ABSTRACT
International trade has been a major source of economic growth. In the eighteenth century, Adam Smith extolled the productivity benefits which could be derived from specialization and economies of scale. In the nineteenth century, most of the growth which occurred in developing countries was due to the stimulus of new trade opportunities. Not only did they derive benefit from specialization, but they were also able to exploit surplus resources of land and labour, which had hitherto had no economic outlet. Trade was their ‘engine of growth’, long before they were able to exploit the benefits derivable from technological progress and capital formation.
