OPTIONS FOR DISMANTLING TRADE RESTRICTIONS IN DEVELOPING COUNTRIES

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Abstract
Although many countries have adopted freer trade regimes or are in the process of reforming quantitative restrictions, such reforms are not without shortterm costs. Sudden removal of quantitative restrictions can release a surge of demand for imports that can deplete foreign exchange reserves and force rapid adjustment by domestic industries. Five methods to more gradually liberalize quantitative restrictions are discussed: raising quota ceilings until they are non-binding; eliminating quotas product by product; converting quotas to equivalent tariffs and then reducing them; auctioning quota licenses; and converting quotas to tariff quotas, and then liberalizing these. The various instruments are evaluated according to their implications for the adjustment period, for government revenue, for the balance of payments, and for the extent to which they are likely to produce political disruptions.

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