13.07.2023 Developing Countries and Trade Policy#

Low / middle income countries: Countries with GDP and HDI lower than certain treshold (2021: < 12.000 GDP World Bank)

Import Substitutin Industrialization#

Policy: encourage local industry

  • tariffs for competing imports

  • add export-subsidy

Goals:

  • Protect infant industry in first steps

  • build up industry for export

problems:

  • Wasteful

  • Industry not getting competitive

Trade Liberalization#

less tariffs and non-trade barriers

  • high growth for some countries (China, Taiwan)

  • no clear effects on ohter (Brazil)

  • higher income inequality

World Bank: Exports and Improt as % of GDP

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Why is Asia different than South America?

  • high saving and investment

  • rapid education

  • other reforms