Trade Policy, Development, and the New Political Economy

By Gerald M. Meier
1989| Working Paper No. 1064

This paper considers some political economy aspects of trade policy in the less developed countries—more than 30 years on. A more literary title might be “Ideas, Ideology, and Interests.” Writing in the 1950’s Meier and Baldwin [1957], as still recent graduate students, were concerned with ideas. In recent years Baldwin, after much practice in actual trade negotiations and experience with the role of ideology and interest groups in the corridors of power, has written about the political economy of trade policy. But his focus has been mainly on the more developed countries. It may therefore be of interest to relate Baldwin’s early interest in development to trade policy, especially as now viewed from the perspective of the new political economy. Section one recalls Meier and Baldwin’s reactions to the ideas of the 1950s on trade policy and development. Section two considers how economists’ thought on the subject has changed in response to the policy lessons from development experience over the past three decades. The third section turns to the new political economy and examines both its usefulness and limitations in illuminating the role of ideology and interests in the practice of trade policy by the LDCs. The final section draws on both the old and new political economy to explain the adoption of import substitution policies and the turning from import substitution to export promotion.