Policy Reform for Promoting Trade in Developing Countries

Various empirical studies have demonstrated the superiority of export-oriented policies over import-substituting (IS) strategies of growth. Widely followed in many developing countries until about the beginning of the 1980s, the IS strategy, which sheltered domestic industries by high protective walls, led to distorted economic structures and bred inefficiency. Recently, therefore, developing countries around the world have adopted, accelerated and broadened a reform process, involving both IMF-type stabilization measures and World Bank sponsored structural adjustment policies, for liberalizing their trade regimes. The rapidly growing market penetration of an expanded range of manufactured export products by a number of East Asian countries suggests that with suitable economic policies and a competitive production base, there is no reason for suffering from “export pessimism.†However, it must noted that export incentives alone are not enough and that prudent fiscal and monetary policies are also essential to successful export orientation. Moreover, depending on the unique features of each individual country, it is necessary to determine the sequence, pace, and mix of reform programs in a pragmatic manner.