Free Trade Fact of the Day

Conn Carroll /

The vast majority of economists agree that further reductions in trade barriers through the Doha Round of trade negotiations would spur economic growth around the world help lift millions of people out of poverty in developing countries. Unfortunately it does not look like the current President will get much progress done on the issue before he leaves office, and if a Democrat wins the White House, all hope for American leadership on free trade will be dead. But as CATO’s Daniel Ikenson demonstrates in a new paper, countries both rich and poor can still realize gains from increased trade by reforming their trading systems.

Called ‘trade facilitation’ these reforms include “improving the chain of administrative and physical procedures involved in the transport of goods and services across international borders.” Ikenson writes:

Like tariff cuts, improvements in trade facilitation procedures can help reduce the cost of trade and increase its flow. A 2004 United Nations study revealed burdensome processes in developing countries, where the average customs transaction involves 20 to 30 parties and requires 40 separate documents to complete. A 2004 World bank study of 75 countries found that if “below average” performances on a compilation of four broad trade facilitation indices were able to raise their scores “halfway to the average” score for all 75 countries, world trade would increase by $377 billion, or about 9% per year.