1. Trade as a Key to Economic Growth and Development A Keynote Address MFT and UNDP Trade Forum, Pyongyang, DPR Korea, 4-5 May 2005 Peter Drysdale Australian National University

2. Background  trade a key engine of growth  no country developed without international integration  high living standards require openness  but no simple relationship between trade and growth

3. Gains from Trade  Smith, Ricardo and Mill and comparative advantage  three channels of trade gains for growth  response to relative price differences  leads to gains from more efficient resource use

4. Origins of Comparative Advantage  role of relative factor endowments  H-O and other theories  capital: labour ratio changes over time with capital accumulation  trade transition to high growth

5. Dynamic Gains from Trade  trade transfers knowledge and technology  trade delivers cheap and high quality capital goods  trade promotes industrial upgrading

6. Evidence  trade policy environment  trade leads income growth  growth of trade in manufactures  experience of China and Australia with trade liberalisation

7. World Trade in Manufactures, 1950 -2003 Source: World Trade Organisation

8. China's GDP and Trade Dependence, 1980-2003

9. Australia’s GDP and Trade Dependence, 1980-2003

10. Empirical Studies  econometric studies of openness and growth  openness premium to growth  methodological and other questions

11. East Asian Experience  East Asia as exemplar of open growth  question of state intervention  pattern of catching-up industrially  labour-intensive export specialisation

12. GDP and Trade Dependence for Eastern Asian Economies

13. Average Tariff Rates by Region

14. Asia’s Share in Labour Intensive Exports 1970-2000

15. Asia’s Share in Capital Intensive Exports 1970-2000

16. Asia’s Share in Technology Intensive Exports 1970-2000

17. Foreign Direct Investment  source of technology as well as capital  role in re-locating production and access to industrial markets  requirements policy environment

18. Other Policies and Institutions  market economy institutions and the state  corruption and governance  macro management and financial market  education

19. Conclusion  openness induces the institutional change  openness central to achieving higher welfare  practical issues but principles relevant to all economies, including DPR Korea