IntroductionThe period since 1990 has been a decade of trade policy reform. Accordingto the World Bank’s
World Development Indicators
, the average tariff rate in the world went down from 10.5% to 6.0% between 1990 and 2002 and the ratio of imports plus exports in GDP rose from 75.2% to 86.8%. In 1990, the General Agreement on Tariffs and Trade had been signed by 96 countries: between 1990and 2005, 65 countries joined it either as the GATT or in its most recentincarnation as the WTO. In Wacziarg and Welch’s (2002) analysis of tradeliberalization experiences, the authors account for 49 countries that liberalized between 1990 and 2001.
The trade policy reform of the nineties was spurred by a broad coincidenceamong a significant proportion of highly-trained economists regarding the benefits of greater economic integration. Anne Krueger’s words in her 1997Presidential Address at the AEA capture the state of thinking at the time:“It is now widely accepted that growth prospects for developingcountries are greatly enhanced through an outer-oriented trade regimeand fairly uniform incentives (primarily through the exchange rate) forproduction across exporting and import-competing goods… Policy reformefforts removing protection and shifting to an outward-oriented tradestrategy are under way in a number of countries. It is generally believedthat import substitution at a minimum outlived its usefulness and thatliberalization of trade and payments is crucial for both industrializationand economic development…while there are still some disagreements overparticular aspects of trade policy both among academic researchers andpolicy makers, the current consensus represents a distinct advance overthe old one, in terms both of knowledge and of the prospects it offers forrapid economic growth” (Krueger, 1997, p.1)Krueger’s statement is indeed a reflection of the state of academic debateat the time. In a citations count of the most cited papers dealing with opennessand growth published after 1992 that Dani Rodrik and I carried out (Rodríguezand Rodrik, 2001, henceforth RR), the four most cited papers were concerned with cross-national statistical evidence linking trade and growth, and all claimedto find a positive association between economic integration and growth orconvergence.In RR, we carried out a systematic critique of this evidence. We arguedthat the results in these papers either derived from the fact that the opennessindicators used were
appropriately measuring openness (while moreappropriate indicators in fact failed to deliver a significant association) or that thepapers in question had made questionable methodological choices. Using thesame data than the authors of these papers, we showed that correcting for these
As we argue below, we believe that Wacziarg and Welch actually underestimate the amount of globalization that occurred during this period.