Free trade and development
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Transcript of Free trade and development
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I. Points covered:- How did today’s developed
countries become rich?- What lessons from the past
should today’s developing countries learn?
II. Critical skills: critique
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What can today’s developing countries learn from the development process of today’s developed countries from the 17th to the 20th century?
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How do the developmental policies of today’s developed nations compared to the measures recommended to today’s less developed nations?
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Development in the past (1600-1970) had little to do with the laissez faire policies which the WTO and IMF recommend to developing countries today.
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‘Infant industry promotion’:It is very difficult for a country to develop if it practises free trade.
Why? Because its domestic industry won’t survive the competition of more developed nations.
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Examples: Britain and the US‘Kicking away the ladder’
Japan: an alternative ladder to development
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Chang (p. 27): Important to compare not tariff levels but tariff levels in comparison to the amount of ‘catching up’ a nation has to do relative to the richest nations.
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Elements of the model:1)Heavy state intervention in:
investment, credit provision, state banks, training/education, infrastructure
2)Protectionism (undervalued exchange rate, tariffs)
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2 mutually exclusive critiques of WTO:
1)WTO rules and free trade are good; however, rules are not fairly applied. The solution is to apply the rules fairly.
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2) Free trade not unambiguously good; it is bad during the ‘catching up’ period; prior to catching up, developing countries should be exempt from WTO rules.
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- Economists and politicians are often totally ignorant of historical fact.
- Do NDCs have an interest in the development of LDCs?