Trade policy and performance in the eighties and nineties

This  research together with  the  severe  debt crisis  in many developing countries in the eighties, and the general move towards market oriented policies in the developed countries starting in the late seventies resulted in a shift towards export oriented policies by more and more developing countries. Currently hardly any developing country  has  recourse  to extensive QRs  either because of BOP problems or because of developmental reasons.  There have also been very substantial reductions  in tariff rates in developing countries. Currently much of Latin America and the transition economies of Europe have average tariff rates of about 10 percent. Rates in East Asia,  till the financial crisis of 1997, and South Asia are slightly higher. For instance, though average tariff rates in India have declined in the nineties hm  over 100  percent to about 20 percent and peak  rates have declined hm  almost 400 percent to about 45 percent,  they  are still  high compared to  rates in  Latin America and  the transition  economies.

The liberalisation of  trade policies has resulted in a very rapid growth  in exports  and a large increase in the trade1GDP  ratio in almost all regions of the world.  

But the results  in tenns of growth have not been very encouraging.  Low rates of  growth  continue  to  plague most countries in Latin America and Afiica . As Bruton (1998) pointed out the reforms unfortunately ignored  the  very substantial achievements of the earlier period and1  instead  of  adjusting  the policies to overcome their deficiencies they we e  totally  discarded.  The achievements of  the earlier  polices were  substantial.  Many  developing countries  raised savings and investment rates considerably  higher than the 10 percent considered sufficient by economists such as Rostow and Lewis  to generate a sustainable rate of growth, and grew  faster than  in  any  earlier period. Many countries also  showed  substantial  improvement  in social indicators such as  education enrolments and literacy levels,  reduction  in mortality etc. The main drawback was an  inadequate creation of jobs,  the elasticity of employment creation turned  out  to be  lower  than  had  been expected.  Consequently, poverty  levels remained  high.  Also  import substitution was undertaken haphazardly with practically all industries being granted protection. This resulted in waste. There is  little  justification  for providing protection  of over 350 %  as was done  in India  It  is  difficult  to  visualise what future  improvements could  justifL so much inefficiency in the short  run. Also merely removing protection is not enough. Positive policies have to be adopted  to generate a supply  response in export  industries.