DP447 | Trade Policies and Development: Some New Issues


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The 1980s have seen the beginnings of a change of heart among developing country policymakers, as the import-substitution consensus of the previous decade has all but evaporated. It is paradoxical that the 1980s should have become the decade of trade liberalization in LDCs, since this has also been a decade of macroeconomic instability. The benefits of liberalization become muted under conditions of macro instability. This paper discusses three questions that arise with this experience. First, how can the credibility and sustainability of the reforms be enhanced? Second, what role should trade reform play when it is implemented in the context of macroeconomic instability? Third, should we worry about the consequences of trade reform in the imperfectly competitive environments that characterize the developing economie.