Chapter 6


 mainly been on the account of industrial countries which hold a share of more than 70
 percent of the world exports, while the share in world exports of the developing countries
 (excluding OPEC) amounts to 15 percent.

* Trade among the industrial countries absorbs more than 50 percent of international trade
 volume, while trade among developing countries (without OPEC) only accounts for about
 3 percent of international trade. The main export markets of the developing countries are
 the industrial countries which absorb about two thirds of their exports.

* The expansion of international trade volume has been accompanied by a change in
 composition. While the share of manufactured good has increased continuously and
 amounts to about 75 percent by now, the share of primary commodities (agricultural
 products, fuel and minerals) has decreased.

* Primary products account for more than half of the exports of developing countries but
 less than 20 percent of the exports of the industrial counties. Many developing countries
 mainly depend on the export of one or two primary commodities.

In essence, the structure of international trade of developing countries is characterized by a
dependency on exports of primary commodities to industrial countries on the one side, and on
imports of manufactured products from the industrial countries. This structure has a number
of unfortunate implications.

* The world markets for raw products are largely saturated. Therefore, increased production
 can only be absorbed at decreasing world market prices. Such tendencies are reinforced
 by new technologies which are less dependent on raw materials.

* Due to limited alternatives of export diversification, there is strong competition among
 the exporters of primary commodities, compounding the tendencies of price decreases.

 Exports of primary commodities are, in price and volume, largely dependent on the
 economic situation in the industrial countries. Highly fluctuating prices and volumes in
 exports stand against a relatively inflexibly demand for imports of industrial products.

 In the production of primary commodities, the scope to compensate price reductions by
 increased production efficiency is limited and lower than in the case of industrial
 production. Exports at low world market prices of primary commodities can only be
 maintained if wages are kept low. This is possible if a high number of un- and under-
 employed people (a typical feature of many developing countries) exerts a downward
 pressure on wage levels. Low export prices go hand in hand with low levels of household
 incomes.

 All these factors together are responsible for the unfavourable position of many developing
 countries in the international trade system. These are the reasons for their declining share in
 international trade and the worsening terms of trade (see Box 6.7). During the period 1980
 to 1992, the relative prices of primary commodities (excluding fuel) decreased by almost 50
 percent in relation to the prices of industrial goods (Commodity Terms of Trade).


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