Import Growth, Globalisation and the Impact of Trade Liberalisation

Abstract Liberalisation of the trading environment, through regional integration and the formation of WTO, is shown to increase trade growth relative to GDP. The impact of trade liberalisation compounded over time and added about 1.5 per cent per annum to world trade growth during the last decade. Trade, demand and competitiveness without trade liberalisation variables do not cointegrate in the long run and on their own cannot provide a coherent structural explanation of the growth of world trade. Results obtained from standard panel techniques, augmented with CCE estimator, point to strong commonalities across countries.