How Free Trade Might Be the World’s Best Option

Huffington Post: How Free Trade Might Be the World's Best Option – Bjorn Lomborg

… The classic argument for free trade points out that specialization and exchange benefits everyone, because goods are produced by the countries that specialize in those goods and produce them most efficiently. The standard World Bank models show that realistic free trade, even just by the end of this decade would increase global GDP by several hundred billion dollars per year, with perhaps $50 billion accruing to the developing countries. Towards the end of the century, the annual benefit will likely exceed Cameron's $1 trillion annually, with half going to the developing world.

But a growing number of academic studies now show that the free trade story goes much further than simple specialization. History shows that open economies grow faster. Good examples include Korea from 1965, Chile from 1974 and India from 1991, which all saw their growth rates increase significantly after liberalization. Even modestly freer trade helps domestic markets become more efficient and get supply chains better integrated. At the same time trade transfers knowledge, which spurs innovation. Free trade means we don't all have to reinvent the wheel over and over again.

This is perhaps best captured in a recent state-of-the-art literature review by Professor Kym Anderson for the Copenhagen Consensus think tank. Anderson, one of the World Bank's lead modelers, shows that the long-run benefits from even a modestly successful Doha free trade round would be vast. The annual GDP compared to no extra free trade would in 2020 be about $5 trillion larger, with $3 trillion going to the developing world. Towards the end of the century, slightly higher growth rates will have accumulated to benefits exceeding $100 trillion annually, with most going to the developing world. By then, benefits would add about 20 percent annually to developing world GDP. …