Trade and Development(s): Many Concepts, Different Approaches

Abstract

The panel was convened at 9:00 a.m., Friday, March 31, by its chair, Welber Barral of Federal University of Santa Catarina, Brazil, who introduced the panelists: Kevin Davis of the New York University School of Law; Teresa Genta-Fons of the World Bank; Gary Horlick of Wilmer Cutler Pickering Hale and Dorr LLP; and Seema Sapra of King's College, London. TRADE AND DEVELOPMENT(S): MANY CONCEPTS, DIFFERENT APPROACHES What are the effects of international trade for national development? This question has been posed hundreds of times, and thousands of writings have probably been dedicated to worshiping or fustigating trade as a source of success, or of damage, to development. Traditionally, three intellectual attitudes respond to the relationship between trade and development. On one pole, the free-traders are seated. The intellectual heirs to David Ricardo's view of a permanently positive relationship between trade and development, although this relationship may have minor relevance in some particular circumstances. Such logic is normally shared by those who are in the center or in the right of the political spectrum and who see international trade as the evidence, in the global sphere, of the free market's dynamic efficiency. On the opposite pole, the trade pessimists are seated. For them, international trade relations only reflect the rules of domination in the world. Consequently, trade expansion only reinforces such domination as it serves to exhaust scarce resources in developing countries. Such a posture is identified with the nationalist discourse, normally found in the left's political view. Ironically, far right parties use similar arguments to justify closing to foreign influence. I would prefer, Aristotelianly, a third attitude: international trade is not an exclusive cause of scourges in poor countries, nor does it serve as a sole mechanism for development. Yes, some national experiences have had success by adopting a radical openness to foreign trade as the main development strategy. However, these national experiences derive from factors such as geographical location, political and institutional structure, historical moment, and other factors hardly repeatable in other poor countries. Yes, in some cases dependency to international trade provoked national impoverishment and the maintenance of archaic social structures. However, these situations occurred when a national project did not exist, and they did not derive from an inherently pernicious character of international trade, as the dependency theory once believed. Thus, as advocated in the following paragraphs, international trade can be a strategic instrument for development. Its successful use, however, depends on institutional and social factors that are not intrinsic in nor derived from trade practices. Building a general theory about trade and development faces two conceptual issues. The first one is the number of variables to be included in a proposed analytical model. The second issue refers to which concept of development is being taken into account. This way, one must initially observe that some proposed models ignore certain variables, because of ideological or political preferences. An analytical model that intends to evaluate this relationship should consider at least, as mandatory variables: (1) the analyzed country's historical moment and national scenario, for they affect the relevance of trade flux to national economy; (2) geographical location, although minimized by revolution in transports, still is relevant when considering costs for consumer markets; (3) a country's dimension and its capacity to autonomously produce resources necessary for its development; (4) the size of average consumer market, for its implications to gains of scale; (5) infrastructure and its capacity to adapt to international trade; (6) institutional structure and its costs for the country' s economic order and competitiveness; (7) political interests related to trade, regarding the extension of national power or the fear of dependency towards a larger power. …