NCPA - National Center for Policy Analysis

Barriers to Free Trade

September 22, 2003

Trade is a vital engine of economic growth, and the trade barriers being implemented by many nations today raise prices and reduce global prosperity, argues Douglas Irwin in a recent book about trade liberalization.

The importance of trade to the United States is growing, and trade barriers end up hurting the economy more than protecting it. According to Irwin:

  • Exports and imports comprise 25 percent of Gross Domestic Product (GDP).
  • Some 70 percent of all imports are used directly to make other products.
  • Sugar quotas cost American consumers and workers $900 million and 9,000 jobs annually.
  • All together, U.S. trade barriers cost Americans $32 billion per year.

Protectionism, says Irwin, raises the costs of raw materials and capital goods used by American industry, which then hurts workers who are hit by the high prices on finished goods. Furthermore, international trade improves productivity by increasing competition and forcing the weakest producers out of the market.

Free trade ends up raising the standard of living wherever it is practiced, and attempts to "strengthen" environmental or labor protections are often simply trade barriers that will prevent further economic development.

Source: Charles Oliver, "Tear Down These Walls," review of Douglas A. Irwin, "Free Trade Under Fire" (Princeton University Press, April 2002), Reason magazine, July 2003.

For review text

http://www.reason.com/0307/cr.co.tear.shtml

 

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