The supply determinants of the developing countries' penetration of the US market for manufactures

Abstract

Although exports of labour intensive manufactures from developing countries have expanded rapidly since the 1950s, export pessimism persists in many forms. In recent years it has been argued that the markets of industrial economies, which take almost two thirds of the manufactured exports of developing (and centrally planned) economies, are being saturated so that further growth of these exports must be limited. The first part of this study is devoted to testing the 'saturation' hypothesis. This involved the further improvement of a concordance created in 1980-81 between trade and manufacturing production data so as to make them internationally comparable, and the creation of a data set of world manufacturing production and trade. The market penetration of manufactured exports from developing countries in industrial market economies was then calculated. It is clear that while there is considerable variance in market penetration by product and country, overall there is considerable room for a shift of supply of manufactures from capital intensive industrial market economies to countries with an ample supply of labour. In the second part of the study the data set was used to explain the patterns of penetration of the United States market for manufactures. In particular, the East Asian economies have been more successful than Latin American economies in penetrating the US markets. The market condi tions facing exporters have been broadly similar for all coun"tries. If anything, the newly indus trializing Eas t Asian economies have faced more barriers than other developing country exporters. In contrast to the export pessimists' approach which focuses on the demand country factors, the analysis concentrates on the supply country factors. The results indicate that several economic factors, including the size of the manufacturing sector, the rate of domestic inflation and exchange rate valuation, are important. Nevertheless, there is considerable la ti tude in domes tic policies that permi ts success in spite of deviations from an optimal policy framework. What seems to be important is a country's 'export culture'; that is, the degree of commitment to exporting and its embodiment in collective attitudes of poli ticians, bureaucrats and entrepreneurs towards finding ways to ensure that exporting is successful.