UNCTAD Secretary-General's
High-Level Multi-Stakeholder Dialogue on Commodities
in the context of UNCTAD XII
28-29 January 2008
China, Terms of Trade &
Development Strategy in SSA
By
Mr. Raphael Kaplinsky
Professor, Open University, UK
The views expressed are those of the author and do not necessarily reflect the views of UNCTAD
CHINA, TERMS OF TRADE
AND DEVELOPMENT
STRATEGY IN SSA
Raphael Kaplinsky,
Dept of Policy and Practice,
The Open University,
UK
High Level Multi-Stakeholders Dialogue On Commodities
in the Context of UNCTAD XII
The drive to industrialisation
• Close association between incomes and
industrialisation
• The terms of trade favour manufactures
Commodities-manufactures terms of
trade
The drive to industrialisation
• Close association between incomes and
industrialisation
• The terms of trade favour manufactures
• Manufactures are (relative to agriculture) income
elastic and price inelastic
• Synthetic substitutes for natural products
• Manufacturing embodies rents – agriculture does
not
• Manufacturing can be labour intensive – primary
commodities are very capital intensive
China’s growth is not unique..
GDP (constant prices)
3.5
Log of export growth
Log of GDP growth
Growth of exports
3
2.5
2
1.5
6
5
4
3
2
1
01
6
1
11
16
21
26
31
36
6
11
16
21
26
31
36
Ye ars from be ginning of growth surge
41
41
Years from beginning of export surge
China (1989-2003)
China (1989-2003)
Japan (1960-2003)Japan (1960-2003)
Korea (1963-2003)
Korea (1963-2003)
Share of Global Population
25
20
15
10
5
0
1960
1964
1968
1972
1976
China
1980
India
1984
Japan
1988
1992
Korea, Rep.
1996
2000
2004
Share of manufacturing value added
Share of the
world
1985
East Asia
China
South Asia
Latin America and Caribbean
Sub-Saharan Africa
Middle East, North Africa, Turkey
4.1
1.4
0.8
6.7
1.0
1.5
1998
13.9
7.0
1.8
5.2
0.8
2.4
Share of developing
countries
1985
1998
29.2
10.2
5.9
46.9
7.1
10.8
57.7
29.3
7.3
21.8
3.4
9.8
World Manufacturing Export Price,
1986-2000
20
15
10
5
0
-5
-10
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
Annual price change (%)
25
IMF, World Economic Outlook Database
EU Imports from China
1st Q 2005/1st Q 2004
China Market Share in EU-25
Imports
Volumes %
Price %
1 Q 2004 %
1 Q 2005 %
T-shirts
164
-26
7
17
Pullovers
534
-47
6
38
Men’s trousers
413
-16
6
35
Blouses
186
-24
6
22
Women’s coats
184
-18
6
10
Bras
139
-15
30
49
Socks and
pantyhose
63
-22
30
54
Linen and ramie
yarns
51
1
27
45
Linen fabrics
257
1
10
45
Source: Euratex data as reported by Nathan Associates
0
Resource based
manufactures
Low technology
Medium technology
High-income
Upper-middle-income
Lower-middle income
China
Low income
High income
Upper-middle-income
Lower-middle income
China
Low income
High-income
Upper-middle-income
Lower-middle income
China
Low income
High-income
Upper-middle
Lower-middle
China
Low income
%of sectors
Caught between a rock and a hard
place
70
60
50
40
30
20
10
High technology
Percentage of sectors with negative price trends, 1988/92000/2001 by technological intensity and country-grouping
Actual and projected global share of
China’s consumption of base metals
30%
25%
%of total
20%
15%
10%
5%
0%
1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010
Coppe r
Source: Macquarie Mining
Alum inium
Zinc
Nick e l
Ste e l
