Terms of Trade and North-South Relations: Implications for Foreign Wealth Accumulation and Comparative Development (1962-2025)

Since the 1960s, many low- and middle-income countries have remained heavily specialized in primary commodity exports, fueling long-standing debates about deteriorating terms of trade, unequal exchange, and the “resource curse.” In a context of slowing global convergence, reassessing the role of commodity prices in shaping global wealth inequalities is particularly timely.

In this paper, Simon Keller studies how the long-run evolution of primary commodity prices has shaped foreign wealth accumulation and development paths across world regions. Using the new WBOP dataset (1962–2025) and constructing world export price indices from UN Comtrade 5-digit trade data, he runs counterfactual simulations to estimate how alternative price trajectories—for agricultural, fuel, and mining products—would have affected countries’ net foreign asset positions and income levels.

Key findings:

• For non-fuel primary commodities, the rise in trade value since 1962 is driven more by increases in volumes than by price growth, suggesting limited price gains for exporting countries.
• Mining export prices increased far less than volumes (about +500% in prices vs +2659% in volumes), implying that mining-dependent regions benefited relatively little from global trade integration.
• A modest increase in mining prices (+40%) would have been sufficient for Sub-Saharan Africa to hold a positive net foreign asset position in 2025; under an OPEC-style price path, the region could have accumulated foreign wealth equivalent to +1400% of GDP (vs –43% in reality).
• If agricultural prices had followed the trajectory of fuel prices, Latin America would hold foreign wealth of around +490% of GDP (vs –30% in reality) and could have reached high-income per capita levels (around €34,000 in 2025 PPP, vs €15,000 observed).
• Alternative price regimes would have dramatically reshaped global creditor–debtor positions, reversing net foreign asset positions between Sub-Saharan Africa, Latin America, and the Middle East and North Africa.
• Overall, the paper highlights the decisive role of the bargaining power of commodity exporting countries and trade regimes in shaping long-run global wealth distribution and the unequal development of world regions.

AUTHOR

• Simon Keller, Paris School of Economics, World Inequality Lab