Crisis or Opportunity?
Edited by Peter Draper, Philip Alves and Razeen Sally
Razeen Sally and Philip Alves All seven country studies show that the liberalization of trade and FDI has worked. It has reduced discrimination against tradable sectors, enabled specialization according to comparative advantage, boosted both imports and exports, increased inward investment and triggered major productivity gains. This has raised economic growth. Trade and FDI have increased in absolute terms and as a proportion of national economic activity. All these countries have integrated rapidly into the global economy. The supporting evidence is strongest for the small countries in the sample, Australia, New Zealand, Chile and Malaysia. Opening to trade and FDI has been critical to their successful transformation into more prosperous, globalized economies. But the supporting evidence is also strong for the large and medium-sized economies in the sample, India, Brazil and South Africa. Imports and inward investment have been a boon to consumers, and spurred competition, restructuring and innovation in domestic business. Brazil has become an exporting powerhouse in agricultural commodities, agro-food products and other commodities. It is even doing well in some parts of manufacturing. Both Brazil and to a lesser extent South Africa have reaped the benefits of the global commodities boom. India, unlike China, has not exploited comparative advantage in labour-intensive products, but it has emerged as a leading exporter of IT services. And it is breaking into niche manufacturing exports. All the above would not have been possible without external liberalization. But the latter has not happened in isolation. Rather it is embedded in bigger packages of...
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