Krueger condemns protectionism: The struggle to convince the free trade skeptics
| Pages | 204-205 |
Page 204
The benefits of free trade are clear. The latest U.S. Economic Report of the President, issued in Washington earlier this year, cites a study by Warcziarg and Welch of 133 countries between 1950 and 1988. Countries that liberalized their trade regimes enjoyed annual growth rates about 1/2 of 1 percent higher after liberalization. And opening up to international trade has become increasingly important: removal of trade barriers during the 1990s raised growth rates by 21/2 percent a year.
For me, the single figure that brings home how much was achieved in that postwar era is the gap between life expectancy in rich countries and that in poor countries. In 1950, that gap was 30 years. It is around 10 years today-because life expectancy in most poor countries has risen even more than it has in rich countries.
Why, given its proven track record, is trade liberalization something governments around the world seem so reluctant to embrace? And why are the opponents of free trade in society as a whole so much more vocal than its advocates? One explanation for government behavior is that many of them have been captured by special interest groups. Modern-day agricultural protection is a classic example, of course.
Agricultural protection in rich industrial countries is, simply, indefensible. Its sheer scale is shocking. The annual cost to consumers and taxpayers of 29 Organization for Economic Cooperation and Development (OECD) members' support for agriculture and horticulture is so large that it could pay for each of the 56 million cows in the OECD dairy herd to enjoy a first-class air ticket around the world. Each cow would also have $1,450 spending money to finance stopovers in the United States, Europe, and Asia.
This is amusing, of course, but it is also alarming. And countless similar examples abound. It has been estimated, for example, that each one of the 2,300 jobs saved in the American sugar industry through barriers to imports in the 1990s cost around $800,000 a year. Such industrial-country protection imposes enormous costs on consumers and taxpayers in rich countries. And it deprives poor farmers in poor countries of access to open markets where they might have a comparative advantage.
But agricultural protection is hardly rare in developing countries...
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