Trade liberalization and the balance of payments in selected developing countries

An analysis is made of the impact of the reduction of tariff and non-tariff barriers on the trade balance and the current account of the balance of payments of 22 developing countries from Africa, Latin America, East Asia and South Asia that have undertaken important trade reforms since the mid-1970s. The study applies dynamic panel data and time series/cross-section analysis. The main findings are that liberalization has worsened the balance of trade and the balance of payments, because imports have increased more rapidly than exports. The adverse effect on the trade balance has been nearly 2 per cent of GDP. The impact of liberalization and other variables varies according to the region and type of trade policy regime existing.