[3] This conclusion relies heavily on an analysis of the terms of trade between the two countries; i.e., the price ratio between manufactures and primary products.
This graph makes it clear that the real terms of trade decreases when the growth rate is higher in the South than in the North (because, thanks to unity in elasticity of demand, the export line would shift to the right faster than the import line).
The resultant decrease in the terms of trade, however, means a lower growth rate for the South.
This creates a negative feedback cycle in which the growth rate of the South is exogenously determined by that of the North.
The conclusion, which fits in with dependency theory, is that the South can never grow faster than the North, and thus will never catch up.
Under this theory, less developed countries should use barriers to trade such as protective tariffs to shelter their industries from foreign competition and allow them to grow to the point where they will be able to compete globally.
For example, the Asian Tigers are famous for pursuing development strategies that involved using their comparative advantage in labor to produce labor-intensive goods like textiles more efficiently than the United States and Europe.