Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here�s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.

 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate


On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.


RSS 2.0

Free trade trumps hot air on climate

By Bjorn Lomborg - posted Tuesday, 19 August 2008

Last month, the Doha negotiations, broke down, ostensibly over a technicality. In reality, the talks collapsed because nobody was willing to take the political short-term hit by offending inefficient farmers and coddled domestic industries in order to create greater long-term benefits for virtually everyone.

And they broke down because we really don't care. After a few exasperated editorials, the world has pretty much dropped the subject and gone back to its usual concerns. This is foolish. Establishing significantly freer trade would help the world combat almost all of its biggest problems. For an astonishingly low cost, we could improve education and health conditions, make the poorest people richer, and help everybody become better able to tackle the future.

We have known for centuries that free trade almost always benefits both parties. The economist David Ricardo pointed out in 1817 that both Britain and Portugal would benefit if they exploited their comparative advantages. Portugal could produce wine cheaply, whereas Britain could produce cloth much more cheaply than wine. By selling cloth and buying wine, Great Britain obtains more of both, as does Portugal. The same holds true today, when countries, doing what they do best, produce more and exchange it for more of all other goods.


Yet today, with international trade talks stalled and protectionist rhetoric rising, we are instead moving towards building bigger trade barriers. These barriers are supported by deep-pocketed corporations and lobby groups, and defended by politicians who are scared that the redistribution of jobs, income and wealth resulting from freer trade will reduce their chances of remaining in power.

When the Doha trade round was launched shortly after September 11, 2001, there was plenty of international goodwill. But a recent poll in the US and Europe found people nearly three times more likely to say that globalisation is negative rather than positive.

Recently, the Copenhagen Consensus project gathered some of the world's leading economists to decide how to do the most good for the planet in a world of finite resources. The panel - including five Nobel laureates - found that one of the single best actions the planet could take would be completing the Doha negotiations. They based their conclusions on new research for the Copenhagen Consensus project by Australian economist Kym Anderson. Anderson showed that if developing countries cut their tariffs by the same proportion as high-income countries, and services and investment were also liberalised, the annual global gains could climb to $US120 billion ($137 billion), with $US17 billion going to the world's poorest countries by 2015.

This is a respectable sum, and certainly a benefit that the international community should try to achieve. But what we often fail to realise is that the story only starts here. As economies open up, as countries do what they do best, competition and innovation drive up rates of growth.

More competition means that previously sheltered companies must shape up and become more productive, innovating simply to survive. Having more open economies allows more trade in innovation, so that new companies can almost instantly use smart ideas from around the globe. Instead of every closed market having to reinvent the wheel, once is enough to get everyone's economy going.

This means that over time, the advantage of moving towards freer trade grows dramatically bigger: the $US120 billion benefit in 2015 grows to many trillions of dollars of annual benefits by the end of the century. And the benefits would increasingly accrue to the developing world, which would achieve the biggest boosts to growth rates.


We have seen three very visible cases of such growth boosts in three different decades. South Korea liberalised trade in 1965, Chile in 1974, and India in 1991; all saw annual growth rates increase by several percentage points thereafter.

If we recast these benefits as annual instalments, a realistic Doha outcome could increase global income by more than $US3 trillion every year throughout this century. And about $US2.5 trillion annually would go to today's developing countries every year, or $US500 a year on average for each individual in the Third World, almost half of whom now survive on less than $US2 a day.

There would, of course, be costs. Freer trade would force some industries to downsize or close, although more industries would expand, and for some people and communities, the transition would be difficult. Yet the overall benefits of a successful Doha Round would likely be hundreds of times greater than these costs.

  1. Pages:
  2. Page 1
  3. 2
  4. All

First published in The Australian on August 18, 2008.

Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

7 posts so far.

Share this:
reddit this reddit thisbookmark with Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

About the Author

Bjorn Lomborg is the author of The Skeptical Environmentalist (Cambridge, 2001), teaches at the Copenhagen Business School and is director of the Copenhagen Consensus Center.

Other articles by this Author

All articles by Bjorn Lomborg

Creative Commons LicenseThis work is licensed under a Creative Commons License.

Photo of Bjorn Lomborg
Article Tools
Comment 7 comments
Print Printable version
Subscribe Subscribe
Email Email a friend

About Us Search Discuss Feedback Legals Privacy