The Political Economy of Trade Liberalisation: What Lessons for Reforms Today?

The report argues that while trade liberalisation has generally fostered growth and poverty reduction in developing countries, the momentum for such reforms has slowed since the 1990s. It identifies macroeconomic crises, interest group shifts, and the influence of ideas as primary drivers of reform, while noting that 'new-globalising' countries—particularly in East Asia—have seen the most success. The author advocates for unilateral liberalisation over reciprocal negotiations and warns against a return to 'hard' industrial policies or over-reliance on foreign aid.

• There is a noticeable decline in the momentum for trade liberalisation and structural reforms compared to the peak of the 'Washington Consensus' in the 1980s and 1990s, with governments becoming more sceptical and defensive.
• Data suggests that 'new-globalising' developing countries, primarily in Asia, experienced significant increases in real per capita incomes and trade-to-GDP ratios since 1980, alongside dramatic poverty reductions, compared to 'less-globalised' countries.
• Historical evidence indicates that 'hard' industrial policies aimed at protecting infant industries have largely failed in the developing world, often leading to corruption and inefficiency.
• Protectionism remains higher in developing countries than in developed economies; for example, average applied tariffs in developing countries were more than double those in developed countries between 1998 and 2004.
• Major trade policy reforms are frequently triggered by macroeconomic crises, which create 'windows of opportunity' for thoroughgoing reforms that would be impossible under normal political conditions.
• The report identifies a 'resource curse' where land- and resource-abundant countries often struggle to sustain growth because their political economy is geared toward squandering rents rather than improving governance.
• Unilateral liberalisation is presented as more effective and faster than reciprocal negotiations, with the World Bank estimating that 65% of developing-country tariff reductions between 1983 and 2003 occurred autonomously.
• The World Trade Organization (WTO) is viewed as increasingly unsuccessful at driving new multilateral liberalisation, as evidenced by the failure of the Doha Round, though it remains useful for locking in existing unilateral reforms.
• Foreign aid and donor conditionality have a poor record of driving sustained market-based reforms, particularly in Africa, and may even provide incentives to delay necessary reforms.
• Future reforms for 'first-division' reformers should shift from 'first-generation' border barrier reductions to 'second-generation' domestic regulatory reforms, such as competition rules and the simplification of business red tape.

APA

Sally, R. (2007). The Political Economy of Trade Liberalisation: What Lessons for Reforms Today? South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2009/12/dttp_rep_tpr_18_sally_20001007.pdf

Chicago

Sally, Razeen. The Political Economy of Trade Liberalisation: What Lessons for Reforms Today? South African Institute of International Affairs, 2007. https://saiia.org.za/wp-content/uploads/2009/12/dttp_rep_tpr_18_sally_20001007.pdf.

Wikipedia

{{cite report |last1=Sally |first1=Razeen |title=The Political Economy of Trade Liberalisation: What Lessons for Reforms Today? |publisher=South African Institute of International Affairs |date=October 2007 |url=https://saiia.org.za/wp-content/uploads/2009/12/dttp_rep_tpr_18_sally_20001007.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sally2007political, author = {Sally, Razeen}, title = {{The Political Economy of Trade Liberalisation: What Lessons for Reforms Today?}}, institution = {South African Institute of International Affairs}, year = {2007}, month = oct, url = {https://saiia.org.za/wp-content/uploads/2009/12/dttp_rep_tpr_18_sally_20001007.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }