^{Page 491 note 1} United Nations, World Economic Survey, 1962, Part I: the developing countries and world trade (New York, 1963).Google Scholar

^{Page 491 note 2} This term comprises all countries except those of North America, Western Europe, Japan, Australia, New Zealand, South Africa, and the ‘centrally planned’ economies.

^{Page 491 note 3} In the period 1950–1961 the volume of exports of the under-developed areas to the developed areas expanded at the rate of 2·6 per cent a year in the case of food, 1·6 per cent in the case of raw materials, and 9·3 per cent in the case of petroleum; the current dollar value of exports in the three categories together increased at the rate of 3·3. per cent. See U.N.Statistical Bulletin (New York), 01 1964,Google Scholar Table B. Since the growth of petroleum exports cannot be expected to continue at such high rates, the rate of growth of the volume of exports of primary commodities cannot be put at more than 3 per cent a year, given the current rates of the G.N.P.'s of the developed countries. World Economic Survey, 1962, p. 6.Google Scholar

^{Page 492 note 1} Cf. G.A.T.T., International Trade in 1959 (Geneva), pp. 40–56.Google Scholar

^{Page 492 note 2} A 5 per cent growth rate in the domestic product, with an estimated population increase of 2·4 per cent, would generate a rate of growth of real income per head of 2·6 per cent, which would mean that by the turn of the century real income per head of the under-developed countries would rise from the present $130 to $360. At that level it would still be only one quarter as high as the current level of real income per head in the United Kingdom.

^{Page 493 note 1} ‘Prospects for the Development of U.S.S.R. Foreign Trade’ (U.N. document E/CONF 46/108, submitted by the U.S.S.R.).

^{Page 493 note 2} This trade at present is highly concentrated, both as to countries of origin and destination and as regards the nature of commodities traded. According to the study of the U.N. Secretariat submitted to the Geneva Conference, ten countries (India, Hong Kong, Israel, Mexico, Iran, the Philippines, Pakistan, Taiwan, Argentina, and Brazil) accounted for 75 per cent of the total (excluding base metals), while 79 other developing countries accounted for only six per cent. On the side of imports, 6 per cent of the total (excluding base metals) was absorbed by the U.K., the U.S., and other E.F.T.A. countries. As regards the commodity composition of such imports, 25 per cent consisted of clothing, textileyarn, fabrics, and other textile products, almost 40 per cent of base metals, and the rest was divided between carpets and leather goods (5·5 per cent), precious stones and pearls (3·8 per cent), various chemicals (three per cent), machinery and transport equipment (4·2 per Cent), and all other items (18·5 per cent). Cf. World Economic Survey, 1962, ch. 3, and also ‘Trade in Maufactures and Semi-manufactures’ (U.N. documetnt E/CONF 46/6).

^{Page 494 note 1} Since textile and clothing exports accounted for a considerable part (perhaps 40 per Cent) of the increase in their manufactured exports in the last five years and textile exports are now restricted (see below), there is a danger that the recent rate of growth may not be maintained in the near future.

^{Page 499 note 1} In the Argentine the 40 per cent devaluation of April 1962 was offset by an equivalent rise of domestic prices (of 65 per cent) by the end of 1963; in Chile the 42 per cent devaluation of October 1962-January 1963 was offset by an equivalent rise of domestic prices (of 75 per cent) withing a year.

^{Page 501 note 1} Since the less developed a country is the lower is its capacity to export manufactures relative to its import requirements in the same category, the exchange rate at which its imports and exports of manufactures came into balance (which is the rate that would tend to get established, if the supply of foreign currency in the free market came exclusively from the exporters of manufactures, and the importers of manufactures were wholly dependent on that market to obtain licences to import) would obviously be the higher, relative to the official rate, the lower the stage of development. Indeed, for countries in the early stages ofindustrialisation, it would be necessary to direct part of the foreign exchange earnings from the sale of staple products (or from other sources) to prevent the premium on the free rate from becoming inordinately high. Hence, irrespective of any general shortage of foreign exchange (which depends on the overall ba;amce of payments position) the less developed country could always ensure that the premium on its free rate stood higher than that of a more developed country, at any rate so long as countries refrain from manipulating the premium upwards by reducing the supply of foreign currency in the free market through open market operations. It would be reasonable, however, if this system came to be generally adopted, to fix a ceiling for the premium for each particular country—a ceiling that would take into account the varying circumstances of different countries, in particular the differences in the level of their manufacturing costs in terms of primary products—and to require the monetary authorities of each country to keep the free rate at or below this level, by sales of foreign exchange in the free market.

^{Page 505 note 1} Cf. Stolper, W. F. and Samuelson, P. A., ‘Protection and Real Wages,’ in Review of Economic Studies (Edinburgh), IX, 11 1941, pp. 58–73,Google Scholar for a guarded exposition of this argument.

^{Page 505 note 2} The fallacy in the ‘factor-price-equalisation’ theory which suggests the opposite conclusion is that it assumes that there is, in some sense, a given amount of total capital in the country which is not altered by such a structural change, so that when labour-intensive industries contract, and the capital-intensive industries expand (it is supposed that the contracting industries are labolur-intensive, since it is in these industries that the low-wage country will have a comparative advantage), there must be some offsetting change in the capital/labour ratio in all industries, otherwise the available amount of capital would not suffice to employ the same number of workers in the new situation as in the old situation. Hence the marginal product of labour will fall, even though the average product of labour has risen. The simple answer to this is that capital is not like ‘land’, and its quantity cannot be treated as ‘given’, irrespective of the distribution of output between industries. When the output of ‘Capitalintensive’ industries expands, the total amount of ‘capital’ necessarily expands with it; the growth of output in industries with a high output per head and a high capital/labour ratio necessarily grows hand in hand with an accelerated rate of accumulation of capital.

^{Page 506 note 1} Cf. World Economic Survey, 1962, p. 70.

^{Page 506 note 2} Ibid. ch. 3; cf. also U.N. document E/CONF 46/6, PP. 4–9.

^{Page 506 note 3} This is best shown by the large differences in the share of under-developed countries in the total imports of manufactures (excluding base metals) into the various developed countries in 1962. Whereas their share amounted to 12·3 per cent of United Kingdom imports, and 11·3 per cent for the United States, it only amounted to 3·8 per cent for Germany, 3·2 per cent for France, and 1·3 per cent for the other countries of the E.E.C. Cf. U.N. document E/CONF 46/6, Table 8, p. 23.

^{Page 507 note 1} Exports of textile yam and fabrics from under-developed countries into North America and Western Europe (including E.E.C. and E.F.T.A. countries) increased from $220 to $410 million between 1956 and 1961, or by 85 per cent, whereas such imports from other sources only increased by 45 per cent over the same period. In the latter year, however, imports from under-developed countries still accounted for only 13·5 per cent of total imports in these categories. Cf. World Economic Survey, 1962, Table 3–14, p. 69,Google Scholar and Table 3-I, p. 76; and U.N. document E/CONF 46/6, Table, p. 15.

^{Page 508 note 1} Cf. ‘Trade Needs of Developing Countries for their Accelerated Economic Growth’ (U.N. document E/CONF 46/58), Technical Appendix.

^{Page 509 note 1} U.N. document E/CONF 46/108.

^{Page 509 note 2} The assumption of an eight per cent growth rate in manufactured exports would, ceteris paribus, increase the cumulative deficit up to the year 2000 by $925 millions.

^{Page 509 note 3} The assumption of an average rate of interest of four per cent would add $315 millions to the cumulative deficit up to the year 2000.