How the EPA Promotes Economic Development

Discussions of the effect of international trade on development date back to the mercantilist’s writings of the seventeenth century,1 which focused on the effects of a surplus (deficit) in the trade account.2 Later, Adam Smith’s advocacy of free trade was aimed at facilitating the maximum accumulation of capital,3 but the first cogent theory of international trade was produced by Ricardo4 in 1817. During the 1950s and 1960s, the virtues of international trade for economic development were extolled by Viner,5 Harberler,6 and Craincross,7 but elicited vigorous criticism from several perspectives. It was claimed that the history of the now developed countries was a vindication of free trade policies with the experience of Britain,8 Italy,9 and the United States10 in the nineteenth century cited as evidence. The experience of developing countries contrasted with the predictions, prompting different explanations. Nurske11 pointed to the lagging demand for primary products and the enclave nature of export industries was also put forward.12 By far the most telling comments highlighted the deteriorating terms of trade between manufactured goods and primary products. Prebisch13 and Singer14 identified the problem of developing country trade as inherent in the structure of the world capitalist system, the international division of labor, and the deformed economic structure of developing countries. The developed/industrialized countries, which form the core, export manufactured goods, while the developing countries export primary products from the periphery.