October 22, 2016


The Free-Trade Miracle (Bjørn Lomborg, OCT 21, 2016, Project Syndicate)

The far greater benefits of free trade are much less obvious. Consumers get a wider variety of goods at cheaper prices. Middle-class Americans gain an estimated 29% of their purchasing power from foreign trade. In other words, the average middle-class American can buy 29% more for each dollar than if there was no trade. The effect is even bigger - 62% - for the poorest tenth of American consumers.

Trade makes exporters stronger, more efficient, and more productive. The benefits are shared among workers: Obama's Council of Economic Advisers found that, on average, US export-intensive industries pay workers up to 18% more than non-exporting firms.

Opposition to free trade ignores our interconnected reality. Some 80% of trade happens along supply chains within or organized by transnational firms, according to a 2013 UN report. While some US politicians call for tariffs against Mexico, the National Bureau of Economic Research estimates that about 40% of the value of Mexican imports to the US is actually added within the US itself.
These arguments are all part of the overwhelming economic case for free trade. But the strongest argument is a moral one. Cost-benefit analysis shows that freer trade is the single most powerful way to help the world's poorest citizens.

Reviving the moribund Doha Development Round of global free-trade talks would reduce the number of people in poverty by an astonishing 145 million in 15 years, according to research commissioned by the Copenhagen Consensus Center. The world would be $11 trillion richer each year by 2030, with $7 trillion going to developing countries - equivalent to an extra $1,000 for every person every year in these countries by 2030.

Moreover, trade also carries much broader benefits for society. Economic globalization has been shown to reduce child mortality and extend life expectancy, owing to increased incomes and better information. In the US, trade over the past half-century has increased longevity significantly. In Uganda, freer trade in the past 35 years has been shown to lengthen the average lifespan by 2-3 years.

What's more, "free trade is good for the environment," to quote one academic study.

Posted by at October 22, 2016 8:29 AM