A critical question in the debate over free trade is whether freer trade reduces income disparity among trading partners, and whether this reduction comes at the expense of the wealthier nations. Increased trade can lead to the convergence of income levels among nations and increased growth rates for all, say researchers.

Comparing simulations with evidence from five of the six founding members of the European Economic Community, researchers found that these countries showed no tendencies toward income convergence between 1870 and World War II.

However, the extensive trade liberalization in the post-World War II period had significant effects:

• In contrast to the aftermath of World War I, with higher ratios of exports to gross domestic product the majority of countries moved to new, long-run growth paths characterized by higher income levels and faster growth.

• There was also a marked reduction in income disparity between countries.

• In fact, researchers found that a unilateral reduction of tariffs by one country is enough to raise the long-term growth rates of all countries -- although widespread reductions have even stronger growth effects.

• And unilateral trade liberalization may enable the reforming country to overtake and surpass wealthier countries.

Researchers point out that less-developed countries tend to erect protective trade barriers, which makes it difficult to reduce the income gaps between them and developed countries.