T-he question of the wisdom of adopting an export-promoting 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

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Export promoting trade strategy : issues and evidence

This chapter surveys that branch of international trade theory which, following Marshall, is generally described as “pure.” This epithet separates it from “monetary” theory. It is not to be taken to imply exceptional esotericism and abstraction from the problems of the real world. Indeed, I propose to give prominence to that part of the growing, new literature in pure theory which attempts explicitly to bring the theory on to the ground—through empirical verification of testable propositions, through measurement of the gains and losses from changes in trade policy and through the formulation of analytical and operational models to assist the developmental planning that is becoming a key characteristic of the developing nations.

The Pure Theory of International Trade: A Survey

In his 1939 article, Samuelson initiated the modern discussion of the gains from trade. Concerning himself with a small price-taking country and basing his cases on the compensation principle and the axiom of revealed preference, he established that the introduction of external trade could make all citizens better off. His approach received a considerable amount of notice, but no further result came of it for some time. It was not until two decades later that Kemp (1962), along with Samuelson (1962), revived the subject by showing, under a more general condition, that the consumption possibility frontier of the post-trade situation lies uniformly outside that of the pre-trade situation. Their findings, however, seem to call for further generalization.

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Trade and Welfare in General Equilibrium

While it continues to fascinate many, welfare economics does not appear at any time to have wholly engaged the labours of any one economist. It is a subject which, apparently, one dabbles in for a while, leaves and, perhaps, returns to later in response to a troubled conscience—which goes some way to explain why, more than other branches of economics, it suffers from an unevenness in its development, a lack of homogeneity in its treatment and, until very recently, a distressing disconnectedness between its parts.2

A Survey of Welfare Economics, 1939–59

Are the agricultural policy reforms embodied in the Uruguay Round consistent with meeting domestic policy objectives such as providing adequate food security, environmental protection and viability of rural areas? This article examines the claim that agriculture deserves more price support and import protection than other sectors because of the non-marketed externalities and public goods it produces jointly with marketable food and fibre (agriculture’s so-called ‘multifunctionality’). Do these unrewarded positive externalities exceed the negative externalities from farming by more than the net positive externalities produced by other sectors? To what extent are those farmer-produced spillovers under-supplied, and what are the most efficient ways to boost their production to the socially optimal levels? The article concludes that there is little trade-off required to meet domestic policy objectives on the one hand and agricultural protection reform objectives as embodied in WTO rules on the other.

J. E. Meade

Papers

The Theory of International Economic Policy, Volume II. Trade and Welfare