1. Introduction

The term “South–South economic relations” captures a host of economic exchanges within the global South including trade in goods and services, capital flows, technology transfer, labor migration, and remittances as well as preferential trade agreements (PTA) and investment agreements and voting blocs within multinational institutions. For the most part, “South–South trade” is used as shorthand to capture all those modes of interactions and South–South trade and South–South economic relations tend to be used interchangeably. In much of the postwar period through the 1980s, South–South economic relations were a flashpoint for debate between supporters and critics of universal free trade, state-led development, and import substitution industrialization (ISI). The relatively scarce literature tended to focus overwhelmingly on the benefits or drawbacks of trade integration among developing countries.

The supporters’ rationale was the ostensible benefits for industrialization in the South. Prebisch (1959) had famously advocated the “enlargement of national markets through the gradual establishment of a common market” in Latin America to take advantage of specialization and economies of scale (p. 268). Myrdal (1956 p. 261) supported South–South integration to help the global South overcome the colonial legacy that biases them in favor of North–South trade.¹ Linder (1967) had argued that similarities in consumer preferences, resource base, technological development, as well as institutions are likely to make South–South integration and trade more beneficial to Southern industrialization than North–South trade.

The critics on the other hand saw in South-South integration all that was wrong about ISI. According to Havrylyshyn and Wolf (1987, p. 158) if a Southern country “does a great deal of trade with other developing countries, the implication is that it has distorted its domestic prices.” South–South trade according to Deardorff (1987) and Havrylyshyn and Wolf (1987) was an attempt to recoup the losses from ISI. Given its inability to penetrate Northern markets due to the high cost and low quality of its consumer and capital goods, a large industrializer like Brazil would offload them to neighboring Paraguay due to preferential treatment. Amsden (1980, 1983, 1984, 1987, 1989), using her analysis of East Asian industrialization, countered these critics by arguing that much of South–South trade in capital goods was intra-industry and in intermediate products, most of which was not subject to preferential treatment. Moreover, she argued, South–South trade facilitated technology transfer and a “learning by exporting” in countries trying to climb the industrial ladder.

Research on South–South trade as an alternative remained relatively marginal throughout this period even when the structuralist literature on uneven development extensively critiqued North–South trade due to asymmetrical economic structures and patterns of specialization (Findlay, 1980; Darity, 1990; Dutt, 1992). As noted by Darity and Davis (2005, p. 154):

The role of government policy is not at the forefront of most of these [uneven development] papers. If we believe these processes operate and perpetuate international inequality, precisely how do we reverse them? Via industrial policy, South-South trade, South-South finance, autarky? Rarely does the formal literature on North-South trade and growth answer the question of how the world should be changed.

There is good reason for this lack. Research on South–South relations remained minimal because South–South trade and capital flows themselves remained relatively negligible throughout most of the postwar period. It was not until the 1990s that South–South economic relations took off and eventually brought the academic literature along with them. However, the post-1990s boom was fundamentally different from earlier ones. While most earlier studies focused on South–South relations under the ISI and the “old regionalism,” the rise in the past three decades has been under the neoliberal era and the “new regionalism” in which most countries of the globe have experienced significant trade and financial liberalization relative to the earlier period together with a simultaneous retrenchment of industrial policy.

Several themes emerge from this newly bourgeoning literature. First, South–South trade and finance is now a significant economic and political force for South countries as well as for the global economy. There is a near consensus therefore that South–South economic relations do matter and that they have the potential to have a significant developmental impact. Moreover, this impact may be positive or negative, that is, that it may help or hinder the long-term developmental goals of exchanging parties. Second, much of South–South manufactures trade is concentrated in high-technology-and-skill content, opening the door for potential long-run dynamic gains from trade. However, these gains are being increasingly concentrated within a small number of South countries. The global South is, in fact, splitting into two groups, which we refer to as the Emerging South and the Rest of South with very different outcomes. While there is evidence for gains through South–South trade, there is also evidence that the Emerging South is rising at the expense of the Rest of South. Finally, the South–South exchanges have expanded significantly to cover issues including financial flows and technology transfer, among other topics. The overall conclusion of this diverse literature is that while it does matter who is exchanging what and with whom, South–South trade is not a panacea for the development challenges in Southern countries. On the contrary, South–South exchange themselves may become a potential threat for development for some of the Southern countries.

