(DP 2005-04) Ex-post Effects of Trade Liberalization in the Philippines

Ramon L. Clarete

Abstract


This paper examines the Philippine experience with trade liberalization policies and their impact on the economy. Although the relationship between trade liberalization and poverty is not straightforward, empirical evidence suggests that there are beneficial effects of freer trade on the poor in the long run. Since the 1980s the Philippines has considerably lowered import restrictions and expanded trade. An ex-post assessment of the effects of trade liberalization produces results that fall short of the net positive expectations produced by ex-ante studies. An ex-ante assessment of the impact of freer trade in the Philippines using models of the Philippine economy indicates net positive gains for the economy and for representative Filipino households. However, per capita income changed very little over the period 1980-2002. This study seeks to explain the divergence as being due to transaction costs.

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