We show that Bailey's rule holds true in Cole and Stockman's (1992) model of endogenous specialization. Copyright 2004 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

The aims of this paper are to discuss the strategy of international insertion of Brazil and to propose a redefinition of the priorities of external policy, based on an analysis of the structure and the dynamics of the international system, as well as of the challenges faced by Brazilian society.