Sustaining Trade Reform: Institutional Lessons from Argentina and Peru

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09 November 2012

Sustaining Trade Reform:
Institutional Lessons from Argentina and Peru


Elías A. Baracat, J. Michael Finger,

Raúl León Thorne, and Julio J. Nogués


The authors: 3

Acknowledgements 4

Abstract 5

1.Introduction 7

Major themes 7

Layout of the paper 8

2.Analytical Framework 9

Insights from Institutional economics 9

The political economy of trade policy 11

Policy makers’ choices and economic analysis 13

Management of pressures for protection: Formal versus informal procedures 15

3.The Evolution of Trade Policy in Peru, 2001-2011 15

Reform that has taken root 16

Positive results 16

Asian economies as example 18

INDECOPI and the professionalization of management of pressures for protection 18

Trade agreements enter the arsenal of policy management 19

Double strategy with double objectives 20

New government ministry orientated toward integration into the world economy 20

Role of FTA negotiations in forming Peruvian trade policy 20

The momentum of the FTA carries beyond its ‘requirements’ 21

A policy blueprint emerges 21

Inclusion 22

Change is a cumulative process 22

4.Import Substitution under the WTO: Argentina 22

Return to import substitution 23

Return to informal governance of trade controls 24

Import licenses as import restrictions 25

Industry support at high cost 25

Export restrictions 26

Domestic political support 26

WTO discipline 26

Reversion to the old policy culture 27

The Statement 28

Argentina’s Response 28

5.Argentina and Peru: Different Paths 29

The differences 29

Accounting for the differences 30

6.Conclusions and Recommendations 31

Liberalization is a national decision 31

“Commitment” is effective when it creates “interested party” rights in national law and regulation 32

Maintaining the momentum of liberalization 34

Focus on national process 34


The authors:

Elias A. Baracat was the founding President of the Argentine International Trade Commission. He is currently a prominent consultant on Argentine Commercial Policy and the administration of that policy. Email:

J. Michael Finger organized the first trade policy research unit at the World Bank. He has also served as Visiting Professor in universities in Australia, China, Sweden and Texas. Email:

Raúl León Thorne was a founding Member of the Commission on Antidumping and Safeguards in Peru. He has also served as a Member of important WTO Dispute Panels. Email:

Julio J. Nogués: Member of National Academy of Economy, Argentina; has served as Trade Representative of Argentina to the US and Undersecretary in the Economics at Ministry of Argentina. Email:


Francis Ng, TTL of the World Bank’s International Trade and Integration Team (DECTI), has provided substantive and the administrative support throughout the preparation of this study. He guided preparation of the proposal and as the study was conducted he provided data and other information that were critical to the conduct of the work. He has also managed the preparation of a final manuscript and has been an efficient interface between the authors and the publications process.

The authors wish to express their appreciation for the support he has provided. Likewise, we wish to express our appreciation for the support provided by Aaditya Mattoo, Manager of the International Trade and Integration Team of the World Bank.

Financial support from the World Bank’s Research Support Budget is also gratefully acknowledged.

The findings, interpretations, and conclusions in this study are those of the authors. They do not necessarily represent the views of the World Bank, its Executive Directors, or the countries that they represent and should not be attributed to them.


Factually, the principal finding of this study is that the trade policy reforms introduced by Peru in the 1990s have continued over several changes of president, while similar reforms in Argentina have been reversed. In both countries the reforms included introduction of new mechanisms for managing trade policy as well as reduction of restrictions. Through the decade beginning 2000, Peru’s liberalization has expanded. The new institutions have become more robust and through them pressures for protection have been effectively contained. At the same time Argentine trade policy has returned to the high-protection, import substitution regime in place before the 1990s reforms. Multiple restrictions have been imposed; mostly through a reversion to informal methods that abjure the governance characteristics the 1990s reforms introduced.

Explaining the difference between the two cases is not a matter of economic parameters such as resource endowments or external shocks. Peru’s reforms manifest the buoyant and confident attitude toward the global economy that reform leaders were able to introduce into Peruvian politics. In the words of former president Alan Garcia, an eagerness is to “climb up on the wave of growth.” In comparison, Argentina’s current development strategy sees international trade only as “the second avenue of transmission of the global crisis.”

The Peruvian case provides examples of successfully managing the politics of reform and of managing the technical aspects of policy so as to establish transparent and participatory processes that weigh accurately the impact of trade policy on all affected domestic parties. The Argentine case demonstrates that the WTO legal system is not an effective restraint on a government that wants to revert to an import substitution regime. International cooperation has been useful when it has recognized and influenced domestic sovereignty over economic regulation, not useful when approached as a matter of international regulation of national actions.

Keywords: Peru, Argentina, trade policy, trade reform, institution, trade liberalization, import substitution, WTO

JEL codes: F10, F13, F14, F15, F43, D02

Systems determine outcomes. Public policy will only get the economics it needs, or indeed that society needs, if the processes, the institutions and the individuals responsible for developing it are receptive to good economics, and responsive to it.1

Gary Banks

Chairman, Australian Productivity Commission

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