Cost of living
WTO in Brief
to one calculation, consumers and governments in rich
countries pay $350 billion per year supporting
agriculture enough to fly their 41 million dairy
cows first class around the world one and a half times
is expensive: it raises prices. The WTO’s global system lowers trade
barriers through negotiation and applies the principle of
non-discrimination. The result is reduced costs of production (because
imports used in production are cheaper) and reduced prices of finished
goods and services, and ultimately a lower cost of living.
are plenty of studies showing just what the impacts of protectionism and
of freer trade are. These are just a few figures:
you protect your agriculture, the cost of your food goes up — by
an estimated $1,500 per year for a family of four in the European
Union (1997); by the equivalent of a 51% tax on food in Japan
(1995); by $3 billion per year added to US consumers’ grocery
bills just to support sugar in one year (1988).
agricultural trade reform is a complex undertaking. Governments
are still debating the roles agricultural policies play in a range
of issues from food security to environmental protection.
WTO members are now reducing the subsidies and the trade barriers
that are the worst offenders. And in 2000, new talks started on
continuing the reform in agriculture. These have now been
incorporated into a broader work programme, the Doha Development
Agenda, launched at the fourth WTO Ministerial Conference in Doha,
Qatar, in November 2001.
restrictions and high customs duties combined to raise US textiles
and clothing prices by 58% in the late 1980s.
consumers pay an estimated £500 million more per year for their
clothing because of these restrictions. For Canadians the bill is
around C$780 million. For Australians it would be A$300 annually
per average family if Australian customs duties had not been
reduced in the late 1980s and early 1990s.
textiles and clothing trade is going through a major reform —
under the WTO — that will be completed in 2005. The programme
includes eliminating restrictions on quantities of imports.
If customs duties were also to be eliminated, economists calculate
the result could be a gain to the world of around $23 billion,
including $12.3 billion for the US, $0.8 billion for Canada, $2.2
billion for the EU and around $8 billion for developing countries.
same goes for other goods
When the US limited Japanese car imports in
the early 1980s,
car prices rose by 41% between 1981 and 1984
nearly double the average for all consumer
products. The objective was to save American
jobs, but the higher prices were an important
reason why one million fewer new cars were sold,
leading to more job losses.
Australia had kept its tariffs at 1998 levels, Australian
customers would pay on average A$2,900 more per car today. In
1995, aluminium users in the EU paid an extra $472 million
due to tariff barriers.
of the objectives of the Doha Development Agenda (DDA) is another
round of cuts in tariffs on industrial products, i.e. manufactured
and mining products. Some economists, Robert Stern, Alan Deardorff
and Drusilla Brown, predict that cutting these by one third would
raise developing countries’ income by around $52 billion.
Liberalization in telephone services is making phone calls cheaper
— in the 1990s by 4% per year in developing countries and 2% per
year in industrial countries, taking inflation into account.
China, competition from a second mobile phone company was at least
part of the reason for a 30% cut in the price of a call. In Ghana
the cut was 50%.
group of economists led by Robert Stern estimates that lowering
services barriers by one third under the Doha Development Agenda
would raise developing countries’ incomes by around $60 billion.
so it goes on. The system now entrusted to the WTO has been in place
for over 50 years.
that time there have been eight major rounds of trade negotiations.
Trade barriers around the world are lower than they have ever been in
modern trading history. They continue to fall, and we are all