Impacts of Trade Liberalization on Export Performance in Bangladesh: An Empirical Investigation

Abstract

In the backdrop of persistent trade deficit, Bangladesh has been extensively liberalizing its trade regime since 1992 in order to achieve higher export performance and GDP growth. However, despite the liberalization, imports are still growing faster than exports, increasing trade deficit. The article empirically examines the impacts of trade liberalization on export performance in Bangladesh, using the ARDL ‘Bounds Test’ approach with annual time series data. Empirical results indicate that trade liberalization is having statistically significant but low impact on aggregate export. Neither capital stock as a technology transfers nor liberalization through reduction and withdrawal of export duties shows a significant impact on export performance. Exports are mostly stimulated by GDP growth. The interaction of liberalization with GDP increases exports a little, hence improving the trade balance. However, the liberalization enhances imports compared to exports hence the trade deficit. Therefore, a combined and consistent policy to promote GDP growth, technology transfers and domestic price stability, including education, infrastructures and backward linkage industries is essential in order to achieve higher export performance in Bangladesh.