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Trade Strategies for Development: Export Promotion versus Import Substitution

Trade Strategies for Development: Export Promotion versus Import Substitution. Export promotion: looking outward and seeing trade barriers primary-commodity export expansion expanding manufactured good exports Import substitution: looking inward but still paying outward

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Trade Strategies for Development: Export Promotion versus Import Substitution

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  1. Trade Strategies for Development: Export Promotion versus Import Substitution • Export promotion: looking outward and seeing trade barriers • primary-commodity export expansion • expanding manufactured good exports • Import substitution: looking inward but still paying outward • tariffs, infant industries, and protection

  2. Figure 13.1 Import Substitution and the Theory of Protection

  3. Trade Strategies for Development: Export Promotion versus Import Substitution • The IS industrialization strategy and results

  4. Tariff Structures and Effective Protection The nominal tariff rate, t, is Where p’ is the tariff-inclusive price p is the free trade price

  5. Trade Strategies for Development: Export Promotion versus Import Substitution • The IS industrialization strategy and results • Foreign-exchange rates, exchange controls, and the devaluation decision

  6. Figure 13.2 Free-Market and Controlled Rates of Foreign Exchange

  7. Summary and Conclusions: Trade Optimists and Trade Pessimists • Trade pessimist arguments • Trade optimist arguments

  8. Reconciling the Arguments: The Data and Consensus • Neither the trade optimists nor the trade pessimists are always right • There are many factors that determine whether trade is good or bad for a country

  9. South-South Trade and Economic Integration: Looking Outward and Inward • The growth of trade among developing countries • Economic integration: theory and practice • Regional trading blocks and the globalization of trade

  10. South-South Trade and Economic Integration: Looking Outward and Inward • The growth of trade among developing countries • Economic integration: theory and practice • Regional trading blocks and the globalization of trade

  11. Trade Policies of Developed Countries: the Need for Reform • Rich-nation tariff and nontariff trade barriers and the 1995 Uruguay Round

  12. Figure 13.3 The Poor Face High Tariffs

  13. Trade Policies of Developed Countries: the Need for Reform • Rich-nation tariff and nontariff trade barriers and the 1995 Uruguay Round • The problem of adjustment assistance • Domestic economic policies

  14. Adjustment assistance Autarchy Common market Customs union Depreciation Devaluation Dual exchange rate Economic integration Economic Union Effective rate of protection Exchange control Exchange rate Export promotion Flexible exchange rate Free-market exchange rate Concepts for Review

  15. General Agreement on Tariffs and Trade (GATT) Globalization Import substitution Infant industry International commodity agreements Inward-looking development policies Multi-Fiber Arrangement (MFA) New protectionism Nominal rate of protection Nontariff trade barriers Concepts for Review, cont’d

  16. Official exchange rate Outward-looking development policies Overvalued exchange rate Parallel exchange rate Quotas Regional trading bloc Rent seeking Synthetic substitutes Tariffs Trade creation Trade diversion Trade liberalization Trade optimists Trade pessimists Concepts for Review, cont’d

  17. Uruguay Round Value added Wage-price spiral World Trade Organization (WTO) Concepts for Review, cont’d

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