Trade Policy Note Final-rev08 - Development

Increase Productivity
Exports should, directly or indirectly, provide employment for poor people and
women. The challenge is to provide them with the means to compete and to increase
their productivity. This requires an understanding of factors contributing to
competitiveness in the sector, and policy measures to enhance them. Some countries
have achieved high export growth but with low value added since such exports have
not emerged from the industrialization strategy described in Section 3. The move
from static to dynamic comparative advantage is manifested in the continuous
upgrading of the technological content of exports, which is the expected result of
moving up the virtuous spiral described in Section 3. Success in exporting is a
function of the capacity to domestically produce products that are “dynamic in world
trade”. 32
Box 12: China’s Industrialization
China has followed an approach to industrialization which is similar, in important respects, to
that which was adopted by the Republic of Korea. Both have high technological content and
value-added in the domestic economy, as described in Section 3. Tariff and quota protection
and TRIMs were used as “carrots and sticks” to oblige firms to move up the technological
ladder. China’s impressive export performance has been a result of its ability to produce
“dynamic” export products of ever increasing technological content. China’s pattern of
production and exports were not left to be determined by traditional forces of comparative
advantage. Government policies have nurtured domestic capabilities in consumer electronics
and other advanced technology products. 33
Promote equity
In most cases, even when they have occurred, the benefits of impressive export gains
have not always been widely shared. In certain circumstances, exports have even
undermined the livelihoods of poor people . Policies to increase exports should be
mindful of equity concerns , ensuring that benefits of exports do not accrue mainly to
richer segments of the population. Additional measures are necessary to ensure that
poorer segments of the population derive dire ct gains from export expansion, rather
than rely only on trickle -down benefits. Evidence shows that export growth built on
an inequitable distribution of income, can simply exacerbate existing inequalities. 34
Box 13: Equity Issues in Fisheries Sector
The fisheries sector is a good example where a successful export industry can actually
undermine the livelihoods of poorer producers, unless a strict policy framework is imposed to
protect the latter, as described in Annex B to this Paper . The main exporters are large fishing
fleets which deplete the coastal water and thus reduc e availability to small fishers. Similarly
the great success of aquaculture exports has resulted in the saline pollution of agricultural
lands.
32 For a list of dynamic products in world trade and an analysis of their contribution to export
performance, see UNCTAD World Investment Report 2002 (www.unctad.org).
33 See Rodrik, Dani , What is so Special about China’s Exports?, Centre for Economic Policy Research
(London, February 2006) (www.cepr.org).
34 See UNDP Human Development Report 2005, International Cooperation at a Crossroads: Aid, Trade
and Security in an Unequal World, Chapter 4 (New York, 2005)
(http://hdr.undp.org/reports/global/2005/).
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