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Advanced Introduction to Law and Development

Michael J. Trebilcock and Mariana Mota Prado

This book offers a concise and accessible introduction to the main themes and debates in the field of law and development. It unpacks the role of legal systems and institutions, and investigates what kinds of law and legal arrangements are perceived (correctly or not) to encourage and facilitate development.
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12 International trade

Michael J. Trebilcock and Mariana Mota Prado


In this chapter and the following two chapters, we address features of the international economic order that bear importantly on the economic prospects of developing countries: international trade; FDI; and foreign aid, with a particular focus in each case on how these external sources of financial flows, and conditions attaching thereto, either facilitate or impede domestic institutional reforms in developing countries.

Export earnings are by far the most important source of external revenues for developing countries, followed by FDI flows, with foreign aid a very small percentage of both these flows. Developing country merchandise exports rose from US$599 billion in 1980 to almost US$5 trillion in 2009. Over this period developing countries’ share of world merchandise exports rose from about 29 per cent to 39 per cent. However, this increased relative share of world merchandise exports was largely attributable to China.1 In 2008, foreign direct investment flows to developing countries reached almost US$520 billion,2 and official development assistance flows (foreign aid) reached around US$130 billion3 (with around another US$30 billion from NGOs).4 Remittances from emigrants from developing countries to relatives and friends in their home countries are currently running at about US$400 billion per year. To complete the picture, one might add portfolio investment flows into developing countries (investments in government and corporate bonds and passive equity holdings), which tend to be highly volatile, reflecting responses to divergences in interest rates and movements in exchange rates (and are sometimes negative)...

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