The Trade Reform Wave of 1985–1995

Abstract

The decade from 1985 to 1995 will go down in history as an unprecedented period in which global trade barriers were reduced. Some trade agreements (the North American Free Trade Agreement, the European Single Market, the Uruguay Round) were prominent late in this period, but the reform wave was led by developing countries in Latin America and Asia and formerly communist countries in Eastern Europe undertaking unilateral reforms. What accounts for this remarkable shift in policy? This paper highlights the declining use of trade restrictions for balance of payments purposes and the rise in exchange rate flexibility as important factors driving the policy change.