Tue, Mar 25, 2008 - Page 9 News List

The benefits of free world trade are in billions

Grasping globalization's overwhelming boost to welfare everywhere is potentially one of this generation's biggest challenges

By Kym Anderson and Bjorn Lomborg

An "alternative" to Doha, whereby other high-income countries would follow the EU's offer of duty-free access to products from least-developed countries and small African, Caribbean and Pacific countries, would involve only a tiny fraction of global gains from trade reform.

Moreover, it may well hurt other poor countries -- thereby worsening inequality -- by encouraging resources to be allocated to activities that become uncompetitive following the next WTO agreement.

If trade liberalization in goods and services proves too politically difficult to achieve in this decade, the benefits of liberalizing international labor flows is worth contemplating ? not least because otherwise illegal migration is likely to increase.

Historical experience shows that migration is the fastest way to bring about a convergence in living standards.

We examined the costs and benefits of an expansion in international migration over a 25-year period, amounting to a 3 percent boost in host countries' labor forces by 2025.

The costs would include one-off expenses to migrants: transport, obtaining visas and permits, and finding housing, schooling and employment, as well as the emotional cost of separation from family.

There are also one-off costs to host-country governments, such as processing applications and providing initial help with housing and welfare.

These costs have been estimated at between US$14,000 and US$42,000 per worker and family (shared equally by migrants and host governments). The global net benefit of the increased flow of migrants for 25 years is between US$13 trillion and US$39 trillion -- close to the median estimated gains from the Doha round.

The benefits are between 28 and 220 times higher than the costs.

Even if freeing up immigration multilaterally seems too difficult to include as part of a Doha round agreement, individual countries could do so unilaterally with the stroke of a pen.

The economic logic is compelling: removing trade and migration barriers would be an exceptionally wise investment. The real hurdle is getting this message across to politicians and voters.

Kym Anderson is professor of economics and foundation executive director of the Centre for International Economic Studies at the University of Adelaide in Australia while on leave from his job as lead economist from the World Bank. Bjorn Lomborg is the organizer of Copenhagen Consensus and adjunct professor at the Copenhagen Business School.

Copyright: Project Syndicate

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