Trade Strategies and Economic Development: Theory and Evidence

Abstract

The commercial policies that a developing country pursues may have a significant effect on the pattern and pace of economic growth and development, by influencing either directly or indirectly (via changes in relative prices) the allocation of resources between sectors (e.g. agricultural and manufacturing activities) and between industries (of differing factor requirements and for different markets either domestically or internationally). These policies intentionally and/or unintentionally influence the scope for and nature of the country’s actual and potential ‘performance’. The aim of this chapter will be to identify the nature and characteristics of alternative strategies that developing countries may pursue and have pursued in the last three decades. It will also seek to review the arguments (theoretical and other) that have been expounded in defence of particular strategies (import substitution, export promotion, ‘mixed’ strategies, etc.). Finally, it will seek to evaluate the extent to which empirical evidence demonstrates whether the intentions or objectives of particular strategies have been satisfied. Although these aims could be satisfied without recourse to any judgements about the relative merits of alternative strategies, normative judgement will be difficult to avoid.