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Climbing the Technological Ladder:
Options for Developing Economies Exports against the "New Terms of Trade Pessimism” (Draft)

By Maria Angela Parra

United Nations Department of Economic and Social Affairs, October 18, 2005

Abstract
Although developing countries exports of manufactures have grown significantly in the last decades, the majority of countries still depend on primary commodities or upon components and parts of manufactured goods as a source of export revenue. This paper explores the debate around manufactures exported by developing countries. In this debate the point of contention is whether there are “commodity-like” characteristics in manufacturing processes in developing countries, which could imply declining terms of trade, relative to developed countries exports, similar what has been observed for primary commodities. The dangerous element of this “new terms of trade pessimism” would be to imply that trying to change their pattern of specialization could be self defeating for developing countries exports and growth. Quite on the contrary, this paper will argue that the policy advice should be to be aware of the risk of fallacy of composition, present especially in labor- intensive manufactures, but at the same time, to promote a process of export diversification that creates dynamic comparative advantages and goes “climbing the ladder” towards more technologically advanced products.

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