Open AccessTrade and Industrialisation Revisited (The Iqbal Memorial Lecture)
Author(s) -
I. M. D. Little
Publication year - 1994
Publication title -
pakistan development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.154
H-Index - 26
ISSN - 0030-9729
DOI - 10.30541/v33i4ipp.359-389
Subject(s) - industrialisation , tariff , economics , promotion (chess) , developing country , international economics , value (mathematics) , capital (architecture) , commercial policy , work (physics) , international trade , market economy , law , economic growth , political science , mechanical engineering , archaeology , engineering , machine learning , politics , computer science , history
In 1970 the book Industry and Trade in Some DevelopingCountries by myself, Tibor Scitovsky and Maurice Scott was published(referred to henceforth as LSS). It exposed the bad effects of theimport substitution policies which had been the prevailing mode ofindustrialisation in developing countries for a long time. It advocatedthe elimination of quotas and a uniform tariff of 10-15 percent. Theexchange rate should be adjusted to ensure that exports werecompetitive. If any industry was, exceptionally, to receive morepromotion than that implied by the low tariff, this should be by someform of subsidisation which should not exceed another 10-15 percent ofdomestic value-added. LSS is, I believe, still the most quoted work onthe subject. l It was quite closely related in theory to the methods ofcost-benefit analysis proposed by Little and Mirrlees (1974) (referredto henceforth as LM). While the influence of LSS on the developmentliterature was extensive, neither it nor LM would seem to have had anyinfluence whatever on the policies of most developing countries for adecade. This is, perhaps, the normal fate of policyoriented books. Koreaand Taiwan continued with the export policies they had alreadyinitiated. Admittedly these policies eliminated the bias against exportsinherent in protective policies, a bias that LSS had castigated. ButKorea, and to a lesser extent Taiwan, also reverted in the 1970s to theselective promotion of some mainly capital intensive industries(referred to as Heavy and Chemical Industiies (HCI) in Korea) producingtradables. In Korea, towards the end of the 1970s, it is possible thatLSS played some part in the modification of the HCI drive. But only inChile was the policy of a low uniform tariff, as advocated by LSS,wholly adopted. Chile has stuck to this policy.