Trade policy and human development: a cross-country perspective

Purpose - The purpose of this research is to study the relation between "restrictiveness" of a country's trade policy and its socio-economic well-being as reflected in the indicators of human development. Design/methodology/approach - A recently-developed trade-restrictiveness-index (TRI), which seems superior to almost all existing indexes of trade policy or "outward orientation", is related with infant-mortality, child-mortality, maternal-mortality, access to safe water, access to basic sanitation, and secondary-school enrollment, which are well-known and important measures of a country's human development and are closely related to several Millennium Development Goals. In addition to a consideration of the covariation between TRI and the six human-development measures, estimates from parsimonious regression models are studied. Sensitivity checks are conducted by considering covariations and regression estimates for another trade-policy index and different country groups. Findings - The evidence overwhelmingly shows that, contrary to the position shared and disseminated widely, there is no indication that a more restrictive international trade policy has a significant negative association with human development or socio-economic well-being. Every correlation between trade restrictiveness index and human-development measures is close to zero. Almost every regression coefficient of trade-restrictiveness-index lacks statistical significance at any meaningful level, and a consistent pattern is noted across two measures of trade policy and different country groups. Social implications - The evidence suggests much caution in the articulation and dissemination of the widely-shared view that a more restrictive trade policy is detrimental to a country's socio-economic well-being. In particular, it implies that international organizations and developed-country governments may not force developing-country governments to adopt more "outward-oriented" trade policies, but may let them choose the trade-policy stance they find appropriate for their country. The estimates also reinforce the view that great care be exercised by scholars in the choice of trade-openness measures for studying the relation between trade policy and economic well-being. Originality/value - In the vast literature on the nexus between trade policy and economic well-being, this is probably the only study that relates six important measures of human development with what seems to be the best available index of restrictiveness of a country's trade policy. Therefore, the research, which is based on a fairly large cross-country sample, may be deemed as highly significant on a topic of much scientific and policy relevance.