The rest of the paper proceeds as follows. Section 2 provides a framework for situating the literature by reviewing the traditional targets of development as well as the benefits and drawbacks of integration into the global economy in both South–South and North–South directions. By establishing the general goals for development in the global South and the means to achieving those goals, we can better appreciate the debates in the academic literature on the relative merits of South–South and North–South trade. Section 3 provides a discussion on the definition of North and South and offers a statistical overview of South–South economic relations that also helps contextualize the debates within the literature. Section 4 introduces the theoretical and empirical literature on the relative costs and benefits as well as relative constraints and bottlenecks in South–South and North–South economic exchanges. Section 5 provides a discussion of the China in Africa debate that helps explain the complexities in South–South exchanges. Section 6 debates whether South–South is still a useful analytical category with the potential of uplifting developing countries as a whole. Section 7 concludes.

2. Economic Development and Global Integration within the Global South

In order to understand the evolution of the literature on South–South trade, it is necessary to anchor the discussion on the main question that the literature is responding to. The debate about South–South trade and its comparative merit relative to North–South trade is in essence a debate about economic development strategies within the global South. Linking South–South relations to trade was explicitly made by developing countries themselves starting with the Bandung Declaration of 1955 to the New International Economic Order of 1974 within UNCTAD to South–South coalitions such as the Like Minded Group within the World Trade Organization (WTO) (Dahi and Demir, 2016). Through those various initiatives, the majority of developing countries have declared the goals of development to be solving the problem of poverty, raising the living standards of their citizens, and achieving a level of economic independence to accompany political independence. This leads to two central questions: What kind of processes lead to achieving those goals, and how does integration into the world economy help or hinder those processes?

The answers to those questions have been at the core of debates within economic development and international economics fields over the past half-century. Though the debate itself is outside the scope of this paper, much of the literature reviewed here assumes that the engines of economic development and structural change within the global South emanates from increasing industrialization, technology-and-skills upgrading, as well as the development of effective institutions.² Economists have long argued that there exists a positive relationship between industrialization and income growth (Leontief, 1963; Kaldor, 1967; Chenery et al., 1986; Murphy et al., 1989) though this relationship has not gone without critiques (Easterly and Levine, 2001). Technological upgrading and entering into knowledge-based economies are also shown to be engines of growth (Romer, 1990; Landes, 1998; Rodrik, 2007). Overall, there appears to be a consensus in this literature suggesting that what you produce and export matters for long-run development and growth.

Accepting the goals of development and the general means to achieving those goals leads to the key questions facing developing countries. What kind of barriers or binding constraints, internal or external, does the average developing country face in achieving those goals, and what may be the benefits or drawbacks from integration into the global economy? Internally, most developing countries found themselves in vicious cycles of low savings and capital investments, dependence on primary product exports, underdeveloped institutions, low levels of financial depth and high levels of capital market imperfections, as well as a variety of information and coordination failures. These internal constraints also shape the developmental potential of South–South versus North–South exchanges through adaptive capabilities, suitability of new technologies, transferability of skills and technology, and differences in demand structures. This is not to mention that many countries with extended experience with colonialism often had domestic vested interests in agricultural or natural resource extraction rather than in industrial development. Externally, the significant gaps that existed at the industrial and technological level were coupled by power and knowledge asymmetries, particularly as the United States and the United Kingdom wrote the rules of the game in the post-WWII era through the Bretton Woods institutions.

What then are the purported benefits of integration into the world economy? The mainstream orthodoxy since the 1970s has argued that integration into the world economy is the best path for development and growth and that inward orientation hurts development (Little et al., 1970; Krueger, 1977, 1997; Bhagwati, 1978; Michaely et al., 1991; Dollar, 1992; Harrison, 1996; Dollar and Kraay, 2004). Integration has many potential benefits. Openness, particularly in trade, allows countries to access advanced technology that facilitates the process of growth and structural transformation and helps overcome domestic market constraints, enabling the industrial sector to achieve economies of scale, among other benefits (Grossman and Helpman, 1991). Likewise, financial liberalization is expected to drive down the cost of capital (Henry, 2000), increase investment and growth (Bekaert et al., 2001, 2005), and lower financial constraints on growth (Rajan and Zingales, 1998).

In short, developing countries want to industrialize and upgrade their technological capacity, and integration into the world economy may provide them with the means to do so. Nevertheless, the question then becomes whether North–South or South–South economic relations particularly help or hinder achieving developing country goals. The rest of the paper traces the evolution of this debate.

