Changes were only made to the Executive Summary to clarify the concepts of compatible and complementary policies. All Trade Policy Working Papers are available on the OECD website at:

economies exhibited severe traderelated distortions, including quantitative restrictions on imports and exports, very high tariffs, overvalued exchange rates, and administrative controls on foreign exchange allocation. Although growth remained rapid against a background of a favorable external environment up to the first oil shock in 1973, policies of import control and substitution induced inefficiencies as well as rigidities in economic structure. Often, they resulted in periodic balance of payments crises. Subsequently, the failure of many countries to adjust adequately to the external shocks of the 1970s and early 1980s underlined the importance of

Abstract 3 This paper analyzes the structural reform process that has been taking place in Uruguay since the return to democracy in 1985. Three main questions oriented the research: why reform? what kind of reform? and, how well did the reform perform? The main focus is on the pro-market reforms as they have been summarized in the so-called Washington Consensus, but the paper also deals with political reform and the consolidation of democracy. The general goal is to understand reform in a broad economic and political sense. The study is not just aimed at assessing the reforms implemented, but rather to understand why the market-friendly reforms moved faster in some areas than in others, who promoted and who opposed reform, how the political process shaped the reform, and how well the reform performed. This paper is part of the Global Development Network's research program named "Understanding Reform", which aims at improving our understanding of the recent reform experience by performing simultaneous and coordinated in-depth country-case studies. 1

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Developing country officials increasingly have come to see attracting foreign direct investment as an essential part of their development strategies. The Andean countries of Bolivia, Colombia, Ecuador, Peru, and Venezuela have joined other countries around the world in pursuing multinational investment. This paper presents an overview of their suitability for investment compared to other investment locations. It also describes policy areas where national governments of the five Andean countries can take action to attract the type of foreign direct investment that will increase living standards and help alleviate poverty. Export-oriented investment is identified as the key type of investment on which these countries should focus. Possible policy interventions include improving access to developed country markets, lowering trade costs, improving export processing zones, and investigating the further use of efficient investment incentives.

This paper studies the connection between trade and growth in the context of a partial and inconsistent liberalization process in a specific Eastern European country in transition towards market economy, namely, the Republic of Belarus. The analysis of the country trade patterns during the USSR period and the years since independence revealed that unlike its close neighbors (the Baltic States and Poland) Belarus did not succeed in changing the commodity or the geographical structure of its trade. It is almost a good representation of reality to say that Belarus trades with Russia. The assessment of the rationale for the closer integration with Russia and the impact of this process on Belarus growth led us to the conclusion that the integration in the form of a non-exclusive Free Trade Area and within the framework of a wider set of international connections rather than the move towards a Customs Union (and a Union State) with Russia would be a more optimal policy for Belarus. This conclusion is supported by the results of countryspecific growth regressions and of a counterfactual “free trade experiment ” via a small CGE model. This paper is partially based on the ongoing work by the Authors for the Global Development Network (GDN) Research Project “Explaining Growth in the CIS