The political economy of trade liberalization: The case of Jordan

This dissertation examines seven critical issues related to trade liberalization in Jordan: (1) Given the strong arguments that free trade is the optimal economic policy for any nation, why has a policy of trade protection been the norm? (2) What are the underlying reasons for Jordan's shift to a free trade policy? (3) Why was Jordanian trade reform delayed, gradual, and partial? (4) Why has the government been commited to the reform? (5) What has been the impact of this reform upon the Jordanian economy? (6) Was the reform credible, did it achieve its objectives, and how did private economic agents view the reform? (7) What are the institutional and administrative requirements and economic policies necessary to strengthen the sustainability of the reform?; A theoretical framework integrating domestic and international factors is developed to examine the political economy of Jordan's trade reform. The international factors (external environment) are states, markets, institutions and organizations, and shocks and crises. The domestic factors are the state, interest groups, the market, domestic crisis, and national institutions. Ideas are drawn from two major schools of international political economy: Realism and Public Choice. In addition, four concepts from the field of political economy help in weaving the relationships between the variables of the framework: two-level games, the coalition in power, national crisis, and regime safety and maintenance.; Among the factors that influenced Jordan's economic growth and crisis were foreign aid and workers' remmitances (which created and institutionalzided a rentier behavior of the state, politicians and top bureaucrats, and interest groups), the state's monetary and fiscal policies, and debt. I apply the Dutch Disease analogy to explain the evolution of the Jordanian crisis of 1988 from a political economy perspective. I conclude that the Jordanian crisis was mainly a "home-made crisis" and that the impact of external factors was secondary.