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Working Paper 60 - Trade Liberalization and Growth: Policy Options for African Countries in a Global Economy


The issue of whether trade and increased openness should lead to higher rates of economic growth is an age-old question which has sustained debate between pro-traders and protectionists over the years— from Adam Smith, John Stuart Mill and John Maynard-Keynes to Raul Prebisch and Hans Singer and to Jagdish Bhagwati and Paul Krugman. Theorists from both camps have influenced policy in many countries and at various stages of development. Early proponents of free trade lauded the gains from trade that could accrue to countries when they specialize in the production of goods in which they have comparative advantage, and engage in trade to meet their other needs. New development theorists contend that openness stimulates technological change by increasing domestic rivalry and competition, leading to increased innovation; and, that trade liberalization by allowing new goods to flow freely across national borders increases the stock of knowledge for technological innovations which spur growth.

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