3. Evolving Nature of South–South and North–South Exchanges

3.2 Stylized Facts on South–South and South–North Exchanges

For most of post-WWII period, South–South trade remained marginal, fluctuating at around 10% of world trade in merchandise goods. Historically, an interesting feature of South–South trade is that it is concentrated in relatively sophisticated manufactures compared to South–North trade (Amsden 1989). Since early 1990s, South–South trade has grown substantially, reaching as high as 28% of world merchandises trade by 2013 (Figure 1).⁵ North–South and South–North trade, however, remained relatively stable, with a slight increase for the latter. The importance of South–South exports in total Southern exports has also increased substantially, reaching from around 20% in the 1950s to 60% in 2013. And yet, a majority of this, around 70%, is from trade between Emerging South countries. Likewise, more than 85% of South–North trade originates from Emerging South countries as seen in Figure 2.

During this period, the production structures of some Southern countries have gone through a major metamorphosis, becoming more industrial rather than agricultural or natural resource-dependent. In fact, as shown in Figure 3, the share of Emerging South countries in world manufactures exports steadily increased from 10% in 1962 to 45% in 2012, while the share of the Rest of South countries remained negligible, fluctuating at around 2%–3% of world trade since the 1980s. The situation with high-technology-and-skill-intensive manufactures is even worse such that the share of Rest of South stayed at or below 1% and has never been more than 2% of world trade. Meanwhile, the share of Emerging South in world exports of high-skill goods increased from 2% in 1962 to 55% in 2012, surpassing the share of the North (45%) (Figure 4).

We see a similar trend in South–South financial flows even though they have remained negligible up until very recently, and this is reflected in the relatively minimal literature we have on the subject. In fact, before the 1990s, most of the South was in a state of financial autarky with regard to equity and private debt flows. Besides Southern countries emerging as a source of debt, equity of aid coincides with the rise of few Emerging markets after the 2000s (UNDP, 2013). In 2013, FDI inflows to the South amounted to 61% of global inflows (including both the North and the South), while FDI outflows from the South reached its highest level of 39% within global outflows. We discuss the financial aspect of South–South exchanges further in Section 4.4.

4. Theory and Empirics of South–South Trade and Finance

5. China and the Emerging South in Africa

The increasing importance of South–South exchanges in trade and finance is most visible in the China in Africa literature, which brings together the complex intersection of trade, aid, FDI, migration, and geopolitics. We dedicate a separate section here for several reasons. First, compared to other debates on South–South exchanges, interactions between China and various African countries have received particular attention in North America and Europe. In addition, China and Africa tend to represent opposite ends of the development spectrum, that is, a rising industrial power versus a relatively agrarian and primary good exporting region. Furthermore, on many development accounts, Africa appears as a net loser from the neoliberal period, while China appears as a winner. This makes investigating the outcome of their increased interaction particularly compelling. Finally, China in Africa best illustrates how the academic literature has evolved to allow for greater complexity in analyzing South–South interactions.

The earlier literature on the topic tended to be simplistic. As Ado and Su's (2016) survey argue, “research publications on the Chinese in Africa are mostly oriented toward findings that highlight a win-lose paradigm” (p. 42), underscoring the ideological bias in some of this literature, as is also pointed out by Power et al. (2012). Following Kaplinsky (2013), we classify the China in Africa debate by the levels of complexity of “China” and “Africa” as analytical categories that highlight the dynamism and the heterogeneity of country experiences involved therein. Particularly, we suggest three analytical categories: (a) China and Africa as two homogeneous actors whose interactions would either benefit or harm the other or both; (b) recognizing Africa as too heterogeneous and diverse to expect a unitary impact of Chinese presence, and to (c) a most complex approach, which recognizes that both China and Africa are heterogeneous with multiple actors, processes, and impacts. The articles surveyed here are classified accordingly in Table 4. The main benefit of this classification is that it reveals not just the fact that China–Africa engagement is complex but how it is complex.

