In search of a theoretical foundation of South-South trade the paper looks at some of the determinants of trade pattern between the two labour-surplus economies characterised by an intersectoral wage-differential, labour immobility, unemployment and a labour training technology which may generate either an economy or a diseconomy in the employment of industrial workers. An increase in capital stock raises production in both industry and agriculture. The trade pattern seems to depend on the endowment of capital relative to the exogenously given labour force engaged in agriculture. A small open economy may have a distorted trade pattern in which case its protection policy may not work.