Trade Liberalisation and The Poverty of Nations
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Trade Liberalisation and The Poverty of Nations

A. P. Thirlwall and Penélope Pacheco-López

This book argues that orthodox theory is based on many unreal assumptions, and that there are sound economic arguments for selective protection of industrial activities in the early stages of economic development. The historical evidence of the now-developed countries also illustrates this fact.
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Chapter 5: Trade Strategy and Economic Development

A. P. Thirlwall and Penélope Pacheco-López


5. Trade strategy for development The exchange of reduced policy autonomy in the South for improved market access in the North is a bad bargain where development is concerned. (Rodrik, 2001) In the previous chapters, we have challenged the doctrine of trade liberalisation as the certain route to development for poor countries, and surveyed the empirical evidence of the impact of trade liberalisation and greater trade openness on the growth of living standards and the distribution of income between countries and peoples of the world. The picture painted is not a rosy one, particularly for the poor, and it is time to draw some policy conclusions to provide some advice for poor countries in their future struggles and negotiations with rich developed countries and international organisations pressing for further trade liberalisation and penetration of poor countries’ markets, particularly in their manufacturing and service sectors. There is no dispute that there can be static resource gains from trade liberalisation, but it is important to stress again that they are not continuous – they are once-for-all – and are generally small in relation to a country’s GDP, averaging not more than 1 or 2 per cent. The first question 174 Trade strategy for development 175 that naturally arises, therefore, is: are the benefits worth the costs of disruption and the serious distributional consequences that sudden trade liberalisation can have for particular groups in society, particularly when specialisation according to comparative advantage is likely to condemn many poor developing countries to the production of...

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