Assessing the Efficiency Gains from Further Liberalization

Jeffrey Alexander Frankel ()

Working Paper Series from Harvard University, John F. Kennedy School of Government

Abstract: The paper begins by arguing that globalization, which here means reductions in the remaining barriers to international trade, still has a long way to go. Next it briefly reviews the evidence on the economic benefits from globalization, followed by a consideration of the non-economic effects in such areas as the environment. A section on what should be the priority areas for multilateral trade negotiations considers form (regional vs. multilateral, the new role of developing countries, the new role of NGOs), sectors (textiles, other manufactures, agriculture, services), and other issues (anti-dumping, competition policy, investment, and government procurement). The paper concludes with a rough quantitative estimate of the economic benefits of a new WTO round. Other authors, using static models, have estimated that a new round might raise trade over the next five years by about $300 billion, and that this might raise global welfare on the order of 1 per cent of world income. But the implied 20 per cent increase in global trade volumes may have further benefits. The author’s back-of-the-envelope attempt to take into account also dynamic gains says that if multilateral liberalization raised the global level of merchandise trade from 37 per cent of world income to 45 per cent, it could raise global income per capita by roughly 2 per cent over the subsequent two decades.

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