Problem%20Set%20_6b%20ANSWERS - Econ 181: International...

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Econ 181: International Trade Spring 2009 Problem Set #6b (Due Tuesday, May 5, 2009) 1. Article Analysis—Import-Substituting/Export-Oriented Industrialization. Read this article and answer the following questions. Stephen Kotkin, “In Africa, One Step Forward and Two Back”. The New York Times, July 08, 2007. The URL is: . a. The textbook argues that import substitution industrialization did not work well, including in Africa. However, export oriented industrialization might have had some success in East Asia. However, according to the article, Paul Collier seems to argue that export oriented industrialization or trade liberalization policies enacted by African countries would not help Africa develop. Why? Do you believe his argument? There are various answers to this. Here is one: Mr. Collier seems to argue that "the bottom billion" residing mostly in Africa would not benefit from trade liberalization because East Asian countries "stand in Africa's way", which seems to imply that Africa is not competitive or productive enough to export to other countries. This thinking ignores the fact that Africans are productive in something, even if they can not competitively export, say light manufactures, to rich countries. There is no reason why African countries should mimic Asian countries in their export sectors; in fact, the theory of comparative advantage says they should not. Asian countries can not produce everything for themselves and for the world; Africa can and does produce something for itself and for the world more productively and competitively than other regions. Furthermore, it is unclear why Mr. Collier points his finger at "cheap-labor Asia" instead of say, Brazil, Mexico, Europe or the U.S. . Each country or region can and does produce goods and services for trade. b. Mr. Collier seems to argue that rich countries need to lead trade liberalization in a way that gives preferential treatment to African countries—so that African countries can engage in a kind of "export oriented industrialization" initiated by rich countries and driven by demand in rich countries. Please comment. Again, there are various answers to this. While reduction of trade barriers by rich nations (in particular in the agricultural sector as the next chapter discusses) could help both the rich nations and some African countries, African countries could help themselves by doing their own trade liberalization. And if policy makers are uncomfortable about making goods imported from rich countries cheaper, they could lower trade barriers on products from other African countries so that intra-African trade could increase. Interesting studies could compare the demand of products in other African nations versus, say European nations. (Mr. Collier might point out that African
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Problem%20Set%20_6b%20ANSWERS - Econ 181: International...

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