FREE TRADE FOR DEVELOPMENT: AN APPRAISAL

This article provides a critical appraisal of the dominant development paradigm that posits free trade as a primary engine of economic development. It examines the theoretical arguments that underpin the "free trade for development" thesis, which are rooted in the classical theory of comparative advantage. The study then provides a critical assessment of the empirical evidence, questioning whether the promised benefits of trade liberalization have materialized for all developing countries. The research explores the significant challenges and risks that developing countries face when opening their markets, including the de-industrialization of infant industries, increased vulnerability to global market volatility, and the constraints that free trade agreements can place on a country's policy space. The paper argues that the relationship between trade and development is not automatic but is contingent on a range of factors, including a country's initial conditions and the quality of its domestic policies and institutions. The analysis concludes that a more nuanced and "strategic" approach to trade integration is needed, rather than a one-size-fits-all prescription of rapid and complete liberalization.

For several decades, the "Washington Consensus" promoted a simple and powerful message: free trade is the key to development. This paper provides a critical appraisal of this dominant paradigm. The first part of the study outlines the intellectual foundations of the free trade thesis, from David Ricardo's theory of comparative advantage to the modern advocacy for trade liberalization by institutions like the World Trade Organization and the IMF. The core of the article is a powerful critique of this thesis, based on both historical and contemporary evidence. It argues that the relationship between trade and development is far more complex and contingent than the simple free trade model suggests. The paper presents the counter-argument, drawing on the experience of the East Asian "tiger economies," that a successful development strategy often involves a strategic, rather than a doctrinaire, approach to trade policy, which includes a period of protecting and nurturing "infant industries" before they are exposed to full international competition. The study also delves into the significant adjustment costs associated with rapid trade liberalization in many developing countries, such as increased unemployment and inequality. The findings lead to a clear conclusion: while trade can be a powerful engine of growth, the benefits are not automatic. The paper advocates for a more pragmatic and context-specific approach, where the pace and sequencing of trade liberalization are carefully tailored to a country's specific level of development and institutional capacity, a concept often referred to as "policy space."