Free Trade: the Best Foreign Aid
Thursday, May 29th, 2008 By Marc KilmerWhile it’s politically popular to attack free trade in Ohio, the reality is that freedom to trade and move freely has a variety of benefits:
Anderson looked at a number of econometric modeling scenarios and calculated the cost and benefits that would obtain from full trade liberalization under realistic assumptions derived from the current World Trade Organization’s Doha Development Agenda negotiations. Anderson estimated that liberalization of global merchandise trade would mean an annual increase of $287 billion per year in global GDP, of which $86 billion would go to developing countries. This compares very nicely with the $104 billion in development assistance that the governments of industrialized countries gave to developing countries in 2006.
In other calculations, Anderson found that the long term effects of trade liberalization would be that global income in 2098 would be up to 10% greater than it otherwise would have been. The associated net present values from freer trade range from $50 trillion to $424 trillion. Consider that in 2007, total gross world product was $53 trillion. In other words, both the immediate and long-term benefits from free trade are enormous. Anderson reports benefit cost ratios ranging from 269:1 to 1121:1.
Allowing workers to move from developing countries to rich countries also provides big benefits to both. Anderson cites a World Bank study which found that annual migration from now to 2025 of 560,000 workers and their families from developing countries to rich countries would yield global gains by 2025 amouting to $674 billion per year in 2001 US dollars. Most of the gain would go to the migrants, but natives would gain $138 billion in benefits.
Tags: Economy, Free Trade, Trade
