associated with a decline in the price competitiveness
of a country’s manufacturing or agricultural sectors.
An increase in revenues from those primary exports
could strengthen the national currency to the point
where the country’s other exports become too
expensive to compete on world markets. Concerns
over this problem lead some countries to develop
proposals by which the revenues from extractive
industries would be directed to export-diversification
projects. Investing in alternative sectors, it is hoped,
can help sustain growth, diversify risk, and ensured
that non-renewable natural resources are more of a
blessing than a curse.
Promote inclusive and sustainable industrialization
and, by 2030, significantly raise industry’s share of
employment and gross domestic product, in line with
national circumstances, and double its share in least
developed countries.
Support domestic technology development, research and
innovation in developing countries, including by ensuring
a conducive policy environment for, inter alia, industrial
diversification and value addition to commodities.
Two of the eight targets under Sustainable Development
Goal
9:
INDUSTRY, INNOVATION Build resilient infrastructure, promote AND INFRASTRUCTURE
sustainable industrialization and
foster innovation
II. TRADE AND DEVELOPMENT 13
This does not mean that a country ought to do
whatever it can to reduce the size of its primary sector,
or to inflate its tertiary sector. What it does suggest is
that there is a well-established pattern to the process
of economic development, with countries upgrading
the complexity and sophistication of their production
from the most basic and fungible goods to the more
distinct and differentiated activities. They need not
eliminate their primary sectors, which may continue
to play important roles even in the most advanced
economies. An efficient primary sector, be it based on
agriculture or other raw commodities, may be vital to
a country’s food security, its exports and its supplies
to other industries.
How important is manufacturing to development?
There is no doubt that most developed countries
today went through a progression by which industry
gradually eclipsed agriculture and was then eclipsed
in turn by services. The data illustrated in table 2 also
imply that the manufacturing sector tends to follow an
arc as a country develops. The association between
manufactures and development is so common that
the term “industrialized” is still used as a synonym for
“developed”, despite the fact that services are now
five times larger than manufactures in the average
developed country. The Sustainable Development
Goals call for the promotion of inclusive and sustainable
industrialization in developing countries, as well as the
advancement of industrial diversification and value
addition to commodities. It is nonetheless worth noting
that there are some developing countries that were
once devoted principally to primary products and now
have large services sectors, typically in tourism and
associated fields. Some of those countries have little
experience with manufacturing, either now or in the
past, and in many cases their historical attachment
to industry consisted largely of apparel production.
That industry was artificially distributed throughout
the world by a system of import quotas in the latter
half of the twentieth century but has been greatly
consolidated in the years since the quotas were lifted.
The services sector is not the only main economic activity
in Jamaica but has been the driver of economic growth
in the last 20 years. With the exception of the 1990s, the
growth rate of services outpaced both agriculture and
industry.
Trade Policy Framework: Jamaica (2015)
These are among the many issues for which each
country’s experience and prospects will vary. A TPF
needs to provide detailed information on the evolution
and current status of a country’s primary, secondary
and tertiary sectors. Due consideration should be
given to the arc of development for specific industries
in each of these broad sectors, based on the answers
to a series of questions. Are there sunset industries in
which the country has lost competitiveness? If so, is
that the consequence of inexorable processes (e.g.
the depletion of a natural resource), thus implying
that the country should prepare for a phase-down in
those operations? Or is the industry in the doldrums
for identifiable and reversible reasons, thus implying
that wise investments can be made in revitalizing its
prospects? Are there important sunrise industries on
the horizon, and what might be done to facilitate or
promote new investment and productivity in these
areas? Most important of all, are there steps that the
country can take in trade and other areas of public
policy that can help to ease the transition or reverse
the decline, and to accelerate the development of
industries that are on the rise?
A TPF should devote as much attention to the tertiary
sector as it does to the primary and secondary sectors.
Services are important not just as potential earners
of foreign exchange, but as vital contributors to the
competitiveness of other industries. Producers in the
primary and secondary sectors can quickly be stifled if
they do not have access to high-quality and affordable
services in transportation, banking, and legal services.
In devising a TPF, countries should consider not only
the development of their own tertiary sectors, but also
the contributions that foreign providers of services
can make to the development of their primary and
secondary sectors. Restrictions in this area can, in
some cases, be just as self-defeating as barriers to
the importation of raw materials.
Moving from the descriptive to the prescriptive,
what types of policies might be most appropriate for
countries that have differing mixes of these sectors?
It might be comforting to imagine that devising an
appropriate trade and development strategy by
calibrating the ends and means of policy to the relative
size of mining or manufacturing, but the differing
experiences of specific countries suggests instead that
this is a sui generis process unique to each economy.
Consider the case of Panama, where the economy in
general and the services sector in particular have done
well in recent years. Panamanian growth over the last
14 TRADE POLICY FRAMEWORKS FOR DEVELOPING COUNTRIES: A MANUAL OF BEST PRACTICES
decade has more than double the regional average,
and is reflected in numerous services associated
with the external sector (e.g. the Panama Canal, the
Colon Free Zone, ports, air transport, and tourism).
One might well imagine that this success story points
to the importance of fostering the tertiary sector and
promoting the economic transition, and yet in this
specific case, the TPF implied that some degree of
rebalancing was in order. The report stressed that the
shares of the manufacturing and agricultural sectors
have declined, to the detriment of the working poor in
both urban and rural areas. Panamanian policymakers
now consider it desirable and feasible to stimulate the
exportation of agricultural and manufactured goods
with high levels of domestic value added. That will,
according to the TPF, favour the laggard primary and
secondary sectors, while also aiding areas outside of
the country’s interoceanic corridor.
Achieve higher levels of economic productivity through
diversification, technological upgrading and innovation,
including through a focus on high value added and
labour-intensive sectors.
Promote development-oriented policies that
support productive activities, decent job creation,
entrepreneurship, creativity and innovation, and
encourage the formalization and growth of micro, small
and medium-sized enterprises, including through access
to financial services.
Two of the 12 targets under Sustainable Development
Goal 8:
Promote inclusive and sustainable
economic growth, employment and
decent work for all
DECENT WORK AND
ECONOMIC GROWTH
Table 4. Relationship between access to the sea and income (Average GDP per capita for non-oil developing economies)
Sources: Calculated from World Bank data at http://data.worldbank.org/indicator/NY.GDP.PCAP.CD. List of landlocked
countries from the United Nations Office of the High Representative for the Least Developed Countries, Landlocked Developing
Countries and Small Island Developing States at http://unohrlls.org/about-lldcs/country-profiles/.
Islands, isthmuses and
peninsulas
Coastal countries Landlocked countries
Africa Income: $5 126
Countries: 6
Income: $2 419
Countries: 28
Income: $1 183
Countries: 16
Americas Income: $10 506
Countries: 12
Income: $7 519
Countries: 15
Income: $3 628
Countries: 2
Asia and the Pacific Income: $15 673
Countries: 19
Income: $3 507
Countries: 9
Income: $1 928
Countries: 5
Total Income: $12 287
Countries: 37
Income: $4 078
Countries: 52
Income: $1 558
Countries: 23
Conclusions of this sort militate against any
expectation that one might devise a simple set of
universal guidelines for all countries that are based on
unidimensional considerations such as the sectoral
composition of the economy. The task of the TPF
is instead to consider these and other factors in
their entirety in order to determine the nature of
the challenges that the country faces and how its
resources might best be redirected.
