Trade Policy and Changing Trade Patterns

Abstract

The basic question for developing countries with respect to their international trade relations is how trade can contribute more to economic growth and industrialisation. There is a certain agreement among economists that international trade and economic growth are interrelated. However, the way in which they are related – trade as an engine or a handmaiden of economic growth – is still a matter of dispute as discussed in the contribution by Linnemann in this volume (Chapter 2). Industrialisation is a complex dynamic process influenced by many factors. Chenery (1960) showed that there are some similar tendencies in the industrialisation processes across countries. In his famous paper ‘Patterns of Industrial Growth’ he showed a strong positive correlation between an increase in income per caput and the rise of value added per capita in industry (manufacturing and construction). The per capita income elasticity of value added of industry and of manufacturing appeared to be larger than one, indicating that the share of industry and manufacturing in national production increases.