Would general trade liberalization in developing countries expand South-South trade?
For most developing countries, the proportion of exports going to other developing countries has steadily increased since the early 1970's. Until that time, most of the developing countries with an outward-looking trade strategy did proportionately less trade with other developing countries, particularly manufacturers. Since the early 1970's, however, an outward orientation has often gone hand in hand with more South-South trade. The proportionate increase in South-South trade occurred despite relatively higher protection in most developing countries against the products for which they, as a group, have a comparative advantage. As the annual growth rate slowed, it greatly affected the direction of developing countries trade. But the resumption of growth in industrial countries did not alter the increasing trend in South-South trade. The structure of tariff and nontariff protection in most developing countries discriminated against products that other developing countries could supply competitively. Hence, across the board, nondiscriminatory liberalization would generally favor South-South trade - particularly if liberalization focused on the most heavily protected sectors.
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