Globalization : a new role for developing countries in an integrating world

The author reviews trends and developments in world trade, investigating the elements involved in the accelerated integration of world trade rights in the past decade. He explores what conditions and policy initiatives make it easier for countries to benefit from global trade and capital flows, and concludes: (1) World trade relative to world income has grown more in the 1990s than in the 1970s or 1980s, mainly due to: (a) the desynchronization of business cycles in Japan, Europe and the United States; (b) the expanded role in world trade of developing countries; and (c) the transfer of purchasing power that supported heightened import demand among developing countries. (2) Measured as the ratio of trade to output, the trend toward global integration accelerated sharply in the mid-1980s. A wave of liberalization among low- and middle-income countries resulted in a shift from an inward-oriented development strategy to an outward-oriented one. (3) World trade will grow more than 6 percent a year (on average) in the coming decade, although prospects for trade integration differ by region. (4) Balanced integration--with export and import capacities expanding sustainably--can be achieved only through policies that encourage long-term productive investment in the export sector.