> >William Milberg argues that "the South" is caught in a contemporary P-S trap at:
> >
> >http://www.ilo.org/public/english/bureau/integration/download/publicat/4_3_247_wcsdg-wp-33.pdf
> Maybe I'm missing something. Looks like an interesting paper, but I
> don't see anything resembling a P-S argument here. Section 7 is all
> about North-South manufacturing trade and doesn't address the
> North-South terms of trade at all. Neither Prebisch or Singer appear in
> the bibliography.
>
> Seth
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Well, let's compare the following. The first is from Milberg's piece, the second from Singer's entry: 'Terms of Trade and Economic Development', pp. 323-8 in John Eatwell et al. The New Pal~rave: Economic Development. New York: W.W. Norton, 1989.
"The flow of profits and rents to developed-country firms that result from asymmetric market structure constitutes a loss of capital for investment in developing countries and a drain on the balance of payments. Developing countries have successfully shifted out of commodity exports and into the export of manufactured goods. Still, most studies find that the terms of trade for developing countries has not improved and may have even deteriorated further over the past 20 years.[40] Once again, the nature of global production systems can explain this. Developing countries have specialized in low value-added products and parts, partly because of their skills and partly because of barriers to entry in the higher value added segments. Moreover, competition is intense among producers of these goods, generating enormous excess capacity globally, which places even more downward pressure on prices...In sum, many developing countries, having successfully followed the strategy of moving away from a reliance on the export of commodities and natural resources and into the export of manufacturers, have found themselves in a modern-day Prebisch-Singer trap.[41] With the change in the structure of international production and trade, the promotion of manufacturing has not been sufficient to improve the barter or factoral terms of trade. The rents earned by developed country oligopoly firms could, under a different constellation of market structure, be redistributed to developing countries, boosting their ability to invest and grow."
Here's Singer:
"It will be noted that some of the . . . explanations for a deteriorating trend in terms of trade of developing countries relate as much or more to the characteristics of different types of countries - their different level of technological capacity, different organization of labor markets, presence or absence of surplus labor, etc. - as to the characteristics of different *commodities*. This indicates a general shift in the terms of trade discussion away from primary commodities versus manufactures and more towards exports of developing countries - whether primary commodities or simpler manufactures - versus the export products of industrial countries -largely sophisticated manufactures and capital goods as well as skill-intensive services including technological know-how itself."
Substitute Milberg's 'asymmetric market structure' for Singer's 'different organization' and the two claims are extremely complementary if not identical.
Curiously, support for some of P&S' claims come from research carried out by Bela Balassa, who was a rather fierce proponent of liberalization for 'the South'. The relevant research was done on the impacts of tariff escalation in the Generalized System of Preferences and it's ability to frustrate 'the South's' attempt to move up the value chain:
>From Trebilcock & Howse' "The Regulation of International Trade 2nd Edition"
"Tariff escalation denotes the tendency for developed countries to impose very low tariffs on imports of raw materials and much higher tariff rates on processed or finished products that are made from those raw materials. This practice makes it very easy for developing countries to export raw materials in an unprocessed state and much more difficult to export products that have a significant value-added component. The escalation effect occurs because while developed country producers of the processed or finished products have access to raw materials at almost the same price as developing country producers (due to the low tariffs on raw materials), they also have a protected market against the developing country producers by virtue of the significant tariff imposed on on the processed or finished products in question. The end result is to discourage export-driven strategies of moving up the value chain from the extraction of raw materials to increasingly sophisticated processing industries. Balassa found that, even on the basis of GSP and Lome preferences, effective protection against higher value-added products from developing countries due to tariff escalation ranged from three to nine times the applicable nominal tariffs." [page 375; Balassa "The Extent and Cost of Protection in Developed and Developing Countries" in Balassa ed. "New Directions in the World Economy" NYU Press, 1989]
What we've been seeing, as Dwayne Monroe and others have pointed out in other threads on technology and the US, is the gnawing away at the mechanisms by which the US in particular and 'the North' in general have protected those sectors of their economies where, once they had the lead in the Red Queen game of technological innovation and product market competition, they sought to lock in those gains, all the while their various factions of capital calling for "free trade." Now there's damned near nothing left except protecting those sectors where they still have marginal leads with intellectual property rights and 'service industries', namely *finance*; hence the bitter disputes over the Singapore issues and the arm twisting in the Green Room 'discussions' at various WTO meetings. If these aren't just the latest
way to lock-in unjust terms of trade then what are they?
One of the big reasons that there's damned near nothing left is that the US has massively underinvested in knowledge creation for a very long time. Coinciding perfectly with the anti-intellectualism that Wojtek and others savage interminably on this list. Technologically, all the 'low hanging fruit' has been plucked just as the planet is about to test our species knowledge base in bizarre and largely unforseeable ways.
For an interesting elaboration, analysis and qualfied support of the P-S hypothesis and it's shifting permutations see James Cypher's and James Deitz' "The Process of Economic Development" [Routledge 1997 and the new edition, 2004]
Here's the 2002 UNCTAD WIR that WM refers to for more evidential support:
http://www.unctad.org/en/docs/wir2002_en.pdf
Htbw,
Ian