This paper surveys the recent literature on trade liberalisation and economic growth. While there are serious methodological challenges and disagreements about the strength of the evidence, the most plausible conclusion is that liberalisation generally induces a temporary (but possibly long-lived) increase in growth. A major component of this is an increase in productivity. Part 2 stresses the importance of other factors in achieving growth, such as other policies, investment and institutions, but argues that many of these respond positively to trade liberalisation. It also considers the implementation of liberalisation and notes the benefits of simple and transparent trade regimes.Trade liberalisation has been a prominent component of policy advice to developing countries for the last two decades. Among the benefits claimed to spring from it, economic growth is probably the most important. And yet economists continue to argue about, and conduct research on, the connection between them. This paper samples the resulting literature with a view to assessing the current state of the evidence that trade liberalisation enhances growth and identifying the key steps in actually reaping such benefits.The paper comprises two parts. The first considers some of the empirical evidence linking trade liberalisation and openness to trade on the one hand with higher incomes and economic growth on the other. The evidence suggests that openness enhances growth, at least over the medium term, but the methodological problems preclude our being wholly certain. Cross-country studies face problems in defining and measuring openness, in identifying causation and in isolating the effects of trade liberalisation. Case-studies avoid some of these problems but cannot confidently be generalised. Attempts to model the links explicitly -specifically to relate productivity to openness -face similar problems of identification but on the whole provide a somewhat more convincing account of the benefits.Part 2 considers explicitly the role of other policies and institutions in connecting openness and income. While trade liberalisation alone is unlikely to be sufficient to boost growth significantly, in two important dimensions -corruption and inflation -it appears to improve other policies. The paper then stresses the importance of investment -and hence of other policies affecting investment -in translating trade liberalisation into growth and the importance of institutions in permitting growth. I argue that openness can enhance institutional development, although not through the external imposition of institutions on unwilling

This paper exploits the surge in Chinese exports from 1994 to 2004 as a natural experiment to evaluate the effects of a unilateral low wage trade and competition shock to producers in Mexico. We find that this shock causes selection at both firm and product levels as its impact is highly heterogeneous both on the intensive and extensive margins. Sales of smaller plants and more marginal products are compressed and are more likely to cease, while larger plants and products exhibit an opposite response. Similar results hold both for the domestic market and for competition facing Mexican exporters in a third market (i.e. the United States).

This paper assesses the current state of evidence on the impact of trade policy reform on poverty in developing countries. There is little empirical evidence addressing this question directly, but a lot of related evidence on specific aspects. We summarize this evidence using an analytic framework addressing four key areas: economic growth and stability; households and markets; wages and employment and government revenue. Twelve key questions are identified and empirical studies and results are discussed. We argue that there is no simple generalizable conclusion about the relationship between trade liberalization and poverty, and the picture is much less negative than is often suggested. In the long run and on average, trade liberalization is likely to be strongly poverty alleviating, and there is no convincing evidence that it will generally increase overall poverty or vulnerability. But there is evidence that the poor may be less well placed in the short run to protect themselves against adverse effects and take advantage of favorable opportunities.

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While the liberalisation of trade has been at the forefront of the global agenda for many decades, the movement of natural persons remains heavily guarded. Nevertheless restrictions on the movement of natural persons across regions impose a cost on developing and developed economies that far exceeds that of trade restrictions on goods. This paper uses a global CGE model to investigate the extent of these costs, by examining the effects of an increase in developed countries' quotas on both skilled and unskilled temporary labour equivalent to 3% of their labour forces. The results confirm that restrictions on the movement of natural persons impose significant costs on nearly all countries (over $150 billion per year in all), and that those on unskilled labour are more burdensome than those on skilled labour.