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October 2000. ::: Vol.51 No.09-10

    Davor Mikulić
    Željko Lovrinčević

GROWTH, INTERNATIONAL TRADE AND OPENNESS OF ECONOMY

Pregledni rad

A survey of empirical results of studies on interdependence of international trade, economic growth rate and openess of economy suggests that in most cases, independently upon used indicators of openness of economy and methodological approach, exists close correlation between economic growth rate and level of openness of economy. This is empirically established fact, but researchers are still faced with the problem of establishing exact mechanisms by which the process of faster openness of economy and more considerable integrational division of labor influences faster economic growth. Majority of researchers points out the correlation of phenomenon of openness and transfer of technology and knowledge, thus the conclusion is that beneficial effects of openness of economy are received through technology and knowledge transfer, what secures quality improvement of domestic technological structure. That is an usual scenario in “normal” circumstances. But the cases of particular unsuccessful openness in Latin-American countries testify that in certain circumstances, in spite of openness of country and due to economic policy, it does not occur technology and knowledge transfer, but only extremely high balance of payments deficit which soon threatens the whole economic program. In other words the scenario of existence of beneficial effects of fast openness towards world and the use of allbeneficions through growing productivity, has real prospects only if all other parameters of economic policy are adjusted in a way that they aspire to realization of the same goal. However contradictions can appear, thus there are always researchers who conclude that fast openness towards the world itself is not sufficiently explored, it is dangerous and similar, and they are trying to find out many arguments which will contribute to infant industry scenario. It simultaneously follows from this fact the main attitude concerning possible doubts about growth liberalization and necessity of domestic industry protection in the Republic of Croatia. More comprehensive liberalization and integration into world trade capital and goods flows is not only necessity for a small country like Croatia, but also a process which already in a short term, and especially in a long one, brings to country huge profits with growing productivity. It should be repeated that all other parameters of economic policy should not be contradictory, but they must be established in such a way that they lead to realization of this goal. Especially mentioned should be here fiscal policy, monetary policy and wage policy, and entire economic and institutionally legal frame in general, which must aspire to promotion of transparency and efficiency on the whole. Experience confirms that in most cases, the arguments of domestic industry protection which were so frequent in past, and which appear nowadays in transitional countries due to the problem in there structuring process of economy, are the wrong way of deliberation of the way of integration into international goods and capital trends. Here should not be confused the concepts of protection of domestic industry and active industrial policy which each particular country conducts in a less or more explicit way, just because of alleviation and acceleration of technology and knowledge transfer from abroad, as well as production of the same at home. Perhaps it is not needless to remember the old truth in new environment like the transitional one.

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