USTR - Carnegie Study Reveals Benefits Increase with Deeper Trade Liberalization
                 
The Office of the United States Trade Representative

Carnegie Study Reveals Benefits Increase with Deeper Trade Liberalization
03/15/2006

Underscores U.S. Efforts to Achieve Ambitious Doha Development Round

WASHINGTON – Today, the Carnegie Endowment for International Peace released a study which shows that under full trade liberalization all countries win.

"The scenarios presented are consistent with a view that underlies the U.S. negotiating approach in the Doha Development Round – economic gains grow as the degree of trade liberalization increases," said U.S. Trade Representative Rob Portman. "This is why the United States has been a primary force pushing for a maximum degree of market opening in these negotiations."

"The study examines scenarios of less than full trade liberalization as well as full liberalization. In its less than full liberalization scenarios, the Carnegie study finds some developing countries may suffer net welfare losses," Portman added. "One reason welfare benefits are not larger is that gains from trade liberalization in services are not measured in this study. Also, the use of a static rather than dynamic model in this study limits the measurement of net welfare gains because it does not include estimates of the economic growth effects of trade liberalization."

"Even with these omissions, the report's results support the important point that the lesser the degree of liberalization by all members, the greater the possibility that not all ships are raised. We need an ambitious result to deliver on the promise of Doha, the promise of greater global economic growth and the alleviation of poverty," Portman said. Tables in the study’s last technical appendix show that when Carnegie’s model was run with full trade liberalization, there were no losers, all countries gained. (Pages 98-99)

"The study also highlights three other important areas. First, it notes that trade is only one policy mechanism among many to achieve economic development When pro-market and other development policy reforms are in place, developing countries can take much better advantage of the opportunities offered by freer trade," Portman said.

"Second, it emphasizes the need to assist developing countries as they adjust to freer trade. The United States agrees. It is one of the reasons for our massive investment in trade-related capacity building and why we have committed to doubling that aid for trade over the next five years," Portman noted.

"Third, in calling for middle-income developing countries to extend greater access to products from the least developed countries, the study echoes what is widely understood but too often forgotten. Significantly reducing high trade barriers in developing countries will increase potential benefits developing countries derive from the Doha negotiations," Portman concluded.

The Carnegie study examines the static effects of liberalization of trade in goods. It does not include estimates of the effects of liberalization of trade in services or of dynamic economic effects resulting from trade liberalization. The Carnegie study is titled, "Winners and Losers: Impact of the Doha Round on Developing Countries."

###