The Trade Policy Debate: Export Promotion, Import Substitution, and Economic Integration Chapter 13 Trade Strategies for Development: Export Promotion versus Import Substitution ν Export promotion: looking outward and seeing trade barriers – primary-commodity export expansion Trade Strategies for Development: Export Promotion versus Import Substitution ν Export promotion: looking outward and seeing trade barriers – primary-commodity export expansion – expanding manufactured good exports ν Import substitution: looking inward but still paying outward – tariffs, infant industries, and protection Trade Strategies for Development: Export Promotion versus Import Substitution ν The IS industrialization strategy and results Nominal Rate of Protection The nominal tariff rate, t, is p′ − p t= p Where p’ is the tariff-inclusive price p is the free trade price Effective Rate of Protection The effective tariff rate, g, is v′ − v g= v Where v’ is the value added per unit of output, inclusive of the tariff v is the value added per unit of output under free trade Trade Strategies for Development: Export Promotion versus Import Substitution ν ν The IS industrialization strategy and results Foreign-exchange rates, exchange controls, and the devaluation decision Summary and Conclusions: Trade Optimists and Trade Pessimists ν ν Trade pessimist arguments Trade optimist arguments Reconciling the Arguments: The Data and Consensus ν ν 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 South-South Trade and Economic Integration: Looking Outward and Inward ν The growth of trade among developing countries South-South Trade and Economic Integration: Looking Outward and Inward ν ν ν The growth of trade among developing countries Economic integration: theory and practice Regional trading blocks and the globalization of trade South-South Trade and Economic Integration: Looking Outward and Inward ν ν ν ν The growth of trade among developing countries Economic integration: theory and practice Regional trading blocks and the globalization of trade Rich-nation tariff and nontariff trade barriers and the 1995 Uruguay Round South-South Trade and Economic Integration: Looking Outward and Inward, cont’d ν ν The problem of adjustment assistance Domestic economic policies Concepts for Review ν ν ν ν ν ν ν ν Adjustment assistance Autarchy Common market Customs union Depreciation Devaluation Dual exchange rate Economic integration ν ν ν ν ν ν Effective rate of protection Exchange control Exchange rate Export promotion Flexible exchange rate Free-market exchange rate Concepts for Review, cont’d ν ν ν ν ν General Agreement on Tariffs and Trade (GATT) Globalization Import substitution Infant industry International commodity agreements ν ν ν ν ν Inward-looking development policies Multi-Fiber Arrangement (MFA) New protectionism Nominal rate of protection Nontariff trade barriers Concepts for Review, cont’d ν ν ν ν ν ν Official exchange rate Outward-looking development policies Overvalued exchange rate Parallel exchange rate Quotas Regional trading bloc ν ν ν ν ν ν ν ν Rent seeking Synthetic substitutes Tariffs Trade creation Trade diversion Trade liberalization Trade optimists Trade pessimists Concepts for Review, cont’d ν ν Uruguay Round Value added ν ν Wage-price spiral World Trade Organization (WTO)