Comment on Professor Myint’s Paper: 1

In his paper Professor Myint has rightly drawn attention to those policies of the developing countries which can do more harm than good to their development. Evidence can certainly be found in the experience of the past two decades to support the view that such policies as indiscriminate import substitution, dis­couragement of primary commodity production and exports, and excessive optimism about foreign aid, can lead to a misallocation of productive resources and thus impede rather than promote economic development. The author has also rightly reminded us that ‘successful import-substitution need not be confined to manufacturing industry’ and that ‘increasing productivity can occur as frequently in primary production as in manufacturing industry. …’ All these remarks, however, are incidental to the main theme of the paper which is that the principle of comparative advantage is the best guide to foreign trade policy in the developing countries. This view is based on the belief that ‘the theory of comparative costs, as a branch of the static theory of allocation of resources, is neutral between foreign trade and domestic production’, and that ‘in order to maximise the direct gains from trade, resources should be allocated impartially between the export sector and the domestic sector according to the existing comparative advantage’. What the paper attempts to do, in fact, is to evaluate the trade policies of the developing countries with reference to this basic theoretical premise.