Toward a tariff-free world

By Howard H. Baker, Jr.
Special to The Yomiuri Shimbun

The following, originally published in The Daily Yomiuri, December 19, 2002, on Page 16, is reproduced here with The Yomiuri Shimbun's permission.

On November 26th the United States made a bold proposal in the context of ongoing negotiations in the World Trade Organization to eliminate all tariffs on manufactured products by 2015. We began to formally discuss this proposal with our trading partners at the WTO during the first week of December.

In offering this proposal, our goal is to stimulate economic growth, raise incomes, lower taxes, generate jobs, reduce poverty and cut costs for consumers and businesses around the world.

This fits in very well with the similarly ambitious U.S. proposals for market access liberalization in the agriculture and services sectors. In fact, the U.S. goal for all trade in goods is the same: complete elimination of tariffs. These three areas of the Doha Development Agenda are the core of market access.

This would result in nearly $6 trillion in world trade becoming duty free. As one of the worldfs largest economies, and as a world trade powerhouse, Japan would stand to benefit greatly from such comprehensive trade liberalization.

The World Bank estimates that removing all barriers to goods trade would expand the global economy by $830 billion by 2015. This represents a 2.5 percent annual increase in world per capita income, about $136 for every person in the world.

We also believe the U.S. proposal would contribute significantly to worldwide economic development. Increasingly, WTO members are coming to accept that the path to economic development and the liberation from poverty lies not in continued protectionist trade policies, but rather in multilateral trade liberalization. For that is what the evidence shows. Those countries that are willing to actively seek a better future are the ones that prosper. And those countries that cling to insular and outdated economic policies are continuing to drop behind.

The U.S. proposal would provide considerable benefits for the world's poor. Let's touch on some evidence that illustrates this point.

Developing country tariffs hurt other developing countries the most. Nearly half of all developing country trade is with other developing countries, and about 70 percent of the tariffs paid by developing countries are paid to other developing countries. Those tariffs are on the whole quite high.

As the WTO recently reported, high tariffs impart an anti-export bias, hampering a country's ability to grow through exports.

The World Bank estimates that developing countries could realize income gains of more than $500 billion from duty free trade. Three-fourths of that gain would come from eliminating tariffs on trade between developing countries themselves.

Also according to the World Bank, duty free trade in goods and services - coupled with other steps to enhance development - could lift 300 million people out of poverty by 2015. That is certainly a goal well worth pursuing.

And it is important to note that the U.S. proposal gives developing countries what they have always wanted: duty-free access to the markets of North America, Europe and Japan as well as to other developing country markets for the products they export.

This raises another important point. We are not asking developing countries to throw open their doors immediately. And we are not asking them to act without help from us. The fact is that our proposal first provides for WTO members to achieve an overall balance in tariff rates, and only then to move together toward tariff elimination. Along the way, the United States and other developed countries are committed to providing technical assistance to developing countries, so that they can fully participate in and benefit from the new negotiations under the Doha Development Agenda.

Because we are sure that liberalization will ultimately benefit all, we are willing to ensure that all members are in a position to benefit from liberalization.

The United States views this proposal as a critical part of a larger "competitive liberalization" strategy, fitting in with the current U.S. bilateral and regional free trade negotiations. The reality is we will seek progress where it can be made, with countries that are prepared to negotiate.

About half of global goods trade is already duty-free under more than 200 regional or bilateral free trade agreements. However, we would like to see that progress takes place primarily in the WTO, where trade liberalization can benefit all members. This proposal is simply asking the WTO to set the world standard for genuinely global duty free trade.

But we and others are not going to sacrifice our own economic future if the WTO proves too slow. The message here is simple. Countries run an increasing risk of being sidelined if they prove unwilling to work with other WTO members toward liberalization.

This proposal contributes to fulfilling our commitment to the U.S. people to grow the economy, and to fulfilling a moral responsibility to reduce poverty and stimulate economic opportunities around the world. We encourage our WTO partners to work with us to create a more prosperous future for all.

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