Developing Country Trade Policy Reform And

Less-than-rich countries now play an increasingly important role in international trade and investment. Since 1980, their share of world manufactured exports has doubled from 10 to 20 percent. Over a third of foreign direct investment (FDI) goes in their direction, up from 14 percent in the late 1980s. According to World Bank projec-tions, their shares of world trade and output could roughly double to 50 percent and 30 percent, respectively, by 2020. Correspondingly, developing countries and countries in transition play a weightier role in international trade policy. They account for over three-quarters of World Trade Organization (WTO) membership today—a share that is set to increase further as new countries gain accession (including Russia and China). For much of the postwar period most developing countries, account-ing for about half of the world’s population, pursued interventionist and protectionist policies, and were marginal players in the General Agreement on Tariffs and Trade. In addition, a third of the world’s population lived in centrally planned economies almost hermetically sealed from the world economy and not even members of the GATT. In the last decade-and-a-half, though, a sea change in trade policies has taken place alongside policy reform in other areas. Thirty-three developing countries (almost half of all developing countries with protectionist policies) swung from relatively closed to relatively open trading regimes between 1985 and 1995. In roughly the same period, the number of them with liberal or mostly liberal regimes of cross-border capital movements swelled from 9 to 30. Since 1990, three-quarters of countries in transition have liberalized trade-and-payment