The More We Import From Developing Countries, The More They Will Import From Us

Low import levels from less developed countries raise economic, political and moral questions. Fraser Hosford and Shane Roberts examine the theory and evidence to propose an economic argument in favour of importing more from less developed countries.

This paper will use both qualitative and quantitative analysis to evaluate the proposition that the more we import from developing countries, the more they will import from us. For the purposes of this analysis, it will be assumed that Ireland aims to maximise its net exports, rather than its real income, quality of life, or any other measure of welfare. The many other arguments in favour of trade (such as the gains from specialisation, scale and international competition) will therefore be ignored.

While there are several mechanisms by which an increase in Ireland\'s imports from developing countries could theoretically lead to an increase in their demand for Irish goods, there are a number of qualifications to this theory. There is, in practice, only a very small link between Irish imports and future demand for Irish goods.

Section I of the paper will state the arguments in favour of the proposition. Section II will examine the problems with these arguments and Section III will run three simple regressions using trade data from the last 23 years to test the theory.