Opinion: Free Trade is the Answer

In the United States, presidential candidate Barack Obama has been quoted as saying that a commitment to free trade is not in the interests of working Americans. In Europe, French politicians are using the food crisis to push for greater protectionism. In Asia, tens of thousands of South Koreans protest against beef imports from the United States.

Yet if the world could do one thing right now that would help combat almost every one of its biggest problems, it would be to establish significantly freer trade. Easing restrictions on trade would improve education and health conditions, make the poorest people on earth richer and give us all more money to tackle costly challenges like global warming. Yet recent polls show public sentiment in the United States and Europe turning sharply against globalization, the Doha round of international trade talks is stalled, protectionist rhetoric is rising and many countries are building bigger trade barriers.

Passing the World Trade Organization's Doha Development Agenda would be an astonishingly cheap way to reap the benefits of more free trade. At the Copenhagen Consensus project, we gather some of the world's leading economists in an effort to decide how to do the most good for the most people at the lowest possible cost. The world's resources are limited, so choices have to be made about how to invest: Into reducing malnourishment? Combating climate change? Improving education? This year the panel—including five Nobel laureates—concluded that the second most efficient action the planet could take (after providing malnourished children with vitamins) would be to complete the Doha round.

It based its conclusions on new research for the Copenhagen Consensus project, including some by World Bank economist Kym Anderson. Anderson examined different econometric modeling scenarios, and calculated the realistic costs and benefits of completing the Doha talks. He concluded that if developing countries cut their tariffs by the same proportion as high-income countries, and services and investment were also liberalized, the global annual gains could climb as high as $120 billion by 2015, with $17 billion going to the world's poorest countries.

Over the long term, richer countries would invest more and grow even faster, and thus the benefits would grow very large toward the end of the century. Recast as a steady annual benefit, a positive Doha outcome could increase global income by more than $3 trillion per year, four fifths of which would go to today's developing countries.

The experiences of successful reformers like South Korea, China, India and Chile suggest that trade liberalization immediately boosts annual economic-growth rates by several percentage points for many years. Eliminating subsidies and trade barriers would mean that resources could be used more efficiently, so there would be more scope to reduce inequality and poverty, social tensions, environmental degradation, malnutrition and diseases. Per capita income would grow, enabling more people in developing countries to take care of some of these problems for themselves.

There would, of course, be costs. Reform will force some industries to downsize or close, although more industries will expand. The adjustment will also bring social costs; for some people and some communities, the transition would be difficult. Yet across the board, the benefits of a successful Doha round are likely to be hundreds of times higher than these costs.

The fact that completing the Doha round would increase global wealth is unique. No other measure that we studied could achieve this. So more free trade is the only step that would help finance other top investments endorsed by the Copenhagen Consensus panel, including the top choice, fighting the "hidden hunger" problem of malnutrition. For example, providing micronutrients—particularly vitamin A and zinc—to 80 percent of the 140 million or so undernourished children in the world would require a commitment of just $60 million annually, a small fraction of the billions that would be generated by a successful Doha round. And the investment in combating malnutrition would more than pay for itself: the economic gains from improved productivity and a lower burden on the health system would eventually clear $1 billion a year.

It is interesting to contrast global skepticism about free trade with the support for expensive, inefficient methods to combat global warming. For example, spending to reduce climate change by cutting carbon emissions was ranked the lowest priority by the Copenhagen Consensus expert panel, because it costs an awful lot but achieves very little. As it turns out, the impact of passing Doha is several times more positive than combating global warming.

While citizens around the world have rallied around a number of the global problems analyzed by the Copenhagen Consensus, free trade doesn't get its fair share of attention. It's simply not a sexy issue. There are few celebrity campaigners calling on politicians to sort out the Doha round.

Which is too bad. Fear and a lack of understanding about the implications of free trade leave the planet at risk of missing out on the extraordinary benefits it offers. Free trade is not only good for big corporations or for job growth. It is just plain good for everybody.

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