Trade and Industrial Policies in East Asia: In Search of Lessons for Africa

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Addis Ababa University


Most African economies have not achieved any significant level of industrialization and export diversification to date; and so, the continent remains the least industrialized in the world. In response, with strong conviction that economic theory has irrefutably proved the superiority of free trade and laissez-faire industrial policies, the governments and international economic institutions of the developed countries have been pressurizing African governments to free their external trade and minimize their involvement in the form of industrial policies. Under such a context, this study analyzes the trade and industrial policy experiences of three East Asian countries. It also analyzes the terms of trade implications of export diversification into manufacturing under the context of "new export pessimism" using data for six East Asian countries. The study finds that the governments of the countries studied deliberately and consistently employed policies that are against the free trade and laissez-faire paradigms and resorted to a strategic approach to industrial development and international trade. The study also finds that export diversification into manufacturing have had a positive impact on the terms of trade of the countries studied. And therefore, it suggests selective, dynamic, predictable and performance based protection and promotion of infant industries contexutualized to the current global conditions and where the government has the willingness and the ability to withdraw the protection and promotion. Key Words: Industrialization, Infant Industry, Terms of Trade, Panel Cointegration



Industrialization, Infant Industry, Terms of Trade, Panel Cointegration