TWN Trade & Development series no. 40

Trade Liberalization, Industrialization and Development: The Experience of Recent Decades


Publisher: TWN (ISBN: 978-967-5412-49-3)

Year: 2011†† No. of pages: 48


In this paper, the author analyzes the experience of countries in trade liberalization in the light of the debate between neoliberals and neo-developmentalists. The latter regard selective and gradual trade liberalization as necessary at a certain level of development and industrialization. The former group advocates universal, across-the-board and rapid liberalization by developing countries, irrespective of the level of development and industrialization of the country concerned.

The historical evidence from the early industrialization period, the author finds, does not support the claims of the advocates of universal and across-the-board free trade. More recent experience from the last quarter-century also bears this out, with developing countries which had undertaken full-blown trade liberalization facing de-industrialization or becoming locked in low-value-added manufacturing based on natural resources and assembly operations.

The paper also specifically compares the recent performance of China and Mexico, two economies which share similarities but which have followed different approaches to trade liberalization and industrialization. Mexico has been following policies recommended by the neoliberals, while the Chinese government has pursued an experimental and developmentalist approach, implementing policies for building the capabilities of domestic firms while also gradually liberalizing international trade. Their contrasting experiences, it is argued, point to developing countriesí need for a dynamic and flexible trade policy that not only eschews premature liberalization but also operates in tandem with a development-oriented industrial policy.


MEHDI SHAFAEDDIN is a development economist affiliated with the Institute of Economic Research, University of Neuchatel, Switzerland. He is a former head of the Macroeconomics and Development Policies Branch at the United Nations Conference on Trade and Development (UNCTAD) and author of many articles on industrialization and development policies in international journals. His books include Trade Policy at the Crossroads: The Recent Experience of Developing Countries (Palgrave Macmillan, 2005) and Competitiveness and Development (Anthem Press, forthcoming). He can be contacted at or He also runs a training course on building up competitive industrial capacity for development.


1 Introduction†††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††

2 The Trade Liberalization Hypothesis: Background and Features†††††

††† Elements and features of the trade liberalization hypothesis†††††††††††††††††††††††

††† The philosophy behind the trade liberalization hypothesis†††††††††††††††††††††††††††

3 The Experience of Successful Industrializers††††††††††††††††††††††††††††††††††††

††† The particular case of Great Britain as the first industrializer†††††††††††††††††††††

4 Impact of Forced Trade Liberalization Imposed on Colonies††††††††††††

5 The Increased Need for Infant-Industry Support in Late Industrializers

6 The Characteristics of Trade Liberalization During Recent Decades†††††

7 Recent Experience in Trade Liberalization††††††††††††††††††††††††††††††††††††††††

††† Least developed countries†††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††††

8 The Comparative Experience of China and Mexico††††††††††††††††††††††††††

††† Differences in policies of the two countries††††††††††††††††††††††††††††††††††††††††††††††

††† The role of the government in developing capabilities of domestic firms††††††

9 Concluding Remarks and Policy Implications††††††††††††††††††††††††††††††††††††

††† Can the experience of China be replicated by other countries?††††††††††††††††††



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