In the latter half of the 20th century, several once-impoverished Asian nations transformed into economic powerhouses without their citizens needing to relocate.
South Korea's GDP per capita, in constant 2015 US dollars, surged from approximately $1,100 in 1960 to over $33,000 by 2020 - a roughly 30-fold increase that propelled it from low-income status to a high-income economy. Similarly, China's GDP per capita in constant terms grew from around $300 in 1960 to about $10,500 in 2020, marking a staggering 35-fold expansion and lifting hundreds of millions out of poverty.
These "economic miracles" were largely driven by export-oriented strategies that integrated these countries into global value chains (GVCs), attracting foreign investments, facilitating technology transfers, and granting access to affluent markets. But can today's developing nations replicate such feats in an increasingly fragmented world?
International trade has historically served as a "social elevator" for emerging economies, enabling them to climb the value chain by producing increasingly sophisticated goods.
This model, epitomized by East Asian tigers like South Korea, Taiwan, and later China, relied on low labor costs to enter manufacturing, gradually upgrading through knowledge spillovers and export revenues. However, recent analyses suggest this pathway is narrowing.
In a 2025 paper titled "The Changing Nature of International Trade and Its Implications for Development," Yale professor and former World Bank chief economist Pinelopi Koujianou Goldberg, along with IMF deputy department head Michele Ruta, argue that the mechanisms underpinning export-led growth are faltering amid geopolitical tensions and structural shifts. Their work highlights how trade, while still vital for growth, is becoming less accessible as a development tool, potentially widening global inequalities.
The Breakdown of Market Access: Protectionism and Reshoring
One key pillar of the old model - access to rich-country markets - is eroding due to rising protectionism. Since the early 2020s, global trade barriers have proliferated, with the United States alone imposing tariffs that escalated its effective protectionism level from 4.1% in 2024 to 18.3% by September 2025.
Worldwide, tariffs and non-tariff measures have surged, driven by trade disputes and strategic policies; for instance, the Trump administration's 2018 – 2020 tariffs on imports marked a shift toward "strategic protectionism," adding layers like 10% blanket duties that disrupted supply chains.
This trend has dampened global trade growth, which slowed post-2008 financial crisis and plummeted during the 2020 pandemic, only to recover unevenly amid ongoing uncertainties.
Compounding this is the reshoring phenomenon, where companies relocate manufacturing closer to home markets. Fueled by policies like the U.S. CHIPS and Science Act and Inflation Reduction Act, reshoring announcements in the U.S. reached record highs in 2023 –2024, with nearly half of surveyed manufacturers citing benefits like reduced freight costs and proximity to engineering talent.
This shift disadvantages developing countries, which lose out on foreign direct investment (FDI) and job creation. For example, reshoring has revitalized U.S. communities hit by deindustrialization but at the expense of offshore suppliers in Asia and Latin America, potentially reducing their integration into GVCs and stifling economic spillovers.
Blocked Pathways to Knowledge: Geo-Economic Fragmentation
Technology transfer, another cornerstone of development, is increasingly hindered by geo-economic fragmentation — the division of the global economy into rival blocs. This includes restrictions on trade, investment, and knowledge flows, often justified by national security concerns.
Reduced technological diffusion could slash productivity in developing countries by up to 10% in extreme scenarios, as they struggle to access innovations from advanced economies. For instance, U.S.-China tech decoupling has limited FDI flows, reshaping global patterns and potentially costing non-aligned nations welfare losses through disrupted supply chains.
Smaller economies, reliant on imported technologies for upgrading industries, face diminished spillovers, exacerbating their lag behind.
Institutional Erosion: The Weakening of WTO Safeguards
The World Trade Organization (WTO), once a bulwark for small economies against power imbalances, is losing efficacy. Regional trade agreements (RTAs) now proliferate, often bypassing WTO rules and weakening non-discrimination principles, leaving developing countries vulnerable to discriminatory practices.
The WTO's dispute settlement mechanism has been crippled since 2019 due to U.S. blockages on appellate body appointments, eroding enforcement and allowing stronger nations to impose unilateral measures.
This has led to trade policy uncertainty that dampens exports and economic activity, particularly for smaller players without bargaining power. Critics argue that while the WTO has stimulated growth and development, its current fragility amplifies inequalities by favoring the powerful.
Structural Shifts: Automation, Digitalization, and Climate Change
Beyond geopolitics, profound structural changes are reshaping trade's developmental role. Automation and artificial intelligence (AI) diminish the value of cheap labor, a traditional entry point for poor countries into GVCs.
In developing nations, AI exposure is lower - around 26% for low-income countries versus 60% in high-income ones - but it still threatens low-skilled jobs, with automation potentially replacing assembly-line workers more easily than in advanced settings. This risks trapping economies in low-productivity sectors, as rising labor costs and cheaper tech accelerate adoption.
Digitalization offers new avenues through trade in services, which has grown fourfold since 2005, with developing economies crossing $1 trillion in digitally deliverable exports in 2023. However, this requires robust digital infrastructure and skills, often lacking in low-income regions, widening the divide. About 50% of traded services are now digitally enabled, but gaps in connectivity hinder participation.
Finally, climate change disproportionately affects agriculture in developing countries, disrupting GVCs. Rising temperatures and extreme weather could cut global crop yields by 2–6% per decade, with severe impacts in the Global South where agriculture employs up to 70% of the workforce.
This not only reduces export potential but also weakens food security and supply chain resilience, as seen in how climate events ripple through production and prices worldwide.
In this transformed reality, developing countries face a triple bind: restricted markets, curtailed technologies, and eroded protections. While trade remains a growth engine, its benefits increasingly hinge on the strategic decisions of major powers like the U.S., China, and the EU. Without adaptive policies - such as investing in skills, digital infrastructure, and climate resilience - the gap between rich and poor nations may widen, foreclosing paths to prosperity.
As Goldberg and Ruta warn, the era of broad-based export miracles may be over, replaced by a more selective, power-driven global order.
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Author: Slava Vasipenok
Founder and CEO of QUASA (quasa.io) - Daily insights on Web3, AI, Crypto, and Freelance. Stay updated on finance, technology trends, and creator tools - with sources and real value.
Innovative entrepreneur with over 20 years of experience in IT, fintech, and blockchain. Specializes in decentralized solutions for freelancing, helping to overcome the barriers of traditional finance, especially in developing regions.
