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Give an overview of trends and patterns in the move towards global trade liberalisation. Critically review the empirical evidence on the relationship between trade openness and economic growth.
Introduction
When countries are engaging in global trade liberalisation it means they are opening their economies for free trade. Trade is sometimes said to be an engine of economic growth. It is argued that countries should engage in free trade, but this issue is extremely controversial, as not all of the countries are actually benefiting from this phenomenon (IMF, 2014). First of all this essay briefly looks at the trends and patterns in the move towards free trade, emphasising the significant change that happened over the years. It also talks about the challenges facing further trade liberalisation. Then it discusses the theory that is used by many institutions to promote global trade liberalisation- the classical theory of international trade or in other words the theory of comparative advantage. It highlights David Ricardo 's idea that every country will benefit from trade. After this, the essay focuses on the Sub-Saharan African (SSA) region. It reviews extensive empirical evidence on the relationship between trade openness and economic growth in the given region. It looks at the various factors that have an impact on the relationship between openness and growth. Finally it gives an overview of the findings from the empirical evidence and tries to conclude whether it supports or refutes the hypothesis.
Trends and Patterns
At the end of World War II trade tariffs in all economies were very high. What is more, the non-tariff barriers were spreading out. In 1947 an international agreement called General Agreement on Tariffs and Trade (GATT) was introduced to reduce tariffs. The GATT assisted in establishing a powerful multilateral trading system. Because of rounds of trade negotiations, the system was becoming more and more liberal. Nevertheless, the system still
Introduction
When countries are engaging in global trade liberalisation it means they are opening their economies for free trade. Trade is sometimes said to be an engine of economic growth. It is argued that countries should engage in free trade, but this issue is extremely controversial, as not all of the countries are actually benefiting from this phenomenon (IMF, 2014). First of all this essay briefly looks at the trends and patterns in the move towards free trade, emphasising the significant change that happened over the years. It also talks about the challenges facing further trade liberalisation. Then it discusses the theory that is used by many institutions to promote global trade liberalisation- the classical theory of international trade or in other words the theory of comparative advantage. It highlights David Ricardo 's idea that every country will benefit from trade. After this, the essay focuses on the Sub-Saharan African (SSA) region. It reviews extensive empirical evidence on the relationship between trade openness and economic growth in the given region. It looks at the various factors that have an impact on the relationship between openness and growth. Finally it gives an overview of the findings from the empirical evidence and tries to conclude whether it supports or refutes the hypothesis.
Trends and Patterns
At the end of World War II trade tariffs in all economies were very high. What is more, the non-tariff barriers were spreading out. In 1947 an international agreement called General Agreement on Tariffs and Trade (GATT) was introduced to reduce tariffs. The GATT assisted in establishing a powerful multilateral trading system. Because of rounds of trade negotiations, the system was becoming more and more liberal. Nevertheless, the system still
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