THEORIES RELATING TRADE AND DEVELOPMENT AND THEIR RELEVANCE TO SELECTED DEVELOPING COUNTRIES

Abstract

This academic exercise aims to analyse the role of trade in the economic development processes of three selected developing countries by discussing the relevance, if any, of the theories relating trade and development. A survey of the theories as well presented categorically based on detrimental effects of trade as related models is the favourable and on economic growth. Subsequently, trade strategies are formulated in accordance with the prognoses of the respective schools of thought. Thereafter, case studies on South Korea, Singapore and Malaysia are carried out using as the focus their phases of economic development which embody the particular trade strategy pursued. Empirical findings of these countries demonstrate a positively robust nexus between trade and economic growth that generates varying externality and productivity effects thereby affecting the capacity for development. The case studies further discover some common salient features. Specifically, the countries' economic achievements were attained under changing comparative advantages and varying degrees of government intervention and intermediation as well as an apparent "natural" reliance on foreign investment, an inevitable by-product of trade, to provide the added impetus for each country's development endeavours. In addition, institutional and social factors, to some extent, come into play. Simultaneously, the limitations of the theories begin to unfold. In general, these countries conform to the dictates of the neoclassical school of thought and its hybrids while the structuralist and radical theorists could project an iota of relevance in certain aspects. Noticeably, the gains or losses from trade as argued by the respective schools of thought only remain potential until policies or strategies are designed to realize them. As a matter of fact, these countries have adhered to, at one time or another, the policy conclusions of the differing schools of thought in their quest for development.