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Abstract

The promotion of free trade is one of the oldest policy implications offered by international economic theory. While significant disconnects have historically existed between the politics and the economics of trade policy, the rapid economic growth experienced by the export-oriented Asian countries during the 1960s and 1970s amidst a largely stagnating and trade-restrictive developing world provided a precedent for effective development policy, especially within the world’s less developed countries (LDCs). Free trade arguments have since been championed by a majority of global institutions, including the International Monetary Fund (IMF hereafter), the International Bank for Reconstruction and Development (IBRD) or World Bank, the Organization for Economic Co-operation and Development (OECD hereafter), and the World Trade Organization (WTO hereafter). The argument goes that a reduction in trade barriers will induce greater economic efficiency within LDCs by offering cheaper world prices to domestic consumers (increasing consumer welfare) while creating conditions of competition for domestic producers (forcing domestic production to shift towards the most efficient sectors based upon availability of domestic factors).

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