Fortress Europe and other myths about trade logo An export-oriented development strategy has long formed a main thrust of the World Bank's advice to developing countries. This paper sets out to examine whether one of the essential preconditions for successful implementation of that advice is valid: whether industrial countries are open to developing countries exports. On the basis of what happened to merchandise trade in the 1980s, it concludes that markets were indeed free to imports of manufactures; protectionism was largely a myth. This paper is a revised version of work first published as WPS1098. This revised version takes a somewhat more intensive look at the interactions of trade, growth, and employment in the industrial countries. It concludes that this has not been as smooth and problem-free as some enthusiastic advocates of free trade would have it. During a period of low investment and low growth, some of the potential benefits of free trade cannot be captured, while some of its costs can be immediately felt; when the most intensive competition comes from relatively low wage countries, its impact is most directly felt by labor. In such circumstances, the political attractiveness of protectionism can become huge. However, the paper decisively rejects that route. Protectionism, it argues, would veil real problems, and at best, offer a placebo for real difficulties. Industrial economies, the paper concludes, should not try to hide from competition, but improve their ability to meet it.

Publisher: World Bank

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