Introduction and Overview

Abstract

In general developing countries are small open economies. In the absence of intervention the traded goods sector invariably accounts for a large share of total output or final expenditure. The exact composition of output would in turn be determined by factor endowments, technology and tastes and preferences. Economic theory tells us that the allocation of resources across sectors, and the efficiency with which resources are utilised in a given sector, can be influenced by intervention. Governments have at their disposal a range of instruments which can be, and in general are, used in an endeavour to direct resource utilisation in a particular way. These instruments are collectively referred to as trade policy, or more generally trade and industrial policy. The former applies to border measures, the latter non-border measures, although drawing the line between the two is becoming increasingly difficult.