chapter  4
26 Pages

Trade liberalization and economic growth

The last chapter described several aspects of contemporary trading patterns: the tendency towards greater trade regionalization; the triadization of FDI; and the continuing dominance of the North in relation to world shares of trade and investment; plus the increasing share of relative trade accruing to East Asia. As was pointed out, this does not imply that the trading volumes of other countries have not increased. The last 20 years have seen a substantial reduction in tariffs in most countries around the world. The greatest reductions have been in South Asia, followed by Latin America and the Caribbean and then East Asia and the Pacifi c (Figure 4.1).1 At the same time, the volume of world merchandise trade has grown at a much faster rate than world output. For example, from 1980 to 2004, the value of world merchandise exports increased four fold; whereas world GDP less than doubled. As a result of this general growth of trade, by 2002 ‘trade in goods and services as a share of world output reached 54 per cent, up from 31 per cent in 1980’.2 So it is not that trading activity has not increased for most countries in the world, but that some are trading relatively more than others.