As alluded to by Power et al. (2012), China's Africa presence is often interpreted by its Cold War era engagements, signified by the iconic Tanzania-Zambia Railway, built during 1970–1975, which contained several elements that were later erroneously considered as new in terms of China's current engagement in Africa. First, it was a massive investment, costing about $600 million dollars, more than the Aswan dam in Egypt had cost the Soviets. Second, it was efficiently and rapidly done. Despite containing 300 tunnels, 10 km of bridges, and covering a distance of 1860 km, it was completed in only five years and two years ahead of schedule. Third, it contained a large number of workers, many of whom were Chinese (of the 75,000 workers who worked on the project, 25,000 were Chinese, and the remaining were Tanzanian). These three elements: massive infrastructure project, efficiency in implementation, and the presence of Chinese laborers are common tropes covered by the later literature.

The first wave of the China in Africa literature was born in reaction to the overwhelmingly alarmist discussions in the West. Some, if not all, of this literature was excessively optimistic, highlighting the benefits more than potential risks (Alden, 2007; Mawdsley, 2008; Brautigan, 2009; Chan, 2013; Kachiga, 2013). Brautigan (2009) questions the “myths” on China in Africa by arguing that contrary to Western aid, Chinese aid and concessionary loans reduce the possibility of corruption and embezzlement in host countries as they are often contracted directly through Chinese companies. Likewise, Alden (2007) assesses China–Africa policy through three possibilities that are partner, competitor, and colonizer, and finds elements of each in this relationship. While he finds that Chinese presence provides significant infrastructural benefits, it may also undermine African local industrial development and hurt indigenous democratization efforts. Jenkins and Edwards (2006) examine the direct and indirect impact of both China and India on African development in both natural resource and textile sector and find only limited crowding out effect on African exports in third country markets.

Kachiga (2013) through case studies on Nigeria, Sudan, Angola, Zimbabwe, and South Africa illustrates both the unique aid and investment strategies of China and how they compare and differ from those of the West. Like Western aid, Chinese aid comes with conditionalities and expectations of strategic payoffs, including tying them to purchases of Chinese goods and services. Nevertheless, given China's principle of sovereignty and noninterference, Kachiga argues that China's aid more closely fulfills the meaning of the word than that from the West as African countries are freer to set their own priorities on spending aid money. Carmody (2013), focusing on the BRIC countries, also highlights the positive developmental effects of these countries’ involvement in Africa.

Kaplinsky et al. (2007)), Kaplinsky (2008), and Kaplinsky et al. (2010) provide a more critical and balanced analysis of China effect in Africa. Kaplinsky (2008) is a cornerstone of the second level of complexity of China in Africa studies and finds that China may be undermining industrial development in sub-Saharan Africa (SSA) through two channels. First, increasing Chinese imports of natural resources turns the terms of trade against manufacturing.¹¹ Second China's manufacturing growth is outcompeting African manufacturing, which has direct as well as indirect effects through third countries. For example, China's trade with the United States may help or hinder SSA exports to the United States. In addition, high saving rates of China help lower global interest rates and stimulate investment in SSA. Finally, increasing Chinese participation in international financial institutions may help relax their conditionality requirements imposed on SSA in aid flows given that China has now become a major donor for aid to the South (Gallagher et al., 2012; Strange et al., 2013).

In a follow-up work, Kaplinsky et al. (2010) focus on three areas: trade, production/FDI, and aid. Regarding trade, unlike Jenkins and Edwards (2006), Kaplinsky et al. (2010) suggest that the opening up of the United States to imports from China (particularly in textiles after January 2005) resulted in significant declines in SSA manufactures exports to the U.S. market, hurting unemployment and poverty reduction efforts. The decline in exports and industrial employment is not sufficiently countered by growth in resource-extractive industries as the latter is more capital-intensive and involves more concentrated forms of ownership. Similarly, Giovanetti and Sanfilippo (2009) show significant crowding out of African exporters by Chinese manufactures exports to the United States, EU, and other African countries. Furthermore, Adisu et al. (2010) find that while Chinese investments create only minimal employment effects, they significantly hurt local trade in host economies. Similarly, Brenton and Walkenhorst (2010) highlight the competition risk China poses on domestic industries in North Africa, while Edwards and Jenkins (2014) find a strong crowding out effect of China on South Africa's exports to SSA in medium and low technology manufactures. Busse et al. (2016), in their assessment of Chinese trade, aid and FDI effects on per capita growth rates among SSA countries find that while imports from China have a negative displacement effect on African growth, exports to China do not have any significantly positive effect.

