The policy environment for a country's international trade or for a trader depends only partly on direct interventions on trade by its own government. Many policies towards aspects of the economy: macroeconomic, infrastructure, sectoral, can be as significant as direct policy towards trade or towards firms involved in trade. And the trade and other policies by trading partners will have the same types of effects as policies by the home government. In an interrelated economy, at country and world levels, the policies need not even be directed at a partner; a policy towards a third party may change the relative attractiveness or costs of the traded sector in any country. International institutions may impose or forbid certain types of policy, both within and between countries. Trade is for most countries, and for many firms, a marginal activity: the result of a balance between domestic and foreign production, and therefore of all the forces acting on each of these. This position at the intersection of a range of policies and production conditions means that assessing the 'success' or 'effectiveness' of a policy may also require multiple criteria. A policy must promote, or at least not hinder, a variety of objectives. The objectives, the weighting of each, and the effects to be expected from them will change as a country develops, as the international environment changes, and as firms evolve.
This chapter is directed at identifying the role and effects of national policies specifically directed at trade. It will first examine briefly the evolution of our understanding of the relation between trade and development. It must then look at the policy and economic constraints and opportunities for country policy which are created by the international environment. After this background, it will examine the trade policies available within a country. A section on 'The role of national policies' will examine the role of international policy and the possibilities available to a country to influence it, before concluding with an assessment of the policies available.
Trade was first considered a central element in a country's development path in the 1950s and 1960s; at the same time, planning was becoming the 'normal' way