The paper argues that trade, except when it gives rise to a net export surplus, and not even necessarily then, can, and usually does, have a retrogressive impact on an economy. In this context, a simple single-period model with the assumption of balanced external trade is used in the first instance to establish the proposition that if an economy has a comparative advantage in the bottleneck sector in the pre-trade situation, it is likely to experience retrogression in the non-bottleneck sector and hence in a macroeconomic sense through exposure to international trade. This result is than shown to be likely even for a world where the exporting sector has demand-constrained output. It is then argued that this has serious implications in that trade disarticulates economies, delinking sectors from one another and gives rise either to de-industrilization as in the colonial period, or to "de-agriculturalization" as in case of the Indian economy in the current context leaving behind a vast pauperized mass of agricultural peasantry, which constitutes a potentially highly explosive, socially destabilizing force.

October 29, 2006.