMIC GROWTH Table 4. Relationship between access to the sea and income (Average GDP per capita for non-oil developing economies) Sources: Calculated from World Bank data at http://data.worldbank.org/indicator/NY.GDP.PCAP.CD. List of landlocked countries from the United Nations Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States at http://unohrlls.org/about-lldcs/country-profiles/. Islands, isthmuses and peninsulas Coastal countries Landlocked countries Africa Income: $5 126 Countries: 6 Income: $2 419 Countries: 28 Income: $1 183 Countries: 16 Americas Income: $10 506 Countries: 12 Income: $7 519 Countries: 15 Income: $3 628 Countries: 2 Asia and the Pacific Income: $15 673 Countries: 19 Income: $3 507 Countries: 9 Income: $1 928 Countries: 5 Total Income: $12 287 Countries: 37 Income: $4 078 Countries: 52 Income: $1 558 Countries: 23 Conclusions of this sort militate against any expectation that one might devise a simple set of universal guidelines for all countries that are based on unidimensional considerations such as the sectoral composition of the economy. The task of the TPF is instead to consider these and other factors in their entirety in order to determine the nature of the challenges that the country faces and how its resources might best be redirected.
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