EXPORT-PROMOTING TRADE STRATEGY

Abstract

T-he question of the wisdom of adopting an trade strategy has recurred in the history of the developing countries. Development economics was born in an atmosphere of export pessimism at the end of the World War II. By the late 1960s, however, the remarkable success of the few economies that pursued export-promoting (EP) rather than import-substituting (Is) policies swung the weight of academic opinion behind the EP strategy. Aiding this process were numerous academic findings from research projects around the world, which investigated both these EP successes and the failures of the is countries.1 The debt crisis of the 1980s, the sluggish world economy, and the continuing depression of primary product prices have revived export pessimism afresh. It is time again, therefore, to examine the old and new arguments that question the wisdom of the EP strategy. The early postwar arguments in support of export pessimism are briefly reviewed below, before the precise content of an EP strategy is stated. The article then considers a few salient lessons that have emerged in the studies on the advantages of the EP strategy and examines several new sources of skepticism concerning export-prom- oting trade policies. The contrasts between the old (postwar) pessi- mism and the new pessimism prevalent today are then exploited briefly to draw a central policy lesson for the developing countries, especially in regard to the multilateral trade negotiations (MTN).2