rodrik2005 - METU Studies in Development, 32 (December),...

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METU Studies in Development, 32 (December), 2005, 259-274 Notes on trade and industrialization policy, in Turkey and elsewhere 1 Dani Rodrik Harvard University, Kennedy School of Government, 79 John F. Kennedy Street Cambridge, MA 02138, USA Abstract Standard trade theory predicts that trade liberalization will result in inefficient, protected industries being swept away by the forces of global competition, with new industries more in line with the country’s comparative advantage taking their place. In Turkey, as well as in most countries opening up to trade during the 1980s and 1990s, some of the most heavily protected industries have been those that led the way in terms of exports. This pattern of export performance suggests a fundamental lesson about economic development. Economic development is best achieved under a mixed policy regime that combines market discipline with government promotion. 1. Introduction There has been probably no more perceptive an observer of the Turkish economy than Merih Celasun. In all areas that he wrote on -including income distribution, macroeconomic adjustment, and trade policy- Merih Celasun left his distinctive imprint. He took his time to make up his mind, and facile conclusions were not his style. Instead, he grounded his conclusions in rigorous empirical analysis and on 1 This paper was prepared as a contribution to this special issue of METU Studies in Development commemorating the life and work of Professor Merih Celasun. I thank Prof. Fikret Ş enses and the editors for asking me to be part of it. This paper draws heavily on my “Industrial Policy for the Twenty-First Century,” September 2004.
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Dani RODRIK 260 insights developed over a long period of observing the Turkish economy. I want to take as my starting point for this paper an observation that Merih Celasun made in connection with Turkey’s industrialization pattern during its post-1980 outward-oriented phase. He wrote: “Turkey’s post-1980 export performance has been largely structured around existing capacities built in the pre-1980 inward- oriented growth era, which emphasized the import substitution (IS) motive in trade regimes and investment programming. The Turkish case demonstrates the overall feasibility of switching from IS strategy to outward-orientation in the latter stages of the industrialization process ….” (Celasun, 1994: 454). What this quote points to is an interesting puzzle, and one that is not specific to Turkey. The typical pattern in countries opening up to trade during the 1980s and 1990s is that some of the old IS industries have been among those that responded the most vigorously. Standard trade theory -and most economists advocating openness- would have predicted otherwise. Trade liberalization was supposed to lead to a fundamentally different pattern of specialization. The old, inefficient IS industries propped up by trade protection would be swept away by the forces of global competition, while new industries more in line
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rodrik2005 - METU Studies in Development, 32 (December),...

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