16 Trade policy and developing countries
There are four main sources of external revenue for developing countries: exports, FDI, foreign aid, and remittances. Developing country merchandise exports have risen from $599 billion in 1980 to almost $5 trillion in 2009. Over this period, developing countries’ share of world merchandise exports rose from about 29 per cent to 39 per cent (however, this increased relative share of world merchandise exports was largely attributable to China).1 In 2008, foreign direct investment flows to developing countries reached almost $520 billion,2 and official development assistance flows (foreign aid) about US $130 billion3 (with about another $30 billion from NGOs).4 Remittances from emigrants from developing countries to relatives and friends in their home countries are currently running at about $400 billion per year. Thus, export earnings are by far the most important source of external revenues for developing countries, followed by FDI and remittances; in comparison, the volume of foreign aid is much smaller. International trade is therefore of critical importance to developing countries. However, many developing countries face special challenges in competing in an increasingly global economy, leading to early recognition by GATT members that various dispensations were justified in accommodating their needs within the multilateral trading system. These dispensations permit greater scope for restricting imports to promote infant industries or to address balance of payments problems and as a necessary corollary contemplate non-reciprocal trade concessions by developed countries with respect to products of actual or potential export interest to developing countries (often...
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