Commodities & Terms of Trade

One of my mentors, Hans Singer, played a leading role in the recognition that over the long term the prices of manufactures were rising faster than those of commodities. Moreover, he argued, much of commodity production in developing economies occurred in isolation from the domestic economy; linkages were thin. Consequently the prime policy response which drove the development agenda in much of the developing world was to promote industrialisation. However during the early years of the 21st Century, this long-term commodities-manufactures price trend was reversed and the world economy experienced a large and sustained reversal in the terms of trade. Was this merely a slightly more protracted price reversal than had occurred a few times in the 20th century, or was there a more fundamental ‘structural break’ in these relative price trends?

I have argued support for the existence of a structural break. There are three reasons why I departed from the development orthodoxy. First, the rapid growth of China (and subsequently of India, Africa and Latin America) was in large part driven by investments in infrastructure, and these investments make heavy demands of raw materials. Second, in many cases the easily accessible raw material deposits had already been exploited and the costs of extraction was rising and will continue to rise. And, third, we have become far more conscious of the environmental costs of resource extraction and use, further adding to the prices of commodities. Further, although Singer and colleagues may have correctly observed the absence of linkages during the post war decades, capabilities in many resource-extracting economies have grown, and linkages are not only more prevalent than is widely believed, but have considerable potential to promote more diversified economies. So unless the greening of the economy rapidly results in intensive dematerialisation of production and consumption, it is likely that the trend in the relative rising prices of commodities will be sustained.

In the list of publications below I highlight what I consider to be my significant contributions to this agenda.


The Impact of China on Global Commodity Prices: The Global reshaping of the Commodities Sector, London: Routledge, 2012 (with M.Z. Farooki). (Chinese translation, 2015)

‘Revisiting the Terms of Trade Revisited: What Difference does China Make?’, World Development, Vol. 34, No. 6, pp. 981-995, 2006.

‘Raul Prebisch and the terms of trade; How things have changed….’ in M. E. Margulis (ed), The Global Political Economy of Raul Prebisch, London: Routledge, 2017  (with M.Z. Farooki)

One Thing Leads to Another: Promoting Industrialisation by Making the Most of Commodities in Sub Sahara Africa, 2012 (with M. Morris, and D. Kaplan).

‘One thing leads to another – Commodities, Linkages and Industrial Development’, Resources Policy 37, pp.408-417, 2012 (with M. Morris, and D. Kaplan).

‘Introduction’, Resources Policy 37, pp.405-407, 2012 (with M. Morris, and D. Kaplan).

Promoting Diversification In Resource Rich Economies’, Mineral Economics , Vol. 27, No 2-3, pp. 103-113., 2014 (with M.Z. Farooki).

‘The Impact of China on Low and Middle Income Countries’ Export Prices in Industrial-Country Markets’, World Development, Vol. 40, No. 8, pp. 1483–1496, 2012 with X. Fu and J. Zhang.

‘Global manufactures prices, 1988-2006: how do China’s exports compare?’ in Xiaolan Fu (ed.), China’s Role in Global Economic Recovery, Abingdon: Routledge, 2012 (with X. Fu and D. Kale).

‘Asian Drivers, Commodities Prices and the Terms of Trade’, in M. Nissanke and G. Mavrotas (eds.), Commodities, Governance and Economic Development under Globalization, Basingstoke: Palgrave Macmillan (2009).

‘China, Commodities and the Terms of Trade’ in D. Greenaway, C. Milner and Shujie Yao (Eds.) China and the World Economy: Consequences and Challenges, London: Palgrave, 2010.

Promoting Industrial Diversification in Resource Intensive Economies: The Experiences of Sub-Saharan Africa and Central Asia Regions, Vienna: United Nations Industrial Development Organisation, 2012 (with M. Z. Farooki, L. Alcorta and N. Rodousakis).

‘A disaggregated analysis of EU imports: Implications for the study of patterns of trade and technology’, Cambridge Journal of Economics, Vol. 30, No. 4, pp. 587-612, 2006  (with A. Santos-Paulino)

‘Innovation and competitiveness: Trends in unit prices in global trade’, Oxford Development Studies, Vol. 33, Numbers 3-4, pp. 333-355, 2005 (with A. Santos-Paulino).

‘Asian Drivers, Commodities Prices and the Terms of Trade’, in M. Nissanke and G. Mavrotas (eds.), Commodities, Governance and Economic Development under Globalization, Basingstoke: Palgrave Macmillan, 2009.