When do autocracies start to liberalize foreign trade? Evidence from four cases in the Middle East and North Africa

ABSTRACT

This paper argues that within autocracies the beginning of IMF-friendly trade and capital account reforms is highly contingent on the ability of alternative policy regulations to provide respective regimes with domestically needed amounts of convertible foreign exchange. A longitudinal comparison of four countries (Morocco, Tunisia, Egypt and Jordan) between the 1960s and the early 1990s in the Middle East and North Africa region shows a historical sequencing of reforms. Before the implementation of orthodox policy change, foreign exchange scarcity was managed primarily by rising restrictions, accumulation of debt and a number of unilateral country-specific strategies, including broader economic openings (infitah) and selective capital account liberalizations. However, IMF-friendly reforms only became a political option after the failure of these alternative policies and the simultaneous drying up of unconditional finance. These findings complement recent debates about the rush to free trade in at least two aspects. First, they point to distinct causal mechanisms depending on the type of political regime (e.g., autocracy versus democracy), explaining the beginning of trade and capital account liberalizations among developing nations. They specify, second, one important contextual condition in regard to the effectiveness of IMF surveillance power.

KEYWORDS:

• Autocracy
• rush to free trade
• trade and capital account liberalization
• IMF surveillance power
• Morocco
• Tunisia
• Egypt
• Jordan

ACKNOWLEDGMENTS

Earlier versions of this paper were presented at the 50th ISA Annual Convention 2009, New York, USA, 15–18 February 2009, the Thursday's Seminar in Political Studies, IMT Institute for Advanced Studies, Lucca, Italy, 21 May 2009 and the GIGA Institute of Middle East Studies, Hamburg, Germany, April 2010. The author whishes to thank Martin Beck, Charity Butcher, Dawid [] Friedrich, Henner Fürtig, Christian May, Rolf Schwarz, Dieter Senghaas, Christian Völkel, all participants and the anonymous reviewers of the journal for their valuable questions and remarks. Main parts of this research were generously supported by the Hans-Böckler foundation and the Bremen International Graduate School of Social Science (BIGSSS).

Notes

1 In principle, I follow the classical definition of Juan Linz that authoritarianism is a political regime with limited political pluralism sharing three attributes: (1) the dominance of mentalities over ideologies, (2) the low degree of political mobilization, and (3) the rule of a leader or a small group within ill-defined but de facto quite predictable limits (Linz, 1964: 297).

2 During the early 1990s, an additional cluster of empirical rich case studies emerged wherein trade liberalization was analyzed within a broader framework of structural adjustment and economic liberalization. Although these studies tried ‘to single out those [factors] that best explain why governments followed similar or different adjustment paths' (Nelson, 1990a: 325), no generalization about the general patterns of these processes was achieved (Wilson, 1991: 1478). See, among others, Nelson (1989, 1990b), Herbst (1990), Frieden (1991), Barkey (1992), Haggard and Kaufman (1992), Harik and Sullivan (1992), Haggard and Webb (1993, 1994), Nelson (1993), Niblock and Murphy (1993), Dornbusch and Edwards (1995) and Henry (1996).

3 The time frame of this study is restricted to the period between the late 1960s and early 1990s and does therefore not include the effects of the recent ongoing transformations in the MENA region.

4 For similar methodological perspectives, see also Eckstein (1975) and Lijphart (1971).

5 Please note that in contrast to findings of MENA area specialists, literature on more general patterns of how authoritarian institutions constrain economic performance have pointed to somehow different trends. According to this research, authoritarian single-party regimes had for instance higher growth rates compared to authoritarian monarchies (Wright, 2008).

6 While especially Morocco and Jordan experienced significant periods of political liberalizations during the 1990s and Tunisia and Egypt underwent major political transitions over the last few months it is important to note that all of these liberalization episodes took place after the beginning of what is described in this article as IMF-friendly trade and capital account reforms. Therefore, political liberalization can be excluded as a possible explanation of the beginning of a permanent trade and capital account liberalization within these four MENA countries.

7 Algeria, Iraq and Syria, the three other single-party Arab Republics in the region, have not been chosen due to their relatively higher dependency on oil revenues, which tends to make them more like oil monarchies in some but not all respects. Mauritania, Sudan and Yemen have been excluded primarily because of their permanently weak state structures, which makes them especially prone to low levels of policy implementation as well as being vulnerable to belligerent within-state groups. Yemen, further, has only existed as a unified nation-state since 1990.

8 I follow here a typology suggested by Melanie Cammett. According to her understanding, distant business–government relations result from a combination of state dominance and dispersed capital structure, while close business–government relations developed under conditions of capital concentration, which is not controlled by the state (Cammett, 2007: 7–9).

9 This notion is probably more common in an Egyptian context, therein characterizing the Egyptian economic opening since 1973. As a matter of fact, Tunisia was almost three years ahead of Egypt with such a policy.

10 The only exception to this statement is the case of capital account regulations in Morocco. However, these regulations were already at a very high level during the 1970s and early 1980s.