Free trade would boost world income by $2.8 trillion annually

July 31, 2012

Free Market Foundation

The U.S. Business Roundtable (BRT) is warning about the lack of progress in the Doha Round trade negotiations” of the World Trade Organisation. It estimates that trade liberalisation in goods and services could create annual global income gains of up to $2.8 trillion by 2015.

The BRT says that developed countries would benefit from enhanced trade and faster economic growth. But the nations that suffer most under trade barriers today are poorer developing countries that face discriminatory trade barriers.

Eliminating tariffs, or duties, on world trade would create $500 billion in global income, with two-thirds of the income going to developing countries.

The average developed country industrial tariff rates are now under four percent, but these residual tariffs impose $16 billion on the high volume of traded goods they encourage.

Developed country tariff rates on developing country imports are four times higher than the tariff rates on imports from other OECD countries.

Furthermore, if agriculture tariff rates, export subsidies, trade-distorting domestic support, and tariff-rate quotas were reduced by just 40 percent, global real incomes would increase by $70 billion per year.”

The World Bank estimates that lowering services barriers by one-third will raise income in developing countries by $95 billion, and radical liberalisation could create as much as $900 billion in gains.

For the past decade, growth of trade in services has increased at a greater rate than manufacturing, and services trade now accounts for more than a third of total cross-border trade.

Source: Press Release, The Business Roundtable Urges WTO To Complete ‘Bold Market Access Agreement To Energize World Economic Growth. May 16, 2003.

For text http://www.brtable.org/press.cfm/929

For BRT task force papers http://www.brtable.org/issue.cfm/9/0/0/921

For more on the Benefits of Trade http://www.ncpa.org/iss/tra/

FMF Policy Bulletin\27 May 2003