Trade theory

Questions about the role of trade and trade policy in development represent one major factor in generalizations about macroeconomic policy and the choice of development strategy in developing countries (Colclough, 1991, p. 18a).¹ In recent years, developments in trade theory and their implications for trade policy have led to changing views on the relative importance of factors influencing trade and trade patterns and on the role of trade in economic development. This chapter examines these developments with a view to drawing out some implications relevant to development efforts in Africa. The chapter begins by examining the core of conventional trade theory, its explanatory and predictive power, and proceeds to survey briefly some critics and extensions of the theory within the conventional framework, and developments from outside it. The chapter closes with some reflections on the relevance and implications of these developments for discussions regarding the options that may be open to Africa in its development efforts in two areas: improving its position in world trade and enhancing the role of industrialization in economic transformation in a changing world economy.