Outward Looking and Development Introduction

Reference: Todaro and Smith Chapters 12 and 13

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Globalization process of increased openness; downside dependence and vulnerability Basic questions about trade and development (a) How does trade affect LDC economic growth? (b) How does trade alter distribution of income and wealth within and across countries? (c) Under what conditions can trade help LDC achieve development objectives? (d) Can LDC by themselves determine how much they trade? (e) Should LDC adopt outward-looking or inward-looking strategy?
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III. Free trade like perfect competition exists more in theory than in practice IV. Why is demand for products from LDC weak when incomes rise? Secular fall in prices of LDC exports lead to long-terms transfer of income from poor to rich countries and a way to combat is import-substitution V. Assumptions in theory and problems (a) full employment (b) fixed technology (c) perfect mobility of resources within country; immobile between countries
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(d) government plays no role (e) trade balanced (f) gains accrued benefit nationals VI. Outward Looking and Seeing Barriers Primary commodity export expansion (limited demand, shrinking markets) Manufactures exports expansion (many barriers) VII. Import Substitution: Looking Inward but still Paying Outward VIII. Industrialization Strategy Approach to Export Policy
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IX. South-South Trade and Economic Integration: Looking Outward and Inward X. Trade Policies of Developed Countries: Need for Reforms