The Problems of Portuguese Economic Development

Abstract

It is generally recognized that in the absence of foreign trade a large country can, ceteris paribus, develop more rapidly than a small one.² What difference does foreign trade make to this situation? The classical or traditional theory of foreign trade leads to the conclusion that small nations derive greater benefits from foreign trade than do large ones. We may quote J. S. Mill, who says in his Principles:³

It still appears, that the countries which carry on their foreign trade on the most advantageous terms, are those whose commodities are most in demand by foreign countries, and which have themselves the least demand for foreign commodities. From which, among other consequences, it follows, that the richest countries, ceteris paribus, gain the least by a given amount of foreign commerce: since, having a greater demand for commodities generally, they are likely to have a greater demand for foreign commodities, and thus modify the terms of interchange to their own disadvantage.

Translated from the French by Elizabeth Henderson.