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What are the benefits of trade liberalization? Describe
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Answer Posted / joe
Trade liberalization is a removal of or reduction in the
trade practices that thwart free flow of goods and services
from one nation to another. It includes dismantling of
tariff (such as duties, surcharges, and export subsidies)
as well as non-tariff barriers (such as licensing
regulations, quotas, and arbitrary standards).
The positives of trade liberalization are:
Trade liberalization spurs growth in overseas markets for
American-made products and generates opportunities for
American workers by creating new and higher paying jobs.
Trade liberalization creates jobs, fosters economic growth
in the United States, and improves consumer choice and the
standard of living of American families.
There is considerable evidence that more outward-
oriented countries tend consistently to grow faster than
ones that are inward-looking.
Indeed, one finding is that the benefits of trade
liberalization can exceed the costs by more than a factor
of 10
Countries that have opened their economies in recent years,
including India, Vietnam, and Uganda, have experienced
faster growth and more poverty reduction.
On average, those developing countries that lowered tariffs
sharply in the 1980s grew more quickly in the 1990s than
those that did not
Freeing trade frequently benefits the poor especially.
Developing countries can ill-afford the large implicit
subsidies, often channeled to narrow privileged interests,
that trade protection provides. Moreover, the increased
growth that results from freer trade itself tends to
increase the incomes of the poor in roughly the same
proportion as those of the population as a whole.
New jobs are created for unskilled workers, raising them
into the middle class. Overall, inequality among countries
has been on the decline since 1990, reflecting more rapid
economic growth in developing countries, in part the result
of trade liberalization.
Conclusion: Although there are benefits from improved
access to other countries' markets, countries benefit most
from liberalizing their own markets. The main benefits for
industrial countries would come from the liberalization of
their agricultural markets. Developing countries would gain
about equally from liberalization of manufacturing and
agriculture. The group of low-income countries, however,
would gain most from agricultural liberalization in
industrial countries because of the greater relative
importance of agriculture in their economies.
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