Peter Mandelson: From Korea to India, trade is the way out of poverty

From a lecture at the London School of Economics, by the European Commissioner for Trade

Trade can make a huge contribution to development, once the capacity to participate in the global trading system is established. A long intellectual debate has raged about whether countries that have pursued a "strategic" approach to trade - the Korean model - have been more successful in promoting economic development than those who have let market forces prevail - the Singapore model.

Trade can make a huge contribution to development, once the capacity to participate in the global trading system is established. A long intellectual debate has raged about whether countries that have pursued a "strategic" approach to trade - the Korean model - have been more successful in promoting economic development than those who have let market forces prevail - the Singapore model.

I am not a neo-liberal dogmatist about this. Infant industry protection may be necessary for a time. The risk is that the protectionism it offers becomes entrenched; vested interests defend it; and as the newly nurtured industries mature into adolescence, they cannot withstand fair global competition.

I am, however, certain of this truth. Countries that have adopted a closed approach to the world economy have not been successful. As a young man, I was optimistic about the prospects of Ujamaa socialism in Tanzania, but harsh experience taught me otherwise.

Similarly, India's attempt at state industrial planning under Nehru, and since, simply did not work. What has been a success in India is the gradual opening of their economy to the outside world in the last 15 years.

This has raised India's growth rate with the consequence that 300 million people have been lifted out of extreme poverty in a generation. Of course, there are still a further 300 million people who are forced to live on less than a dollar a day. But domestic liberalisation, reinforced by greater openness to the outside world, has put India on a sustainable growth path that offers India's poor a realistic hope for the future.