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This paper uses panel data and times series/cross section analysis to estimate the effect of trade liberalisation on export growth, import growth, the balance of trade and the balance of payments for a sample of 22 developing countries that have adopted trade liberalisation policies since the mid-1970s. We find that liberalisation stimulated export growth but raised import growth by more, leading to a worsening of the balance of trade and payments. To the extent that this has constrained the growth of output and living standards, the findings have important implications for the sequencing and degree of liberalisation.One of the major purposes of trade liberalisation is to promote economic growth by capturing the static and dynamic gains from trade through a more efficient allocation of resources; greater competition; an increase in the flow of knowledge and investment and, ultimately, a faster rate of capital accumulation and technical progress. Barriers to trade and anti-export bias will reduce export growth below potential. Import controls are likely to reduce efficiency, although, at the same time, they protect the balance of payments. The presumption is that trade liberalisation will raise the growth of exports and imports but the implications for the trade balance and the balance of payments are uncertain because this depends on the relative impact of liberalisation on export and import growth and on what happens to the prices of traded goods. Trade liberalisation may promote growth from the supply side but, if the balance of payments worsens, growth may be adversely affected from the demand side because the payments deficits resulting from liberalisation are unsustainable and not easily rectified by relative price (real exchange rate) changes (Khan and Zahler, 1985).The purpose of this paper is to examine this issue in a systematic way taking 22 developing countries from different continents that have undergone extensive trade liberalisation since the mid-1970s. We are interested in answering four major questions. First, what has been the effect of trade liberalisation on export and import growth in the aggregate for all countries in the sample and, are there differences between the major regions of Africa, Latin America, East Asia, and South Asia? Second, has the impact of liberalisation been greater on export growth or import growth? Third, how has liberalisation affected the price and income elasticities of demand for exports and imports? Last, what has been the effect of liberalisation on the trade balance and the current account of the balance of payments of countries: has there been improvement or deterioration? Theoretically, the effect of liberalisation on the trade balance or balance of payments is ambiguous whatever framework of balance of payments adjustment theory is used, so the issue becomes an empirical one (see later). The results have policy implications relating to the 'sequencing' of export and import liberalisation. If foreign

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