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Copenhagen Consensus: Subsidies and Trade Barriers Assessment, Anderson

An Assessment Paper on Subsidies and Trade Barriers was prepared for the Copenhagen Consensus by Kym Anderson. The working paper used by the Expert Panel is available for download here, the finalized paper has been published in Global Crises, Global Solutions: Costs and Benefits by Cambridge University Press.

Short Summary

Eliminating government subsidies and trade barriers has clear economic benefits. Despite evidence that those policies harm the economies which impose them and are particularly harmful to the world’s poor, governments continue to intervene in markets for both goods and services.

This paper argues that phasing out these trade-distorting policies should be the highest priority among the opportunities assessed. Not only would this strategy have a direct effect on poverty reduction, but there would also be indirect benefits across the full range of CC challenges. Moreover, the relatively small costs of adjustment to reform would leave plenty of the notional $50 billion to be spent on second priorities.

The most recent big surge of protectionism was about 75 years ago. Following the Second World War governments of major industrial countries – well aware of the economic rationale for free trade – sought ways to reduce import tariffs. But politicians fear making changes that may be associated with politically unpopular redistributions of jobs, income and wealth. The challenge therefore involves finding politically attractive ways to phase out the remaining distortions in world markets for goods, services, capital and potentially even labour.