Defining, Measuring, Explaining and Reducing the Cost of International Trade
Sustained economic growth over a long period is everywhere associated with openness to trade, although openness is itself not a sufficient condition for sustained growth.1 The benefits from openness include the ability to maximize the benefits of specialization by comparative advantage, utilization of economies of scale, the spurring of increased efficiency and innovation in response to import competition or observing best practice in export markets, and the discipline that an open trading system imposes on policymakers. Although academic economists tend to emphasize the benefits from access to imports, policymakers are more influenced by export opportunities and resistant to reducing barriers to imports, so that reduction of trade barriers has often proceeded in fits and starts. Only in the second half of the twentieth century was there widespread commitment to reciprocal reduction of trade obstacles within the framework of the GATT/ WTO. By the end of the century, tariffs had been reduced to historically low levels, and by 2005, with the phasing out of the Multifibre Arrangement, the most egregious quantitative restrictions to trade had disappeared. Realization of the full benefits of an open trade strategy requires appropriate infrastructure. This involves roads, ports and other transport facilities, as well as good communications. However, even the best hard infrastructure will be ineffective if it is not accompanied by good soft infrastructure, such as efficient customs services, traffic management and telephone systems and rule of law. The analysis in Chapter 3 suggested a link from trade facilitation to development in that countries with...
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