A partnership with academia

Building knowledge for trade and development


Twenty-five students and lecturers from Vi Colombian core university member, Universidad EAFIT, joined a videoconference discussion on the industrialization possibilities for emerging economies October 10.
Piergiuseppe Fortunato, of UNCTAD's Division on Globalization and Development Strategies, began with an overview of international economic trends in 2016. He then examined the changing nature of structural change dynamics, the divergence between developing and developed countries and the policy implications for a catching-up process, major topics addressed by this year's Trade and Development Report.
He said that some Asian countries have adopted a strategy based on export-led growth fostered by manufacturing exports. This approach allowed the manufacturing sector to act as an absorber of jobs from agriculture and increase productivity. 
"Such a clear positive association between growth in manufacturing exports and productivity growth is much more difficult to detect in the recent era, however. The diffusion of international production networks or global value chains (GVCs) is partly responsible for this," he said. 
GVCs undoubtedly offer easier access into global trade but their overall impact on industrialization and technological upgrading is not necessarily positive, Fortunato explained. Along GVCs, the link between the technological content of export products and production activities may be broken. Thus, the specific task that is undertaken in a given place may be characterized by low technological content (and low value addition) even if the final output of the value chain is a high-technology good. 
"Those countries unable to climb the technological ladder along the chain will appropriate a very small share of the value added associated to the exported product," he said.
Stagnant growth in advanced economies and sluggish global trade also contribute to explain the reduced effectiveness of export-led growth strategies. In the context of slowly expanding foreign markets, "it is of the utmost importance to reinforce domestic markets. Regional markets also have an important role in compensating or the loss of demand coming from advanced economies," Fortunato added. 
Asked about the reasons for the recession in Latin America, he said that "governments in the region have not been able to profit from the commodity cycle to diversify the economy, a responsibility also shared by the private sector."
"Unfortunately, in developing countries the expansion of the manufacturing sector was left unaccomplished, they were subject to premature deindustrialization, and jobs were absorbed by the low-productivity service sector," he concluded.