Has Trade Liberalisation in Poor Countries Delivered the.pdf

Has Trade Liberalisation in Poor Countries Delivered the Promises Expected? * Penélope Pacheco-López and A.P. Thirlwall Abstract The paper reviews the evidence of the impact of trade liberalisation on the economic performance of poor developing countries with respect to poverty reduction, the distribution of income within countries, the distribution of income between countries, trade and the balance of payments, and economic growth, and finds that liberalisation has not delivered the benefits expected. Economic theory, and the historical and contemporary evidence, all provide arguments for protection of industrial activities in developing countries. Key words: Trade liberalisation, trade policy, income distribution, poverty JEL Classification: F 10; F 13; F 43; F 46 * The authors are, respectively, Economic Consultant and Professor of Applied Economics, University of Kent, UK. Has Trade Liberalisation in Poor Countries Delivered the Promises Expected? Trade liberalisation has not lived up to its promises. But the basic logic of trade ― its potential to make most, if not all, better off― remains. Trade is not a zero-sum game in which those who win do so at the cost of others; it is, or at least can be, a positive-sum game, in which everybody is a winner. If that potential is to be realised, first we must reject two of the long-standing premises of trade liberalisation: that trade liberalisation automatically leads to more trade and growth, and that growth will automatically “trickle down” to benefit all. Neither is