Is the Impact of Trade Policy on Developing and Developed Countries’ Export Performance Sustainable?

Abstract

This article examines anew the implications of trade policy liberalisation for export performance in both developed and developing countries. The current empirical analysis departs from existing research in that it uses the ‘Adstock’ approach to investigate whether there exists a cumulative (i.e. sustainable) impact of trade policy liberalisation on countries’ export performance. Using a panel dataset comprising 168 countries (both developed and developing) over the period 1998–2014, the analysis provides strong evidence on how the impact of trade policy liberalisation on export performance is sustainable, i.e. whether it is persistent over time. Specifically, more advanced countries appear to benefit from a higher sustainability of the impact of trade policy liberalisation on their export performance than relatively less advanced economies. Moreover, in low-income countries there is no sustainability of this impact. The latter result could be explained by the structural weaknesses that prevent low-income countries from deriving the most benefit from their integration into the global trading system. Overall, the rise in anti-trade sentiment and the subsequent increase in trade protectionist measures are likely to hurt countries’ export performance. In addition, it would particularly be desirable that the international community enhance its effort towards helping low-income countries address the structural trade-relating constraints that prevent them from fully benefitting from their integration into the global trading system.