Trade Structure and Endogenous Restrictions: Evidence from Sudan

Abstract This paper attempts to determine appropriate trade control systems for small, capital-poor economies facing external terms of trade disturbances, in terms of minimizing variations in the real sphere of the economy. An attempt has been made to explore the appropriate trade regime for Sudan over the period 1950-1991. Thus, two alternative models are explored: export-subsidy versus import- tariff endogeneity. The theoretical model suggests that the tariff endogeneity (t-regime) regime is a more appropriate policy in the face of foreign price shocks. Error correction mechanism regressions and normalized elasticity results indicate that although there is discernible evidence that Sudan followed the t-regime, the country did not apply the policy correctly because the tariff has been adjusted mainly in response to foreign import prices rather than foreign export prices, which are more unstable.