Measuring outward orientation in developing countries : can it be done?

The pressure for trade reform as an integral component of adjustment programs has intensified the ongoing debate about the benefits of trade liberalization of trade regimes in the less developed countries (LDCs). This heightened interest has in turn generated continued empirical study of the relationship between economic performance and trade policy orientation. One branch of this overall policy-performance literature uses cross-country regressions relating economic performance and a measure of policy"outward orientation"or"openness"to investigate this relationship. This paper attempts to move the debate on the empirical cross-country relationship between trade policy and economic performance backwards one step by asking the question, can the economists'intuitive notion of outwardly oriented policy captured empirically? It reviews some principles of the measurement of trade barriers and examines the relationship between four types of empirical measures of outward orientation across countries, including: (a) the share of trade in GDP; (b) the average tariff and coverage ratio of non-tariffbarriers; (c) measures of the deviation of countries'actual trade pattern from the pattern predicted from a model of resource based comparative advantage; and (d) a measure of real price distortions. The paper also discusses the interpretation and implications of the lack of association between the various measures.