THE POLITICAL ECONOMY OF TRADE LIBERALISATION: A Framework and Application to Pakistan

Abstract

Trade policy reform, in the form of liberalisation or removal of restrictions on trade, has been a predominant feature of World Bank: Structural Adjustment Programmes (SAPs) undertaken, to various degrees, by some 60 developing countries since 1980. The early Iiterature of SAPs concentrated on the types of economic reforms required, and more recent literature addresses the political and institutional dimensions of economic policy reform. This paper addresses the latter issues and presents a framework for analysing the role of institutional change, encompassing the building of both political consensus and administrative capacity, in implementing trade policy reform, and how this relates to domestic political considerations. Pakistan's current trade liberalisation proposals are discussed to illustrate how the framework can be applied. A number of general conclusions are drawn regarding the design of trade liberalisation programmes so as to accommodate political considerations and enhance institutional capacity.

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