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July 13, 2006


Luis Enrique

I don't understand this:

"they are less likely to suffer a worsening terms of trade as they grow, because their exports of any particular good are a small fraction of world trade"

The exports of small countries are likely to be a small fraction of world trade too. Isn't what matters the fraction of that country's own trade?


Not necessarily Luis. It's highly possible that poor countries' supply of some commodities - say Brazilian coffee or Ghanaian cocoa - is so big that it can affect world prices.


"But remember - big business and free trade are two very different things. "

In principle, yes - in practice, not very much. International trade in many sectors, notably many that are particularly important to developing countries, is distinctly uncompetitive because it's dominated by a few enormous companies. So isn't much *so-called* 'free trade' just a replacement of one kind of distortion with another? And if limited tariff protections have the potential to make firms in developing countries more internationally competitive in the medium to long term, wouldn't that garner some support from an advocate of greater international competition?

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