An analysis of the effect of trade liberalisation on Malta's trade performance 1995 - 2010

Abstract

The study analyses the effects of trade liberalisation on Malta's trade performance. It focuses particularly on the liberalisation of trade from 1995 onwards. An analysis of the relevant literature on trade liberalisation is included. The study takes a mixed methodological approach. Econometric work in the form of regression analysis tries to garner a macroeconomic view of the impact of trade liberalisation on Malta's trade performance. This is supported with interviews to obtain a more microeconomic view. A trade freedom index is used as a proxy for trade liberalisation. The general aim is to evaluate the effects trade liberalisation, and the policies inherent with it, on Malta's trade performance. The major effect of trade liberalisation is that it causes imports to grow more than it does exports. Liberalisation in other economic sectors must be undertaken, implying increased investment to accommodate such ventures. Trade liberalisation forces businesses to be more efficient and cost-effective, or otherwise risk closing down.