Ideas with regard to trade policy and economic development have changed radically
since the 1950s. Then and now, it was recognized that trade policy was central to
the overall design of policies for economic development. But in the early days, there
was a broad consensus that trade policy for development should be based on `import-substitution.'
By this was meant that domestic production of import-competing goods should be started
and increased to satisfy the domestic market under incentives provided through whatever
level of protection against imports, or even import prohibitions, was necessary to
achieve it. It was thought that import substitution in manufactures would be synonymous
with industrialization, which in turn was seen as the key to development. The contrast
with views today is striking. It is now widely accepted that growth prospects for
developing countries are greatly enhanced through an outer-oriented trade regime
and fairly uniform incentives (primarily through the exchange rate) for production
across exporting and import competing goods. This paper addresses the changes in
thought and policy. What was the contribution of economic research to the sea change
in thinking, policy prescriptions, and politicians' acceptance of the need for reform?
What sorts of economic research best informed the policy process? In a nutshell,
how did we learn? In this paper, I first sketch the initial approach to trade policy
in early development research and thought. Next, consideration is given to the evolution
of thought, research, and experience with respect to trade and development over the
next several decades, and to the `conventional wisdom' of the 1990s. Finally, the
role of research and the sorts of research that proved most fruitful in guiding policy
and changing the consensus is considered.