Unlocking the Trade Potential in Least-Developed Countries: A CGE Investigation for Bangladesh

Abstract

During the past four decades, the region of developing Asia has significantly increased its trade with the rest of the world and within itself. This trend was led by the newly industrialized economies (NIEs)—Hong Kong, China; Republic of Korea (hereafter Korea); Singapore; and Taipei, China—and Southeast Asian countries in the 1960s and 1970s. The People’s Republic of China (PRC) caught up with them in the 1980s and 1990s. More recently, India and Viet Nam have also seen their trade shares rising. The overall share of developing Asia in world trade rose from 4.1% in 1965 to 16.6% in 2005. The region’s dependence on trade, measured by the sum of exports and imports as a share of gross domestic product (GDP), increased from 11.6% to 83.1% over the same period. This expansion of international trade in developing Asia has been accompanied by rapid economic growth and substantial poverty reduction. Despite the controversial results from the trade and growth literature,’ the growth story of developing Asia in the past few decades clearly demonstrates the vital role of trade in development.