Chapter 11 Trade policies in developing countries

Trade policies in developing countries have been a focal point of analysis for international economists in the past several decades. A desire for rapid economic growth in developing countries raised many questions about the relationship between trade and growth. This chapter discusses that the policies adopted in many developing countries have often been widely at variance with those emanating from models of rational resource allocation and provided researchers with ample scope for analysis of their effects. Simultaneously, analysts have examined the theoretical and empirical content of the rationales given for rejection of the rational resource allocation models. Some developing countries reversed their trade policies in important ways, often with dramatic results. These reversals and the resulting changes in economic structure also provided stimulus for analysis of the link between trade policies and development. Thus, the subject matter usually regarded as comprising trade and development emanates largely out of the concerns and experience of developing countries. The chapter outlines the issues and their historical evolution, setting the groundwork for later sections. It focuses on the analysis of policies adopted under alternative trade strategies and introduces factor market imperfections into the analysis. It also deals with issues of so-called export pessimism and instability of the international market.