“Economies That Are Open to Trade Grow Faster”

True. In low-income countries, openness to international trade is indispensable for rapid economic growth. Indeed, few developing nations have grown rapidly over time without simultaneous increases in both exports and imports, and virtually all developing countries that have grown rapidly have done so under open trade policies or declining trade protection. India and China are the best recent examples of countries that started with relatively closed trade policy regimes in the 1980s but subsequently achieved accelerating growth while opening up their economies. From the mid-1950s through the mid-1970s, industrial countries also enjoyed rapid growth while dismantling their high post-World War II trade barriers and embracing new technologies. Japan offers the most dramatic example, but countries such as Denmark, France, Greece, Italy, the Netherlands, Norway, and Portugal exhibited similar patterns.

Openness to trade promotes growth in a variety of ways. Entrepreneurs are forced to become increasingly efficient since they must compete against the best in the world to survive. Openness also affords access to the best technology and allows countries to specialize in what they do best rather than produce everything on their own. The fall of the Soviet Union was in no small measure due to its failure to access cutting-edge technologies, compete against world-class producers, and specialize in production. Even as large an economy as the United States today specializes heavily in services, which account for 80 percent of total U.S. output.

Of course, openness to trade is not by itself...