The relationship between Malta's trade policy and the external trade account 1980-1995

Abstract

Developments in a country's external account are closely linked with the policy stance of the government with respect to the extent and nature of its external trade policy and domestic production as reflected in the changes in its imports and exports and on the impact on the overall balance of its international payments position. The principal objective of this thesis is to show to what extent trade policies have had an impact on the Maltese external trade account during the period 1980- 1995. A study of these policies in the Maltese scenario is useful and interesting because Malta has, during the period under review, passed through a wide range of trade policies ranging from a high level of protectionism to an extensive trade liberalisation policy that is still unfolding. Moreover, with Malta steadily approaching EU membership, the issue of trade policy, within the context of European and global trade policies and agreements, is becoming increasingly relevant and subject to more analysis and discussions. These issues will no doubt be at the centre of negotiations and agreements as the process of European membership gathers momentum. Besides the historical and theoretical aspects and applications of trade policy, the study builds on various econometric models to show both the negative and positive "impacts" of the various policies adopted during the period in question. This thesis offers a number of recommendations with the view to making Malta's trade policy consistent with international agreements such as the Uruguay Round of 1994 and fiscal, monetary, exchange rate, and incomes policy. Amongst these recommendations, were included commodities and geographical diversification in trade, improvements of infrastructural facilities, incentives for foreign investment and the development of human and non-human resources in Malta. Hopefully this study will be a valid contribution to the literature on the subject and will encourage further research and developmental work in this area.