There is a shared sense that international trade has great potential to contribute to growth and poverty reduction. There are several examples of countries in which integration into the world economy was followed by strong growth and a reduction of poverty, but evidence also indicates that trade opening does not automatically bring growth. The question therefore arises why the effects of international trade have been so different among countries. If the developed world is dependent on the developing world for raw materials for manufacturing, how is it that the developing world is still poor and cannot compete in international markets? To make real profits from raw materials, poor countries need to develop processing industries. In the words of former World Bank chief economist Justin Lin, all countries that remain poor have been unable to diversify away from agriculture and the production of traditional goods into manufacturing and other activities. So an increase of trade openness ...

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