Trade and Structural Adjustment

Embracing Globalisation

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Trade and Structural Adjustment: Embracing Globalisation identifies the requirements for successful reallocation of labour and capital to more efficient uses in response to the emergence of new sources of competition, technological change and shifting consumer preferences.  At the same time, it focuses on limiting adjustment costs for individuals, communities and society as a whole.  Based on specific sectoral case studies, this volume includes analysis of the adjustment challenge and policy framework in both developed and developing countries, together with practical recommendations for good practice.

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The Adjustment Challenge

This chapter sets the scene for the present study, identifying sectors, in both developed and developing countries, which are expected to face adjustment challenges in the future and examining for each of these sectors the underlying forces at work and the nature of the adjustment challenges. The eight sectors chosen for particular attention are agriculture, fisheries, textiles and clothing, steel, shipbuilding, motor vehicles, health services and international sourcing of information technology and business process services. The impact of underlying forces can vary significantly from one sector to another. Pervasive economic forces at work include new sources of competition, technological change, shifting consumer preferences and societal concerns, including those related to the environment. The adjustment process to which these forces give rise can differ significantly depending on countries’ level of development. A distinguishing characteristic of the adjustment process in low-income developing countries is the need for better institutional capacities and infrastructure. The nature and impact of adjustment will vary among different groups in society as well as between individuals and the economy as a whole (e.g. for IT offshoring this is quite modest). The relationship between trade and the adjustment process has many dimensions. While trade policy or trade liberalisation help create conditions favourable to structural adjustment, they can also give rise to adjustment challenges of their own, including those related to preference erosion and revenue loss in developing countries.

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