Trade and Trade Policy for Development

Trade and Trade Policy for Development

Trade and Trade Policy for Development

Trade and Trade Policy for Development

Excerpt

The effects of international trade on underdeveloped countries pose many problems of both practice and theory. Despite much discussion, however, there is little agreement on what in fact an adequate trade theory for underdeveloped areas would be. Strongly formulated opposing views have been advanced, and, in this situation, some of the texts on development economics conveniently bypass the issue by employing vague generalities.

There are many reasons for this state of affairs. To begin with, there exists a neatly woven trade theory -- the neoclassical trade theory, with a number of modifications to allow the incorporation of Keynesian theory. Although originally formulated to explain the effects of trade on countries that happened to be industrially advanced, this theory exerts a powerful influence on attempts to theorize about the trade of other types of countries. Although it is not self-evident that the neoclassical theory is inadequate for this purpose, many economists have considered it inapplicable to the conditions of underdeveloped countries and have put forward a variety of alternative theories -- alternative not only to neoclassical theory but also to one another. The ensuing confusion is increased for two additional reasons. First, even if neoclassical theory can be criticized, it is nonetheless obvious that elements of it are of the greatest significance for underdeveloped countries; the rejection of neoclassical theory thus cannot be carried out indiscriminately. Second, underdeveloped nations do not constitute a homogeneous group the conditions of which can be handled easily in a single theory.

The present study represents, hopefully, a link in the chain of attempts to provide a more secure theoretical basis for thinking about trade and underdeveloped coun-

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