Furthermore, Cheru (2016) examines the case of Ethiopia and points to the use of certain countries such as Ethiopia and Kenya by China and India as regional hubs and launching pads. Aguilar and Goldstein (2009), focusing on Angola, show that China's increasing interest in oil and metals resulted in significant investment and credit extension and helped build critical infrastructure. However, they also find minimal employment creation and, with credit being tied to imports from Chinese suppliers, little boost to domestic production. Contrary to perceptions about lack of accountability, they find persistent Chinese attention to the use of their credit and loans.

As discussed earlier, one of the biggest themes in the literature has been the potential payoffs from South–South technology transfer. Focusing on rice farms in Tanzania, Agyei-Holmes (2016) finds that imported power tillers from China and India are more suitable for local needs than those from Northern countries as they are more labor-intensive, cost-effective, and profitable. Likewise, focusing on furniture manufacturing industry in Kenya, Atta-Ankomah (2014) compares the effects of imported technologies from the North with those from China and with locally developed indigenous methods. He reports that local and Chinese technologies are more labor-intensive, allowing for higher employment creation and poverty reduction. They are also more cost-effective, allowing poor entrepreneurs to start up their businesses with a higher degree of automation than would be possible otherwise. The products produced with these technologies are also reported to be more pro-poor as they meet the needs of poor consumers better at lower prices. Xu et al. (2016) report similar positive effects of knowledge transfer potential of Chinese aid programs in Tanzania, Ethiopia, Zimbabwe, and Mozambique through the agricultural technology demonstration centers.

In contrast, Cabral et al. (2016) argue that Brazilian agricultural modernization initiatives in Ghana, Mozambique, and Zimbabwe are subject to similar constraints and distortions that are present in North–South exchanges. Amanor and Chichava (2016) also find similar constraints in trilateral exchanges in agricultural development policies among Brazil, Ghana, and Mozambique. Shankland and Gonçalves (2016) also question the better suitability of Southern technologies in other Southern countries by analyzing the debates around the pro-Savana project of Brazil and Japan in Mozambique that was expected to boost agricultural productivity and lower poverty rates while increasing employment. They conclude that just being South–South does not ensure that such exchanges will not be subject to the same types of limitations present in North–South dimension. Conflicting priorities, differing development narratives, and problems in the suitability of local technologies to other Southern countries’ needs remain as problematic in South–South exchanges as in North–South. Regarding the effect of Brazilian and Chinese development cooperation in Africa, Scoones et al. (2016) also argue that the benevolent effects of South–South cooperation may be more in theory than in reality and that the existing evidence hints at a reproduction of North–South style uneven development within South–South relations.

Finally, a series of articles have begun examining issues of labor and migration. Baah and Jauch (2009) and Jauch (2011) argue that Chinese businesses in Africa are neocolonial, focusing on resource extraction, and are highly antilabor, and exploitative with minimal labor rights. These businesses also fail to develop local capabilities. Mohan and Kale (2007), Mohan et al. (2014), and Mohan and Lampert (2013), while not disputing the exploitative tendencies of Chinese businesses, argue for a more nuanced understanding of the spatially complex state-capital dynamics, the fractious capital, Chinese and African workers, and other structural factors that are contributing to shaping the outcome of Chinese engagements in Africa. Mohan and Lampert (2013) sees heterogeneous union activity and labor practices depending on country and even the Chinese company in question. Strauss and Saavedra (2009) also bring together a vast array of works, highlighting heterogeneous country experiences in their exchanges with China.

In summary, the literature on China in Africa has moved away from sweeping judgments and extreme pessimism and optimism and toward both a more detailed assessment of heterogeneous impact, not just across but also within countries and by sectors as well as a recognition of the multiplicity of actors on both sides.

6. Is South–South Still a Meaningful Category?

Moving forward, a big question for the South–South literature is existential: to what extent is “South–South” still a meaningful analytical category given the huge disparities within the South? Figures 1 show what might be another great divergence between and within Southern countries themselves (Dahi and Demir, 2016). What has been called the rise of the South is actually the rise of a few in the South albeit the largest and most populous countries. What is more alarming is that their rise is coming at the expense of the Rest of South. As Figure 1 show, more than 30% of world trade is now in South–South direction and 58% of total Southern exports were to other Southern countries in 2013. And yet, 70% of this global South–South trade was between Emerging South countries. In fact, 10 Emerging South countries accounted for more than 60% of South–South trade in 2013 and China alone was responsible for 21% of it (IMF, 2014).¹² Likewise, 86% of global South–North trade was from Emerging South to North and top 10 countries accounted for 60% of total South–North trade in 2013 (with China accounting for more than 25% of the total).¹³

