A Brief Recap

From the early 1950s into the 1980s, South–South trade was a black box into which many development economists and Third World intellectuals projected their hopes and upon which mainstream economists poured their scorn. For the sympathetic economists, two appealing possibilities stood out for South–South trade. One was that, because the countries of the South were on more equal footing vis-à-vis one another than they were against the North, their more equal bargaining power meant they could enter into more equitable relationships and could ally themselves against the North, progressively changing the rules of the global economic game. The second was that, since South–South trade was more focused on manufactures, it offered possibilities for greater industrial development than South–North trade, which caught the South in the colonial pattern of exporting raw materials for industrial goods.

For mainstream economists, Southern efforts to change this second pattern represented all that was wrong with development policy during those decades. From their perspective, developing countries were pursuing a wrong-headed economic model when they focused on import substitution industrialization (ISI). Instead of focusing on their comparative advantage in raw materials, they were turning out low-quality industrial products, whether intermediate capital goods or final consumer products: machines and machine parts, refrigerators, televisions and so on. Or so went the argument. As these economists saw it, South–South trade was more likely than not an attempt to offload such products on nearby developing countries, because their low quality and high price meant no chance of their being exported to Northern markets. Even so, this trade did not amount to much and, thus, any argument over its worth remained muted, a sideshow to more pressing debates over ISI, foreign debt, trade policy, multinational corporations, foreign aid and other issues. In fact, it was a contrived or proxy debate over deeper ideologies; being pro- or anti-South–South trade was code for being a partisan of a larger intellectual debate about the superior merits of developmentalist or neoclassical thinking, of being a statist or a free marketeer.

In the last four decades the picture has changed and the debate itself has shifted dramatically, with support for South–South trade coming both from within and from outside respectable economic-policy opinion.