DDA
- Why more liberalisation?
Studies suggest that the current round of negotiations in the WTO,
the Doha Development Agenda, could produce benefits amounting
to between $250 and $600 billion annually.
History
Politicians reacted to the depression of the 1930s by putting short-term
national interests first and erecting trade barriers.
This simply intensified the slump. Protectionism has proved
an ineffective means of sustaining employment which distorts
domestic markets, pushes up the prices faced by consumers
and insulates inefficient sectors from competition. Protectionism
also penalises foreign producers and encourages the inefficient
allocation of resources both domestically and globally.
Post war trade liberalisation has brought substantial benefits. Since
the GATT (forerunner to WTO) was established in 1948,
eight rounds of multilateral trade liberalisation have
helped reduce the average industrial tariffs of developed
countries from nearly 40% to less than 5%. This has gone
hand in hand with a twenty-two -fold increase in world
trade and a seven -fold increase in world incomes.
Protectionist policies are used by governments to shield domestic
producers from foreign competition. However, they do not
serve the long-term national interests, as they tend to
preserve inefficient, unproductive industries rather than
encouraging potentially more prosperous ones. Whilst trade
liberalisation alone does not produce economic success,
over the past thirty years those countries with the highest
levels of integration in the world economy have achieved
the fastest growth in living standards.
During the 1990s, countries that were more open have achieved roughly
double the average growth rate of others. An open, transparent
and stable world trading system maximises global prosperity.
Trade allows countries, and the firms and individuals
within them, to specialise in the activities, which employ
their relative strengths, resources and expertise. Countries
are able to specialise in producing the things they are
best at relative to other countries. This results in much
better allocation of resources. Allowing countries to
specialise in the production of goods and services in
which they have a comparative advantage, and exchange
them in international markets, increases the incomes of
all countries over the longer term.
However, trade liberalisation is likely to yield the greatest gains
when it is part of a wider package of institutional, human
infrastructure and capacity building reform.
Benefits to the UK
A liberated world trade system has major benefits for the UK. The
living standards of UK consumers and the competitiveness
of our industry depend on our ability to trade and invest
freely. In 2003 the UK was the world’s sixth largest exporter
of goods (amounting to £188bn) and second largest exporter
of services (amounting to £80bn).
Exports account for more than one-quarter of UK GDP. That is, a quarter
of everything that UK produces is destined for sale abroad.
Foreign trade, therefore, represents a major source of
UK employment. The UK does not, however, simply benefit
by having greater market access for its goods and services.
Reducing our own barriers to trade also brings benefits
to consumers through cheaper prices and greater choice,
notably in agricultural produce, and to industry by providing
competitive sources of components and materials.
Benefits to UK business
Trade liberalisation will benefit UK business. Reducing onerous border
controls limits potentially lengthy delays while goods
are processed through customs points. This results in
shorter production and delivery times and reduces storage
costs. UNCTAD estimates that the cost of business compliance
with trade procedures around the world amounts to 7-10%
of the overall value of trade.
Trade liberalisation allows efficient companies to take advantage
of bigger international markets to increase sales and
achieve scale economies. This results in greater output
for each unit of input, or cheaper output, allowing investment
elsewhere in more production. This increased productivity
results in growth at both a macro and micro level.
Benefits to UK consumers
Trade liberalisation means lower prices and wider choice for consumers.
The WTO’s global system lowers trade barriers through
negotiation and applies the principle of non-discrimination.
The result is reduced production costs because it allows
firms to buy materials and components from the most competitive
sourcer; lower prices for finished goods and services
and ultimately, a higher standard of living.
Trade liberalisation has meant that many of the costs necessary to
run an UK household have fallen. For example, the cost
of international telephone calls has fallen dramatically
as worldwide telecommunications have been liberalised.
Trade liberalisation also means more household choice, more variety
and higher quality products. Trade means many fruit and
vegetables are now available to consumers even out of
season. Exotic foods, never seen ten or twenty years ago
are now commonly found in supermarkets. Shops, pubs and
bars are now full of beers and wines from around the world.
Trade liberalisation expands the scope of household entertainment
and widens people’s horizons. Videos, CD players, DVD
players, multi-channel television, computer games, all
originated outside the UK and are now widely sold within
the UK at competitive prices..
The deregulation of international air travel has meant cheaper overseas
travel and more foreign holidays. Following liberalisation
of UK – Irish air transport links economy fares between
London and Dublin were almost halved. Air fairs in Europe
have plummeted.
Government Commitment
The Government is keen to ensure that the benefits of increased
trade liberalisation complement the Government's commitment
to tackling global poverty, and promoting international
stability, sustainable development and environmental protection.
The creation of an open and fair rules-based trading system
that fulfils its potential to contribute to the reduction
of poverty in poorer countries is at the heart of the
Government's international trade policy. The prospect
of increased trade with good governance is the most secure
way that poor countries can raise living standards and
reduce poverty. By stimulating economic growth in all
countries of the world, a development-focused trade round
offers the best opportunity for millions of people
in developing countries to escape from poverty. According
to World Bank figures, the continued opening of markets
to trade could lift an additional 300 million people out
of poverty - helping us make the Millennium Development
Goals on poverty reduction a reality.
Contact:
Liz Lalley
Tel: 020 7215 6029
Fax: 020 7215 2235
Email: liz.lalley@dti.gsi.gov.uk
