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This approach shows deficiencies, especially in the case of coun
tries with different levels of economic development. It fails to clarify as
to which characteristics represent the structure of exchange with refer
ence to both goods and services and which long-term consequences are
implied for the economic relations. In this context it is, for instance, no
exception that high-value industrial products are exchanged for agricul
tural products, textiles or leather goods. It is against this background that
we have to face up to the issue of terms of trade.
Furthermore, in the bilateral economic relations, confined as they
are to trade, service and capital transfer, other forms of cooperation such
as financial and technical development assistance are not accounted for.
What makes matters critical is that in the absence of a comprehensive
analysis, even causal relationships between the individual forms of
bilateral economic cooperation, say, between the trade relations and
development cooperation, go unnoticed. Apart from these failings,
however, there is also a redeeming feature, namely the fact that in the
developmental strategy discourse the conflict of coherence of develop
ment policy, on the one hand, and the financial, trade and agricultural
policy, on the other, is being subjected to ever vigorous debate.3
This also shows that the rationale of bilateral economic relations
generally derives from rudimentary arguments of foreign trade theory.
All discussions on foreign trade theory have been constrained by conflict
ing and irreconcilable positions since the 1960s, i.e., neoclassical ap
proaches based on the theorem of comparative cost advantages vis-a-vis
the structuralist trade theories. The neoclassical postulate which is based
on welfare gains from trade of all the countries involved was shaken
especially by the Prebisch-Singer hypothesis of secular deterioration of
"terms of trade” for the developing countries.4 The dependence-theoreti
cal approaches in view of their critical interaction with the neoclassical
trade theory are concerned less with bilateral economic relations and
more with the disparities of the world economy. Although this ideologi
cal controversy has not been carried further for the last few years, there
is however no doubt that the basic terms of trade relations between the
countries of the North and the South are often extremely disparate.5
The crucial issue is whether in the case of developing countries
foreign trade makes a positive contribution towards economic develop
ment or it actually reinforces absolute or relative underdevelopment. On
finding evidence that absolute or relative underdevelopment is in fact
reinforced, we will need to face up to the question whether there exist
strategies and measures in the framework of bilateral economic relations
that can help restrict or prevent these ill effects. In any case it is not
