THE RELATION BETWEEN THE NORTH AND THE SOUTH TRADE ARRANGEMENT

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INTRODUCTION

With anemic growth in the rich countries of the world, that is, the North, it seems unlikely that they can continue to serve as a growing market for the products of the relatively poorer countries of the world, that is, the South, as it has done in the past. In the words of W. Arthur Lewis (1980), it does not seem that the North can continue being an engine of growth for the South, at least in the near future. Moreover, it can be argued that the Northern engine was not a very effective one in the past, since global growth was unable to narrow the gap between the North and the South and bring about convergent growth.1 Furthermore, it is arguable that it is not desirable, either from a normative Northern or cosmopolitan perspective that it continue to serve as an engine of growth. Does all this doom the poor countries of the world to stagnation and no significant prospect of embarking on the path to sustained development?
The fact that some countries in the global South have recently experienced rapid economic growth may suggest that there is a global engine of growth within the South. It has been widely heralded that in recent years countries like China, India, Brazil and the Russian Federation – the BRICs as they have been called – have performed very well. Sometimes South Africa is added to the list and called the BRICS. While the real per capita income of the world as a whole as grown at an average annual rate of 1.47 per cent from 2000 to 2010 and members of OECD have grown at 1.02 per cent, China has grown over the same period at 9.64 per cent, India at 5.82 per cent, and the Russian Federation at 5.66 per cent. Brazil and South Africa has not done so well in terms of average growth rates, having grown at 2.49 per cent and 2.14 per cent, respectively, but even Brazil has grown at 6.55 per cent in 2010, and at an average rate of 5.27 per cent for the last four years if one leaves out 2009 when it experience negative growth. Apart from these countries, a number of countries in Eastern Europe and the former Soviet Union (Armenia at 8.07, Azerbaijan at 13.61, Belarus as 7.8, Kazakhstan at 7.61, and Turkmenistan at 12.83), and Southeast Asia (Cambodia at 6.70, Lao PDR at 7.40, Myanmar, 11.46, and Vietnam at 6.00) have also experienced high numbers, but have not attracted as much attention because of their smaller population size (although Myanmar had close to 48 million and Vietnam over 86 million people in 2010).2 Can these countries collectively replace the North as an engine of growth and development for the rest of the South? Can they grow in a self‐sustained manner even without significant Northern growth, and can their growth bring about convergent growth in the world economy, while avoiding the problems that can result from continued Northern growth? Or, at the very least, does their experience show that even without the Northern engine, parts of the South can indeed embark on the path to sustained growth?
These are not new questions. Lewis (1980) asked it more than thirty years ago when, as now, the growth rate of the North was low and the prospects of a strong recovery seemed dim. Lewis argued that it was possible for parts of the South which could sustain Southern growth –he mentioned India as a possibility even though at the time India’s growth rate was low, but did not refer to China, since China’s growth had just started to accelerate after the reforms were underway – even if the North did not recover its growth. Compared to the late 1970s and early 1980s growth did, however, pick up in the North, although, despite the strong performance of China and some other countries like India, which have a high weight in the South on account of their size, there has been much talk of North‐South divergence (see, for instance, Milanovic, 2005). However, they are relevant again, because of the current Northern slowdown which is more severe than when Lewis was writing and because there are some Southern countries which are experiencing high rates of growth. Reidel (1984) criticized Lewis at the time, arguing that Lewis’s argument required an engine of growth for the South, whereas, especially because many Southern countries had diversified out of primary production, individual Southern countries were not constrained in terms of their growth by overall Northern growth, since they could gain market shares in the North without requiring the North to grow.

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