Tariff liberatization and the growth of word trade: A comparative historiocal analysis to evaluate the multilateral trading system

The aim of this study is to assess the relationship between tariff barriers and world trade growth from a comparative and historical perspective, and –to derive some useful indications for evaluating the effectiveness of the current multilateral trading system for promoting world trade. The novelty of this work is the complex reconstruction of a historical tariffs and trade series for the period 1870-2000, for 23 countries; this constitutes a good proxy for world trade (accounting for over 60%) in this period. The effect of tariff liberalization on trade growth is analysed empirically using panel data and time series. The empirical results, whilst confirming the existence of a world level long-term relationship between tariff reductions and trade growth, demonstrate how this substantial and significant relationship pre World War II gradually diminished in importance and significance after 1950. This result does not conflict with the key role of the GATT/WTO system in the trade liberalization process; however, it underlines the importance of a formalized multilateral trading system, not so much for tariff liberalization, but for building a virtuous process of international coordination of trade policies and ensuring fuller participation in world trade.