Information about the organization
THE 10 BENEFITS: 4. Cost of living
4.
Freer trade cuts the cost of living

We are all consumers. The prices we pay for our food and clothing, our necessities and luxuries, and everything else in between, are affected by trade policies.


THE 10 BENEFITS
1. Peace
2.
Disputes
3.
Rules
4. Cost of living
5. Choice
6.
Incomes
7.
Growth and jobs
8.
Efficiency
9.
Lobbying
10.
Good government
  

See also:
The WTO in Brief
10 misunderstandings
Understanding the WTO


A first-class ride

According 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

  
Protectionism 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.

There are plenty of studies showing just what the impacts of protectionism and of freer trade are. These are just a few figures:

Food is cheaper
When 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).
Negotiating 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.
But 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.
Clothes are cheaper
Import restrictions and high customs duties combined to raise US textiles and clothing prices by 58% in the late 1980s.
UK 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.
The 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.
The same goes for other goods …
When the US limited Japanese car imports in the early 1980s
Protectionism does not protect jobs, 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.
If 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.
One 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.
… and services
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.
In 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%.
The 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.

And so it goes on. The system now entrusted to the WTO has been in place for over 50 years.

In 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 benefiting.

 
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