Again, country specific factors (economic base) are essential to determining the effectiveness of such policy. It's been been subjected to series of debates regarding the effectiveness of any trade reform on growth of countries ( developed vs underdeveloped) or primary vs manufacturing driven . These might be useful:

The impact of trade liberalisation on exports, imports and the balance of payments of developing countries by Amelia Santos-Paulino, and A. P. Thirlwall

The Impact of Trade Liberalization on the Trade Balance in Developing Countries by Yi Wu ; Li Zeng

The specific results in a specific country depend on the circumstances.

More generally, when restrictions are reduced (or eliminated), ordinarily, we would expect more of the activity to take place. Holding all other things constant, removing an import quota or a significant import tariff ordinarily would not result in fewer imports of that specific good.

A few words of caution are in order when addressing trade because trade requires a trading partner and the funds to make an exchange. Moreover, complicating factors include the potential for many alternative trading partners. Additional important considerations include comparative advantage, the income of potential trading partners, transportation, exchange rates, laws, culture, trust, and many others.

Let us consider an extreme example where only one country (Country A) removes a binding an highly restrictive import quota on a specific good, and this is the only thing that occurs. For simplicity, let us assume Country A's current account is balanced. We would expect more imports of that specific good into Country A when the quota is eliminated. The current account of Country A now shifts to have more imports than exports. (The current account of its trading Partner(s) (i.e., the exporting country or countries) now has an increase in exports. This extreme example illustrates that eliminating a trade restriction could create a current account deficit in Country A. However, the impact of trade is seldom if ever this simple! Changes in trading policy seldom involves unilateral action; most are negotiated. This creates a dynamic experience where circumstances matter.

I am eager to read other answers!

Rob

In his book Termites in the Trading system: How Preferential Agreements Undermine Free Trade, ((Oxford, United Kingdom: Oxford University Press, 2008), Professor Jagdish Bhagwati questioned whether free trade areas (FTAs) under the guise of trade liberalization is not preferential trade areas (PTAs). He wrote: “FTAs are two-faced: they free trade among members, but they increase protection against nonmembers…such discriminatory trade arrangements could divert trade from efficient, low-cost nonmembers to inefficient, higher cost member-country suppliers because the latter no longer had to pay the tariff duties that were still imposed on the former.” (Ibid 2008, 17)

True trade liberalization should benefit all countries. The old GATT and now WTO initative to make trade agreements multilateral seems to be the right step to achieve that objective, but it appear to be a very slow process.

Dear Mr Catlett , thank you very much for your observation and contribution for this dilemma.

But what do you mean about some findings of Roubini and Watchel (1998).

They explained a nation's current account deficit in the first years of transition. Their study found that permanent nation’s current account deficit in the later stage of the transitional process can be viewed from two different aspects. First one, nation’s current account deficit potentially point to the success of structural changes in transition that are enabled the inflow of capital and investment and created opportunities for accelerated economic growth. Second one, they used as an example Czech and Russia to explain nation’s current account deficit as a consequence of the unsuccessful transitional process which leads to unsustainable imbalances that are a potential source for currency or balance of payments.

Dear Mr. Nwaka, Thank you for some recommendations. These two studies recommended by you are more relevant for me because it deals with contemporary trends in developing countries.

The benefits of trade liberalization are challenged since free trade agenda implies that developed countries force developing countries to remove trade barriers on their goods while keeping their barriers to the goods of the South. Guaranteed new jobs are not created and consequently, workers move from low-productivity jobs to unemployment or poorly paid jobs in informal sector which does not improve growth but increases poverty, all of that instead of moving from low to high-productivity jobs

Dear Mehmed Ganic,

In my opinion, liberalization of trade does not always lead to deterioration of the trade balance because there are many determinants that affect the balance of trade. Many of these determinants are not always correlated with the pace of economic development of the country.

Some of the factors affecting the development of international trade are related to the specificity of the structure of the national economy of a given country and the dominant production factors on the basis of which a specific country builds its comparative advantage and develops exports.

In my opinion, the liberalization of international trade should, in accordance with the neoclassical economy, positively influence the economic development of all or most of the countries taking part in over-national trade.

Another issue may be the liberalization of flows of financial capital, mainly speculative capital, which are managed by national banks and investment funds. It happened that the speculative transactions carried out by such large financial institutions on the financial markets of other relatively smaller economies resulted in currency and financial crises in those countries.

Best wishes

According to a study by the International Monetary Fund (IMF), trade liberalization leads to higher imports and exports, but the evidence on the overall trade balance is mixed.