Post 2015: Global Action for an Inclusive and Sustainable Future

CHApTER EIgHT
Rather than
viewing the
state as solely
responsible for
engineering
structural
transformation,
its role is
increasingly
seen in terms of
correcting market
imperfections
and overcoming
market failures.
States that do this
are described as
‘developmental
states’.
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the acquisition and learning of new technologies
(Khan, 1996). It manages state–business relations in
order to achieve structural economic transformation
– in other words, the state is sufficiently embedded
to influence business activities, but sufficiently
autonomous to avoid capture by interest groups (see
box 8.2 on côte d’Ivoire, below).
8.3 Changes in the structure and
flows of trade and investment
the changes in trade and investment patterns that
will shape the integration process of the poorest
countries are related to shifts in the types and
quantity of flows. these shifts have brought new
opportunities and particular challenges for lIcs.
8.3.1 Structural shifts in global
production and trade
the effect of large and rapidly growing economies on
global trade and investment patterns has prompted
some countries to adapt their approach to trade and
development policy. the effect of the ‘asian Drivers’
– the East asian nIcs including china – on global
trade patterns began to enter policy discussions
towards the end of the 2000s, before the onset of
the global financial and economic crisis. other
concerns related to the extent to which shifts in the
structure of global demand had resulted in changes
in the terms of trade for manufactured goods and
primary commodities (Kaplinsky, 2010). this is
because structural shifts in global demand are
likely to alter the potential development trajectory
of late industrialisers, in addition to changes in
global production patterns.
the asian region is increasingly operating as a
manufacturing hub – referred to as ‘factory asia’
(baldwin, 2008) – with other countries and regions
either integrating into this international division of
labour or being left out and suffering the effects of
competition with their domestic industries. relative
price developments are affecting development
EuropEan rEport on DEvElopmEnt 2013
strategies designed to reduce commodity
dependence in regions such as latin america and
SSa, which are seeking to diversify their export
base in order to reduce the various vulnerabilities
associated with commodity dependence (Jenkins,
2010; mccormick et al., 2007).
overall trends in consolidation across marketing
and retailing nodes, which have become much more
apparent in recent years, suggest that all types of
trade are progressing towards more hierarchical
and buyer-driven types of Gvc governance
structures (Keane, 2012a). the global governance
of trade that is negotiated and formulated by
governments influences the decisions of the private
sector on production and trade. It is therefore
important to develop a better understanding of
the constraints that impede the achievement of
economic and social upgrading at each value
chain production node as well as movement from
one node to another, and of the policies that can
help to alleviate these constraints. the upgrading
processes of lIc/lDc firms in Gvcs depends not
only on conventional development policies (e.g.
skills, technology and investment policy) but also
on the way in which firms interact across borders,
which governments can influence in the interests
of promoting development.
Global trade is characterised by the fragmentation
of production dispersed across countries,
coordinated by lead firms within Gpns and Gvcs.
the integration of producers within these Gpns and
Gvcs also entails the parallel development of trade
and FDI. this is because global manufacturing is
characterised by trade in tasks between countries
that specialise in particular segments of a given
production (or value) chain. most international
trade is in intermediate rather than final goods. In
general, countries should therefore be thought of as
trading in tasks, activities or processing stages of
intermediate rather than final products (Grossman
and rossi-Hansberg, 2008; Hanson, 2012; oEcD,
2011; Wto-IDE, 2011).