To trump Trump’s tariffs

developed or developing world the mantra that economic salvation to eradicate poverty and move out of underdevelopment lay in exploiting the principle of comparative advantage developing economies possess in areas of production and exchanging those products in the international market for those which would have cost them more to produce domestically.

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This mantra of comparative advantage ultimately led to a situation where the developing world specialised in labour intensive and mostly agricultural products in exchange for capital intensive industrial goods from the developed world. Sri Lanka was one of them. But the wealth and poverty gaps not only between the two respective worlds but also within each of them moved along the same direction of widening.

Import substitution

That widening gap and the challenge to narrow it became a fertile area for radical thoughts on economic development. One of the ideas that became popular in heterodox economics after 1960s was import substitution as a strategy for reducing economic dependence on the developed world. Several countries in Asia, Africa and Latin America adopted that strategy and started making a headway. But what really made that strategy attractive was the Cold War between the capitalist and communist/socialist worlds.

The rise of Communist China, success of the Cuban revolution and defeat of US in Vietnam and Cambodia all sent a warning to American imperialists that unless the economies of these countries, notably in East Asia were allowed to grow Communism would dominate Asia. It was that fear which made US and its Western allies to open their doors with minimum tariffs on imports from those countries. To the East Asian countries in particular import substitution eventually led to export promotion. That success between 1965 and 1990 was celebrated by the World Bank in its publication The East Asian Miracle, vol. 1 in 1993. It was then the unexpected happened.