The skill content of Southern exports is also highly skewed in favor of a few Emerging economies. Figure 2 shows that the share of Rest of South in world manufactures exports was almost nonexistent in 2012, less than 2%, while Emerging South countries accounted for 45% of the total. Figure 4 shows that the share of Rest of South in global high-skill manufactures exports was 0% in 2012, while that of Emerging South was 55%. In fact, fossil fuels alone accounted for 58% of all Rest of South exports in 2012 (MIT Media Lab, 2015).¹⁴ We should note, however, that the Emerging South as a whole accounts for 75% of Southern population and 86% of Southern output. The top 10 South–South exporters host 47% of Southern population and are responsible for 52% Southern output. China and India are the heavyweights in these calculations, jointly accounting for 42% of Southern population and 33% of total Southern output in 2012.

This country heterogeneity is mostly neglected in the South–South literature. Particularly, the issue that Emerging South–Rest of South exchanges may well recreate the same type of dependency within the South as in North–South is not explored much. Over 74% percent of all Rest of South's exports were in primary commodities in 2012, compared to 64% in 1970, which hints at the return of the traditional center–periphery relationship but this time between Emerging South and Rest of South (MIT Media Lab, 2015). As argued by Ros (2013), the rise of China changed the terms of trade in favor of primary goods during the 2000s, benefiting primary good exporting Southern countries in an opposite pattern to that predicted by the Prebisch-Singer hypothesis. However, this is a double-edged growth spurt, encouraging deindustrialization in the long run.¹⁵ China (mainland) accounted for more than a third of world consumption of all metals, 50% of global coal consumption, 15% percent of global crude oil demand, 73% of iron ore, 38% of copper ore, 60% of global soy beans demand, and 27% of world demand in natural rubber in 2014 (MIT Media lab, 2016). Thus, as discussed in the previous section on China in Africa, growing Chinese demand for primary commodities had two distinct effects on Southern countries. For primary good producers, it triggered a structural transformation, called primarization, so that increasing demand for primary products and favorable terms of trade pushed them to specialize in primary goods and to move away from manufactures. For primary good importing semi-industrialized economies, increasing competition from China in export markets and the rising cost of imported primary inputs have crowded them out of other Southern and Northern markets, decimating their manufacturing industries. Both groups of countries here face deindustrialization/primarization, as the shares of industry employment, output, and investment decrease and they experience a downgrading to less technology-and-skill-intensive, low-productivity activities, mostly in primary goods or low-skill service sectors (UNCTAD, 2003, 2006; Peters, 2005; Jenkins and Peters, 2009; Gallagher and Porzecanski, 2008, 2010; McMillan and Rodrik, 2011; Dahi and Demir, 2016; Rodrik 2016).

Tables 5 and 6 highlight the effect of China on world trade, and particularly that of Latin America. Since the 1990s, China emerged as a major exporter of high-, medium-, and low-skill manufactures.¹⁶ Between 1990 and 2012, China's shares in world exports of these goods increased from 13% to 32% for low-skill goods, from 2.6% to 11% for medium-skill goods, and from 3% to just below 29% for high-skill goods. Meanwhile, its import share of primary goods and natural-resource-intensive manufactures increased from less than 4% to 12%, and from 2% to 10%, respectively. Similarly, in 2012, more than 45% of Chinese imports from Latin America were primary commodities and 41.6% were natural-resource-intensive manufactures, jointly accounting for 87% of its imports from the entire region. In contrast, in that year, 35% of its exports to Latin America were high-skill and 28% were medium-skill manufactures, jointly accounting for more than 63% of Chinese exports to the region. This is exactly what the structuralist economists were afraid of: a vicious cycle of increasing deindustrialization and primarization process in the South. Looking at particular economies, in 2012, 74% of Argentine and 61% of Chilean exports to China were of primary commodities. Together with natural-resource-intensive manufactures, primary goods accounted for 92.6% of Argentine and 99.5% of Chilean exports to China in 2012. Even in the case of more successful industrializing countries such as Brazil, the future looks grim as 92% of Brazilian exports to China were of either primary commodities or natural resource intensive manufactures in 2012.

