Structural Changes in International Trade: Cause, Impact and Response

The possibility that structural changes in international trade might impact countries differently has been a matter of great concern for many observers from the 1950s onwards, and the view that the specialisation pattern of a country in international trade matters for its economic performance has been widespread. This paper analyses the structural changes in international trade from the 1960s omwards, their impact on trade performance and the ability of countries to adapt to these changes. The sample consists of OECD countries supplemented, in the most recent decade, by a group of fast-growing countries in Asia. It is shown that commodities from industries characterised by high R&D outlays, particularly in the electronics sector, grew much faster than other trade. In general, these changes were most favourable for the large, high-income countries of the OECD area, but some small countries that managed to carve out sustainable niches in electronics were also beneficially affected. Moreover, there were striking differences across countries in the ability to adapt to these changes. The best adaptability was recorded by countries that initially were not among the most advanced, but actively exploited the potential for diffusion through appropriate policies. These countries also had much better economic performance (GDP growth) than other countries