Fiscal Space for Trade: How Could the International Trade Community Help?

Abstract

This paper examines the issue of fiscal space for trade, proxied by countries’ public expenditure for the trade sector. It provides empirical evidence that improvement in countries’ overall fiscal space results in higher public expenditure for trade. Furthermore, by promoting multilateral trade liberalization, the international trade community (including the World Trade Organization, WTO) could help enhance countries’ overall fiscal space, which would in turn translate into greater fiscal space for trade. Thus, rising restrictive trade measures in the world would likely undermine the promotion of multilateral trade liberalization and affect countries’ capacity to fund the development of their trade sector.