Strategic Trade Policy and Developing Countries

New theories of 'strategic' trade policy developed during the 1980s challenged economists belief in the optimality of free trade. However, influential critics soon dismissed the relevance of the new theories to practical policy, especially in developing countries. This paper argues that imports of developing countries are frequently supplied under conditions of imperfect competition, and that consequently the environment for strategic import policy exists. This is first illustrated by indirect empirical evidence, and then with reference to historical and institutional features of developing countries' import trade, reinterpreted in the light of modern theories of industrial organisation.