ABSTRACT
Public debate often lumps developing countries into a single category, implies they have a common interest in the way the trading system evolves, and claims they should adopt a common policy stance to increase their negotiating power versus industrialized countries. Such perceptions were at their peak in the 1970s but still exist today. We avoid that oversimplification here, but suggest a two-way categorization of developing countries that also is subject to the complaint that it ignores large differences between countries. The two groupings are:
1 Certain countries export primary products and import manufactured goods. Therefore, they depend vitally on the ratio of prices of primary products to prices of manufactured goods. A few of these countries, such as Botswana, which exports diamonds, have done well, but most of them have been through a very difficult period. The terms of trade of these countries peaked in the 1970s and are now well below levels that prevailed then. Economic growth in these countries has typically been slow, and in a few cases it has
been insufficient to keep up with population growth, producing declining real per capita incomes. This category includes almost all of the OPEC members, all of sub-Saharan Africa except South Africa, and countries such as Ecuador and Bolivia in Latin America. Some Asian countries, such as Cambodia, Myanmar (Burma), and the Asian republics of the former Soviet Union, are in this category, but most of Asia has become much less dependent on primary-product production.
