Relative Incentives and Trade Strategies: Typologies and Possibilities

The paper investigates trade strategy classification within a general equilibrium framework which includes both tradeables and non-tradeables. In a three-sector model there is apparently a wider range of trade strategies available than in the traditional two-sector model. Besides pure import-substitution (IS) and export promotion (EP) policies, mixed IS/EP policies might seek (ex ante) to create a protradeables bias rather than approximate neutrality. However, the ex-post outcome depends upon the substitution, complementarity and/or income effects of commercial policies on equilibrium relative prices. The paper demonstrates that the actual change in the incentive structure may differ from the intended strategy.