Export Pessimism and the Neoclassical Revival

In the 1950s and 1960s, developing countries raised concerns about the challenges they faced in international trade. In their view, sustainable development could only materialize through increased industrialization. They felt that liberal trade policies would stymie infant industry development and continued dependence on primary commodity exports would result in volatile export earnings and deteriorating terms of trade. The trade strategy that emerged from this thinking had three main strands: (a) industrialization promoted through import substitution behind protective tariff and non-tariff barriers; (b) improved access to developed country markets through the establishment of a system of preferences; (c) commodity agreements aimed at stabilizing and, possibly, increasing earnings from commodity exports. The late 1970s witnessed a rethinking of the trade policies that contribute to sustainable development which had an impact on developing country practices and globalization in the next two decades. This chapter traces developing country trade policies until about 1980 and their participation in the General Agreement on Tariffs and Trade (GATT) and the United Nations Conference on Trade and Development (UNCTAD). The last part of the chapter addresses the problem of incoherence in developed country aid and trade policies toward developing countries.