Lessons Learned?

The Impact of Trade Liberalisation Policies on Countries and Regions in the South -
A Collection of Evidence

December 2002
48 pages
ISBN 3-9808227-4-5
5.00 Euro (add shipping and handling)

This publication was produced with the kind support by the Heinrich-Böll-Foundation Brussels.

Trade liberalisation policies are both an integral part of structural adjustment policy packages designed and implemented by the IMF and the World Bank, as well as a central component of regional and bilateral trade agreements between countries in the North and South. Past trade policy reforms in developing countries aimed at integrating these economies into the world economy through the promotion of an export-growth and diversification development strategy, including growth in industrial capacity and competitiveness. Structural adjustment, through its trade policy components, thus favoured 'Growth through Export' policies. In addition to measures that support the export sector, the trade reform packages typically included the removal of protection and support for companies producing for the domestic market, with the intend to remove those that operate inefficiently and non-competitive and thus divert resources from export production. To foster export, in many cases quantitative restrictions were lifted, import tariffs reduced and flexible exchange rate policies were adopted.

Similarly, in recent years regional and bilateral free trade agreements have been promoted by major economies in the North, including the EU, on the basis of their potential benefits to developing countries. FTAs generally aim at the reciprocal liberalisation 'across the board' in line with WTO obligations with the intention to create market access for a large range of goods. In addition, some FTAs also include provisions on a range of so-called 'trade-related issues' such as services, investment, competition, public procurement and trade facilitation. One of the latest examples of an ambitious trade agenda are the ongoing negotiations between the EU and the 77 countries in Africa, the Caribbean and the Pacific (the so-called ACP group) for new trade agreements. Although these negotiations are taking place under the overarching Cotonou framework objectives to foster poverty eradication and promote sustainable development in ACP countries, they focus heavily on the establishment of new reciprocal free trade agreements between the ACP and the EU (Weed et al. 2002).

This collection of evidence sets out to review existing literature and case studies investigating the impact of trade liberalisation policies on several sectors and the poorer parts of the population. The results presented here support the widespread experience that theoretical welfare claims are often grossly exaggerated and cannot be substantiated to the full extend. In addition, frequently considerable costs are associated with trade liberalisation and free trade agreements in developing countries: Trade liberalisation policies raised both socio-economic and environmental problems in countries of the South.

The working paper contains a survey of more recent sectorial and country case studies, both covering the ACP group of states as well as other developing countries, that were conducted to examine the effects of trade liberalisation policies on society and the environment. Most of the ACP country studies cover African countries, since only few are available both from the Caribbean and the Pacific. Additional material is reviewed from other developing countries. Studies originate from a broad variety of sources including the FAO, UNEP, national research institutions, development and environment NGOs, and the final report of the 'Structural Adjustment Participatory Review International Network' exercise.

Content:

Introduction

I. Macroeconomic Effects of Trade Liberalisation

• External Trade
• Manufacturing Sector
• Agricultural Policy

II. Social and Environmental Effects of Trade Liberalisation

• Employment
• Gender
• Income
• Environment
• Food Security

III. Abstracts of Sectorial and Country Case Studies

• Sectorial Studies
• Regional and Country Studies in the ACP
• Other Regional and Country Studies

IV. Summary and Policy Recommendations

References