Immiserizing trade: A theoretical note
The analysis raises a theoretical possibility only, and a fairly dramatic one at that. It shows how international trade can actually make a country worse off than it would have been in the absence of trade. A weaker version of the hypothesis would suggest that the country does derive a net benefit from trade which is, however, constrained by the particular trading conditions under which it operates. These conditions include falling import prices brought about by tariff cuts locally and by cost reductions made possible by technological progress elsewhere. On the export side too, poor countries in particular are finding it difficult to retain existing markets, or indeed penetrate new markets, due to a range of non-tariff barriers imposed by governments elsewhere. Small wonder, then, that poor countries everywhere, and African countries in particular, are turning their attention to adopting a more selective ("sub-sector specific") approach to diversifying their trade (Roberts, 2000), and to pursuing various forms of regional integration (Evans, 2000).