Chapter 13
International Trade, Openness and
Integration
Openness provokes widely different responses, depending on what aspects of
openness are under discussion. While trade openness has long received much
support from economists, it has frequently been viewed with suspicion by
industry groups and trade unions threatened by foreign competition. Openness
in terms of easier migration is generally supported by business keen to access
cheap and educated labour from the global economy but strongly opposed by
many who fear the greater competition for jobs and pressure on social services.
FDI has been both opposed by nationalist governments anxious to avoid any
sign of dependence on big foreign business (such as India’s in the 1970s) and
welcomed by nationalist governments keen to promote economic growth,
modernization and national glory through accessing new technology (such as
India’s in the 1990s and 2000s). Much of this debate has been difficult for
economists to engage with, particularly when openness is considered in terms
of ‘ideas from other countries’ and so has been left to the more narrative-histor-
ical approaches of historians. Good examples of such debates discussed here
include the closure of China to the rest of the world after the fifteenth century
and the impact of the Spanish Inquisition in Europe from the late fifteenth
century.
Openness and economic growth
Should ‘openness’ be considered as a deep determinant of growth? The most
commonly debated aspect of openness is whether policy (tariffs and taxes)
permits the free movement of goods and capital across international boundaries,
so perhaps openness should be better considered as a policy-related proximate
determinant. Other aspects of openness, such as to ideas or whether a country is
landlocked and cannot participate competitively in international markets, have
been considered to be aspects of culture and geography respectively.
Openness as a deep determinant influences economic growth through its
impact on the proximate determinants: on the supply of labour via net immi-
gration or migration; by changing the supply of capital through inward (or
outward) foreign direct investment (FDI) or the drain of surplus (for example
capital flight to safe investments in developed countries); by changing the
incentives to invest (expanding domestic productive capacity to export onto a
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