40 4. The period from 1850 or so to 1913/1929 saw the emergence of what some have called the Great Specialization, when a truly international economy encompassing most of the globe emerged.
A. Changes in patterns of trade during the Great Specialization
i. What were the three main product groups that emerged as important components of core-periphery trade? In which product group were core countries most competitive? In which product group were they least competitive? Did the diversity of exports match the diversity of imports? Which influences were most important: Heckscher-Ohlin (relative resource scarcity—usually land versus labor) or Ricardian (differences in production conditions because of technology or climate)
ii. Which continents were the most important exporters and importers in 1913? How did the pattern of international specialization in 2015 differ from the pattern of international specialization in 1913 in terms of which continents accounted for the most exports and imports? (Which gained, which lost)?
B. Causes of the Great Specialization
i. How did changes in the terms of trade influence the Great Specialization?
ii. Which of these would be more responsible for influencing terms of trade changes: a. changes in technology (transport, communication) or b. changes in trade policy?
C. You have been assigned two countries. This part of the question asks you to evaluate some aspects of the export-led growth of the countries you have been assigned.
i. Please use our General Equilibrium Trade graph to show how in general a change in the terms of trade could lead to a peripheral economy exporting and specializing in a primary product. You may choose the main export product of one of your assigned economies as the x-axis and use “other” (all other goods, usually including manufactures) to indicate the y-axis. (You may upload a picture of your graph on Moodle) Did your economy’s region experience an increase in the terms of trade for primary products?
For your graph, please put the export good on horizontal axis. All other goods (“manufacturing”) are on the vertical axis.
ii. What are the three models of export-led growth? Please briefly explain the significance of each of these models for the growth prospects of a country during the export-led growth era of the First Globalization.
iii. For each of the two assigned countries: Based on its export pattern ca. 1900, which model of export-led growth would appear to best apply to your country? Please briefly explain.
If you have trouble deciding which model to use, please an argument for your best guess at the model. You can also approach this question by making a statement about your best guess (and why) first. Then, write down some questions about the sector and its relationship with the non-export part of the economy that you feel need to be answered before you can be sure about which kind of model best applies.
iv. Did the terms of trade (main export (Commodity 1) ) versus manufacturing found in the Excel spreadsheet) for your country change, remain the same, or worsen from the 1870s through 1913? How would those changes influence the pattern of specialization? You may wish to illustrate your response on the General Equilibrium trade graph.
Please include a graph of the relevant terms of trade for the period 1870 to 1913 in your response.
Note: You will first need to calculate the terms of trade. We will assume manufacturing goods are the main import. The price indices for manufactured goods and all of the main export goods are on the prices tab of the export_share_1900 spreadsheet.
v. How would supply-side considerations influence the ability of one or the other of your countries to respond to changes in terms of trade? You may want to keep in mind both our discussion of international markets in capital and labor (prior to 1930) and the impact of “Free Trade Imperialism” on the specialization patterns of a country.
D. The power point slides posted on Moodle include “Tree Diagrams” for each of your countries. The tree diagrams show the distribution of exports by product (named) and industry (color-coded) for 1962. To what extent did the export specialization of each of your two economies in 1900 remain unchanged up through 1962? To what extent did the specialization change? Did the change reflect a new model of export-led growth or did it remain with the model observed in 1900?
Sample Solution