Table 7 shows the structure of South–China trade in 1990 compared to 2012. The trend here also suggests increasing primarization of exports from the Rest of South to China. In fact, 75% of Rest of South exports to China were of primary goods in 2012, compared to only 13% in 1990. The manufactures exports from the Rest of South fell radically across all skill levels, while the share of primary goods increased. While we observe similar changes in Emerging South–China trade, it is not as radical. Overall, the experience of Latin America and SSA show that export growth is not synonyms with export-led growth.

Despite this heterogeneity however, South–South is still a meaningful unit of analysis in two ways. First, even if some countries have now reached high-income levels, these countries are few (such as South Korea). On the other hand, most countries, including most of the Emerging South, are still at low- or middle-income levels. Therefore, it would be inappropriate to remove these countries from the global South. Our emphasis on heterogeneity is meant to illustrate that these interactions, particularly between Emerging South and Rest of South, may be unequalizing rather than mutually beneficial unless addressed through policy interventions or regional harmonization. Second, as illustrated by some of the literature reviewed, the term “South–South” carries with it a geopolitical and power dimension rather than simply a technical one. The gap in bargaining power and global influence is still significantly smaller within much of the South than between South and North. Moreover, countries such as China self-identifying as “developing” or “South” may be an attempt to utilize the prestige of South–South relations to advance their interests. However, the evidence from negotiating blocs within the WTO showed that South–South cooperation was able to reap meaningful results for the global South as a whole (Dahi and Demir, 2016, chapter 2).

Muhr (2016) argued that social relations and social realities are influenced by discourse and the labels of solidarity, cooperation, and alternative economic models that emanate from within the global South are themselves important and capable of being transformative. Therefore, they should not be dismissed as mere exaggerations or smokescreens to mere exploitation. He points to the case of Latin America, showing how South–South mobilization has proven to be capable of building a progressive alternative, and that ultimately interests and solidarity are not mutually exclusive. And yet, as our review highlights, South–South exchanges involve a variety of perspectives, visions, and motivations, including diverse social, cultural, and political dynamics at home and host countries, and are inherently heterogeneous in nature. Consequently, increasing South–South trade and finance are likely to create diverse outcomes, some positive and, inevitably, some negative. What is needed therefore is recognition of this diversity in the theoretical and empirical analysis of South–South economic exchanges.

7. Conclusion

This paper has traced the evolution of the South–South versus North–South economic exchanges literature. The paucity of South–South trade and financial flows in the postwar period implied that the debate on South–South relations was less of an actual assessment of its implications and more a proxy debate over the (obviously erroneous) state-led versus market-led economic development paradigms in the global South. There was certainly much less at stake than today. Particularly with the industrial rise of large developing countries, South–South trade and finance now makes up significant shares of global as well as Southern country exchanges and much of these exchanges are in increasingly sophisticated products.

However, this dramatic increase in the intensity and scope of these exchanges has implied a greater willingness to embrace complexity in measuring the development positives and benefits. Simplistic assessments have given way to more sophisticated and pointed examinations of certain forms of interactions within the South. At the same time, the lion's share of the benefits of South–South exchanges is accruing to the larger, more populous and more industrialized South countries. For South–South exchanges to be mutually beneficial what is needed is to identify the necessary conditions that maximize spillovers and gains in the form of technology transfer, skills-upgrading, institutional development, policy space and global governance, labor and environment policy, etc. The fact that all developing countries, large or small, still face significant pressures from the North implies an opportunity for South–South arrangements that are mutually beneficial (Dahi and Demir, 2016). However, once left to mere market forces, the evidence points to an increasing uneven development within the global South. Therefore, whether or not South–South exchanges can still offer a developmental promise that might be missing in North–South exchanges depends on how it is appropriated and shaped by movements within the global South.

Acknowledgments

We thank Mustafa Caglayan, Amitava K. Dutt, Kevin Gallagher, Ilene Grabel, Arslan Razmi, Jaime Ros, Roberto Veneziani, and two anonymous reviewers for excellent comments on previous drafts. We also thank session participants at the URPE/ASSA meetings in 2014, 2015, and 2017, the EEA meetings in 2015 and 2017, the Analytical Political Economy Workshop at the University of Notre Dame in 2015, and the seminar participants at the faculty of economics at the University of Montenegro in 2016. Firat Demir thanks the Fulbright Commission and the Faculty of Economics at the University of Montenegro for his Fulbright visit during 2015–2016 when this project was started. Omar S. Dahi thanks the Dean of Faculty Office at Hampshire College and the School of Critical Social Inquiry at Hampshire College for financial support.

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