Does international trade increase economic growth? In this context, what are the trade policies that have been followed by developing countries?
Standard textbook economic theory tells us that international trade benefits both parties in the trade, based on the gains from comparative advantage as laid out by David Ricardo. However, recent research into New Trade Theory suggests that trade may not always be beneficial, and there are examples when it could inhibit growth. This essay will examine when this could be the case and then relate this to the example of developing countries.
The Ricardian story goes that countries have comparative advantages in producing certain goods. [...]