ALBERT

Notes: The effects of industrialization on exports of primary-producing countries. In the period from pre-war to 1955, the volume of exports from the "semi-industrial" countries (i. e. the industrializing group of primary-producing countries) failed to rise, whereas exports from the "non-industrial" countries (i. e. all other primaryproducing countries outside Western Europe, North America and the Soviet bloc) rose by about 60% in volume.There are two schools of thought about the main causes of this lag in exports from the semi-industrial countries. The first school places emphasis on the defciency of demand by the industrial countries for the products of the semi-industrial countries; the second emphasises a deficiency of supply of exports resulting from the process of industrialization in the producing areas. Recent annual reports of GATT have presented statistical comparisons of the exports of the semi-industrial and the non-industrial countries which appear to support the supply-deficiency argument.The GATT analysis, however, suffers from two deficiences. First, it makes inadequate allowance for variations in world demand for particular commodities; second, it makes no allowance for the influence of relative price changes on the exports of particular countries. The present article attempts to build on the GATT analysis by extending it to include these two additional factors.A special index of world demand is constructed for the exports of each of the semi-industrialized countries, based on the movement in world trade of individual commodities and using the commodity-pattern of exports from each country as weights. Further, an index of export unit values of world trade in the commodity "bundle" of exports from each country is computed and related to the actual export unit value index of each country. Regressions of export volume on the indices of world demand and relative prices show a close correspondence between exports from a given country and the relevant world demand changes (as represented by world trade). The mean co-efficient for the relative price variable is -1.7, but the standard error is high (±0.9). The inclusion of a dummy variable to indicate the presence or absence of sheltered market yielded no significant result, but this was probably because the variable used is a very imperfect indicator of the degree of shelter enjoyed. The inclusion of industrial growth in the regressions indicated that if there is any significant relation between industrialization and exports it is a positive, and not a negative, one.A more detailed commodity analysis shows that the export experience of the non-industrial countries was in total much the same as that of the semi-industrial countries, if the comparison is limited to directly competitive commodities. Finally, it is shown that there is a positive association between industrial growth and the “capacity to import”.The implications of the analysis are (I) that industrialization per se in the period covered did not have a retarding effect on the exports of the semi-industrial countries as a whole; (2) the retardation in their exports was due essentially to the slower rate of growth in demand for their "bundle" of commodity exports than for those of the non-industrial countries; and (3) that the pace of industrialization has itself been heavily dependent on the progress of exports. These generalizations appear to fit most closely the views of the "demand-deficiency" school mentioned above.

Notes: Most studies of international demand determinants have found income to be the significant explainer of variations in both imports and exports, while price appeared to have only marginal importance. The present study deals with exports to the United States from eight European countries and gives support to a rather different conclusion: Two price variables—a price index of imports from a particular country, and an index of general-import prices—were significant and sometimes showed high elasticities. United States national income, on the other hand, was a poor explainer of imports from a country supplying finished manufactures, while industrial output was a fair explainer of imports from the suppliers of raw and semimanufactured materials.Of the two successful price variables, general-import prices showed the higher numerical price elasticities. This fact was contrary to the theoretical expectation, and arguments were advanced for believing that there might be greater downward bias in the direct- than in the cross-price elasticities of demand. It was concluded that in general the higher of the two calculated elasticities came closer to the true price elasticity for the country concerned.However, the findings, if taken at face value, also suggest that a European exporting country may be more successful in gaining dollar earnings at the expense of its rivals than at the expense of domestic United States producers. Elasticity with respect to United States domestic prices was low or insignificant; and total imports showed little price response.If it were in fact difficult for the non-dollar world together or even for Europe alone, to adjust its dollar earnings by means of price, it would still be possible for the countries involved to adjust both their dollar and their overall balances. For to the extent that they reduced prices competitively they would be induced to substitute imports from one another for those from the United States.Finally, if the behaviour of overall United States imports can be taken as typical for manufacturing countries' imports, while particular countries' exports to the world as a whole respond to price much as do those to the United States, we can infer that their balance-of-trade adjustments to price will be mainly on the export, rather than on the import, side.

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