Perspectives on International Trade and Development

This chapter reviews the theory of international trade and development, the rationale for trade barriers, and how countries, including those of Africa, have dealt with trade barriers. Three main perspectives on international trade theory are reviewed. They are classical, neoclassical, and Marxist and Marxian perspectives. Both classical and neoclassical trade theories favor free trade and see it as beneficial to all parties. Both explain that trade occurs because of comparative advantage. However, for classical trade theory, comparative advantage is based on the labor theory of value, while for neoclassical trade theory, comparative advantage is based on factor endowments. The weaknesses observed within the neoclassical trade theory of factor endowments have given rise to two additional variations of neoclassical trade theory. The first is firm-based theory, which shifts the agency in international trade from states to firms, with an emphasis on why and how firms trade. The second is the new trade theory, which embraces real-world contexts of economic operations such as oligopolies and imperfect competition and, for that reason, even advocates for state intervention in trade, contrary to the ideals of free trade. Marxist and Marxian trade theory agrees with the classical and neoclassical trade theory about the benefits of free trade. However, Marx in particular sees free trade as a vehicle for the impending crisis of capitalism that would transition society into socialism. Extension of Marx’s ideas sees trade as a vehicle of imperialism, unequal development, and dependency. In spite of all the benefits espoused by free trade, international trade still has many barriers commonly classified as tariff and non-tariff barriers. As a result, there have been constant efforts by countries worldwide—including those of Africa to deal with these barriers. These have included various international agreements.