Effective protection, policy appraisal and trade policy reform

Abstract

David Greenaway and Chris Milner evaluate the contributions of the effective protection concept to trade policy reform, noting both the refinements to the original concept by many including Corden himself and the ardent critics of the concept. The authors note that the concept has continued to be applied in developing countries due to its simplicity and relatively modest data requirements. Greenaway and Milner adduce several reasons for the durability of the concept and its widespread application, despite strong criticisms of the concept. They note that while it is not a general equilibrium concept, it has forced policy makers to think in general equilibrium terms. It has led policy makers to consider the impact of trade restrictions on both exports and imports, on inputs and outputs and the trade regime in relation to the general incentive structure. It allows analysts to evaluate specific activities and it also serves as a general indicator of resource pulls in an economy.