Openness, growth and development: trade and investment issues for developing economies

Abstract

Many developing economies have become increasingly disenchanted with the operations of the World Trade Organisation and the global trading system in general, reflecting a perception that their interests and concerns have been neglected. Inevitably this has reduced the enthusiasm of many governments for participating in further rounds of multilateral trade and investment talks. Yet international trade and investment liberalisation are far from complete, suggesting that it may still be worthwhile to pursue reforms to the rules governing the multilateral trading system. This paper assesses the evidence for the proposition that the interests of developing countries will be enhanced through greater international openness and draws out some of the implications for the issues confronting them in any future round of negotiations. The evidence suggests that greater international openness can help to raise per capita incomes, but the gains from greater openness are by no means automatic. Openness is part of a development strategy, not a substitute for one, and needs to be complemented by a sound institutional and legal framework, along with timely and predictable enforcement of the rules embodied in that framework. Developing economies have much to gain from further multilateral liberalisation of trade policies, but are unlikely to achieve those gains without assistance to help develop their existing institutional and social capabilities.