Structural Changes in International Trade - Cause, Impact and Response

The character of the structural changes in international trade, and the possibility that these might impact countries differently, has been a matter of great concern for many observers from the 1950s onwards. The view that all sectors do not offer the same prospects for growth, and that the specialisation pattern of a country in international trade therefore matters for its economic performance, has also been widespread. This paper analyses the structural changes in international trade between 1965 and 1990, the impact of this on the OECD countries and the ability of these countries to adapt to these changes. It is shown that trade in commodities from industries characterised by high R&D outlays grew much faster than other trade. But also some goods from industries that do little R&D displayed high growth (for example clothing). In general, these changes were most favourable for the large and medium-sized countries of the OECD area (high income). Small countries, and low-income countries, benefited much less. There were striking differences across countries in the ability to adapt to these changes. The large rich countries (USA, Japan) and some of the low-income countries showed good adaptability, while many others failed. This holds, for instance, for all the small, high-income countries. It is shown that this to a large extent may be explained by the failure of these countries to carve out sustainable niches for themselves in electronics, the most fast-growing part of world trade during this period.