Despite the arguments against the comparative cost theory in solving the growth problems of the underdeveloped countries, the theory still has relevance for these countries:
(i) For the underdeveloped countries which are small and which possess sufficient and suitable natural resources and for which stable demand conditions prevail in the world market, international trade, according to the comparative cost principle, provides an ideal path of economic development.
(ii) For the large, overpopulated countries with meager natural resources and with unfavourable world demand for exports, domestic demand is necessary. But, such nations too cannot afford to ignore the opportunities of economic growth provided by the expansion of export of those commodities in which it has comparative advantage.
(iii) The static nature of comparative cost should not render it inapplicable in the developing countries and restrict it from adopting a policy of protection. By definition, an underdeveloped country is that which has not been able to gain from its potential comparative cost advantage.
ADVERTISEMENTS:
The policy of protection, by reallocating the domestic resources, enables the country to specialise in the long run in those fields of production where it has potential comparative cost advantage. Thus, the theory of protection, far from being contradictory to the theory of comparative cost, actually strengthens it by dynamiting its character.