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Economist's thinking about the role of international trade in the process of economic development exhibits a cyclical behaviour. The classical thinking, which held sway until the 1930s, emphasized the crucial role of trade in promoting growth through the optimal allocation of resources made possible by the exploitation of international comparative advantage. By the 1950s, after years of frustration and disappointment in attempting to foster development on the basis of primary commodity exports, many economists, particularly those associated with the Latin American experience, rejected the logic of the classical argument, maintaining instead that underdevelopment is a fundamental problem of transforming the structure of an economy and not of merely achieving marginal optimality in the allocation of resources. Furthermore, imperfections of the international trading framework, such as increasing oligopolistic competition, discriminatory pricing on world markets and product differentiation, discredited deeply the idea of an export-led growth for developing countries. The economic consequence of the new viewpoint was a fundamental rejection of the market mechanism in favour of direct intervention and control of economic decision-making. The main tactic of this strategy was to force the substitution of imports with domestic production by controlling investment decisions and protecting the domestic market from international competition. By the mid-1960s, however, this strategy, or at least the tactics employed to pursue it, had proved unsuccessful (in terms of sustained growth, adequate expansion of industrial employment and removal of severe balance of payments constraints), in many instances only exacerbating problems they were designed to cure.

The purpose of this paper is to examine the theoretical rationale underlying the growth of footloose, import-dependent industry observed in many of the most successful developing countries (Hong Kong, Taiwan, S. Korea, for example). A second objective is to develop empirical formulations appropriate for analyzing the resource allocation consequences of a footloose industrial structure in a developing country. It is argued that previous applications of input-output techniques to factorintensity measurement have in general ignored the implications of trade in intermediate inputs. The Leontief test of the Heckscher-Ohlin trade theory is perhaps the first and certainly the most widely adopted application of input-output techniques to the measurement of the factor intensity of production. The first section of this paper will attempt to demonstrate that the procedure developed by Leontief is not strictly appropriate in an open economy which utilizes imported as well as domestically supplied inputs. An alternative formulation is developed in this paper, which when compared to the Leontief formulation yields a measure of the domestic resource cost or saving resulting from the use of imported rather than domestically produced inputs.

The general consensus in recent literature on development economics is that outward-looking strategies are likely to create more employment opportunities in labour abundant countries than inward-looking strategies. The reasons generally given to support this contention are (i) that inward-looking strategy limits the scope for structural change into relatively labour-intensive branches and (ii) that policies associated with inward-looking strategy tend to distort factor prices thereby giving incentive to the adoption of relatively capital-intensive techniques of production. This paper develops an identity which delineates the components of industrial employment expansion into effects of: (i) productivity change, (ii) capital accumulation and (iii) change in the composition of manufacturing. Applying this identity to India and Taiwan, two countries that have taken very different paths towards economic development, provides some insight into the source of employment expansion and its stringent limitations under alternative development strategies.

It is well documented that the structure of tariffs in industrialized countries affords the greatest protection to relatively (unskilled) labor-intensive branches of industry (Constantopoulos3 1974 and references therein). Since we know from the Stolper-Samuelson theorem that this implies an improvement in the relative reward for services of labor, in particular unskilled labo, the political motive for such a tariff policy is obvious. In recent years industrialized countries have loudly proclaimed their dedication to the principles of free-trade and their intent to counterbalance the disadvantageous trade position of the less developed countries. While progress on the latter objective has been modest (Murry, 1973), great gains have been achieved in lowering tariff barriers. The most significant advances in this regard were effected in the GATT Kennedy Round (1963-67), which produced an average 35 percent reduction in tariff levels of non-agricultural products by far and away exceeding any reductions negotiated in previous GATT rounds. An interesting question in light of industrialized countries practised, as well as proclaimed dedication to trade liberalization is whether their tariff policy continues to be designed with labor's short-run interests in mind.

It is well documented that the structure of tariffs in industrialized countries affords the greatest protection to relatively (unskilled) labor-intensive branches of industry (Constantopoulos3 1974 and references therein). Since we know from the Stolper-Samuelson theorem that this implies an improvement in the relative reward for services of labor, in particular unskilled labo, the political motive for such a tariff policy is obvious. In recent years industrialized countries have loudly proclaimed their dedication to the principles of free-trade and their intent to counterbalance the disadvantageous trade position of the less developed countries. While progress on the latter objective has been modest (Murry, 1973), great gains have been achieved in lowering tariff barriers. The most significant advances in this regard were effected in the GATT Kennedy Round (1963-67), which produced an average 35 percent reduction in tariff levels of non-agricultural products by far and away exceeding any reductions negotiated in previous GATT rounds. An interesting question in light of industrialized countries practised, as well as proclaimed dedication to trade liberalization is whether their tariff policy continues to be designed with labor's short-run interests in mind.

Hong Kong is an interesting case study of economic development for two reasons: (1) the Colony is one of the few successful cases of industrialization and economic development among contemporary less developed countries; and (2) it closely resembles and is in fact a last remnant of the laissez-faire economy. This paper describes the pattern of industrialization in Hong Kong and its economic rationale in terms of the theory of international comparative advantage. The special features of industrialization in the Colony, taken together, constitute what is called the "Hong Kong Model of Industrialization." The "model" is found to be a pure case of industrialization through exploitation of comparative advantage.

Hong Kong is an interesting case study of economic development for two reasons: (1) the Colony is one of the few successful cases of industrialization and economic development among contemporary less developed countries; and (2) it closely resembles and is in fact a last remnant of the laissez-faire economy. This paper describes the pattern of industrialization in Hong Kong and its economic rationale in terms of the theory of international comparative advantage. The special features of industrialization in the Colony, taken together, constitute what is called the "Hong Kong Model of Industrialization." The "model" is found to be a pure case of industrialization through exploitation of comparative advantage.