ABSTRACT
In order to gain admission to GATT in the early 1970s and the IMF in the early 1980s, previous governments gave the impression that Hungary was already an open economy and imports were liberalized. In a non-market, or semimarket, economy, the variance in efficiency levels among firms is much wider than in market economies because of extreme market distortions created by monopolies, arbitrarily fixed prices, and extreme protectionism. The advantages of trade liberalization are well known: it leads to a rational specialization of the economy according to its comparative advantage, to a high level of allocational efficiency, and to a better use of the country's resources. Liberalization of trade was never achieved, and quite probably cannot be achieved, at once. The experiences of several countries tell people that the likelihood of success is significantly higher when the initial changes are substantial and policy actions are resolute rather than hesitant.