Ir on Or e (Tr ade )
China's Share of Global Demand
China's Share of Total World
Growth
26%
100%
99%
95%
24%
90%
80%
22%
68%
67%
51%
50%
20%
18%
16%
14%
8%
0%
Steel
Nickel
Copper Aluminium
Source: Macquarie Mining
2003
10%
2002
10%
2001
20%
2000
12%
1999
30%
1998
2000-2003
1995-2003
1997
40%
1996
% share
60%
% of total World
76%
73%
70%
Steel
Nickel
Copper
Aluminium
1995
100%
28%
Enormous demand potential
Kgs/capita
GDP per capita
($US1995)
Aluminium
Copper
Steel
Japan
1955
1975
0.6
10.5
1.2
7.4
80
599
5,559
21,869
Korea
1975
1995
1.0
15.0
1.3
8.1
84
827
2,891
10,841
China
1990
1999
2002
2003
0.7
2.3
3.3
4.0
0.6
1.2
2.0
2.4
59
108
160
200
342
756
933
1,103
The agricultural sector, 2007-2016
(OECD/FAO, 2007)
• Biofuels raise grain prices
• Raised demand in China for:
–Beef
–Pigmeat
–Milk powder
–Oilseeds for cattle
• “…structural
changes such as increased feedstock
demand for biofuel production, and the reduction
of surpluses due to past policy reforms, may keep
[agricultural product] prices above historic
equilibrium levels during the next 10 years….
• Winners are:
• Brazil (sugar, oilseeds, meat)
• Argentina (cereals and dairy products)
• Russia/Ukraine (coarse grains)
• East and south east Asia (rice, veg oils, poultry)
Clothing exports 2000 and 2004
1,800
1,500
$m
1,200
900
600
300
0
Kenya
Lesotho
Madagascar
2000
Mauritius
2004
S Africa
Sw aziland
Value of SSA and China C+T exports to US, 2004/2006
AGOA
-26
85
Kenya
-5
113
Lesotho
-15
171
Madagascar
-26
108
Mauritius
-48
104
SA
-53
89
Swazi
-24
136
Number of countries accounting for 90% of SSA Exports (excl SA)
25
20
15
10
5
0
Agricultural Materials
Ore and Metals
Fuels
Share of SSA fuel exports
50%
40%
30%
20%
10%
0%
Nigeria
Angola
Equatorial
Guinea
Congo, Rep.
Sudan
Share of SSA exporters of ores and minerals (excl SA)
30%
20%
10%
0%
Mozambique
Zambia
Guinea
Mauritania
Congo, Dem.
Rep.
Share of SSA agricultural exports excl SA
30%
20%
10%
0%
Cote d'Ivoire
Kenya
Ghana
Cameroon
Nigeria
SSA EXPORTS
SA, Lesotho,
Swaziland,
Madagascar,
Kenya, Mauritius
Hard
commodities
Clothing
footwear
SSA LOSS
SSA GAIN
Oil exporters, Zambia, SA, DRC,
Botswana, Ghana, Ivory Coast,
etc
CHINA
IMPORTS
CHINA
EXPORTS
All SSA
Oil
SSA LOSS
SSA GAIN
Most SSA
SSA IMPORTS
Clothing
footwear
So what?
• A complex picture with nuanced impacts and
opportunities
• Imbalances in the global economy
• We don’t know the spread effects
• How long will the terms of trade reversal last?
Regarding precious stones and
hard commodities
• Descent into conflict?
• The economic management of mineral rents
– stability
– over time
• Impact on other sectors (“Dutch Disease”)
• How to maximise backward linkages
• But should forward linkages be encouraged?
• Adverse distributional effects
• But this is a small group of countries in SSA
Regarding soft commodities
• How to take maximum advantage, and speedily
• How to maximise positive distributional impact by
including small scale producers
• Also addressing niche sectors
Regarding manufactures
• Manufacturing is the source of capability-growth
and employment
• But the Washington Consensus circumscribes
trade and industrial policies,
• So:
–How to protect producers in the local market?
–How to maintain access to external markets
–How to sustain industrial policies