3 Trade Liberalization: Policy Options from Inward-Looking to Outward-Oriented
  • 1 0000000404811396https://isni.org/isni/0000000404811396International Monetary Fund

Abstract

Many countries are currently involved in trade liberalization efforts—at three overlapping levels. First, the members of the General Agreement on Tariffs and Trade (GATT) are concluding the negotiations of the Uruguay Round on multilateral liberalization. Second, customs union, common market, or cooperation agreements are in place or are being expanded at the regional level in many parts of the world. Most of these, such as the three integration schemes among Arab countries—the Gulf Cooperation Council (GCC), the Arab Maghreb Union (AMU), and the Arab Cooperation Council (ACC)—are far less comprehensive than the European Common Market. Third, many liberalization efforts are under way at the country level, some in connection with adjustment programs supported by the IMF and the World Bank (Morocco, Tunisia, the Republic of Korea, and Poland), and others following a policy dialogue with the Bank (Brazil and Peru). In a highly integrated world economy, trade liberalization has become necessary for rapid development, but three important concerns are frequently expressed. First, that liberalizing trade threatens domestic industries and that in developing countries export expansion is constrained by protectionist policies in other countries. Second, that liberalization reduces government control and places undue reliance on the uncertain effects of markets. Third, that it is sometimes unwise for countries to liberalize on their own because this may reduce the incentives for other countries to reciprocate.