A note on ‘strategic’ trade theory and the South

Abstract

AbstractThis note discusses the relevance of strategic trade theories for Southern economies. These theories explore the implications for trade of games‐playing by large firms in oligopolistic industries and justify government support for domestic firms. The paper argues that — in contrast to other recent theories emphasizing technology gaps, economies of scale and learning — the strategic theories have little relevance for Third World governments. This is partly because restrictive assumptions make the policy conclusions widely inapplicable, and partly because the type of industries involved are typically non‐existent or inappropriate for Third World economies.