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Study Criticizes Differing Consumer Price Structures - 2004-04-09

A new economic study done by a private firm in Washington suggests that ending the disparity in prices that consumers pay in rich countries could boost global output by as much as two percent.

The Institute for International Economics finds that even in countries that are very open to international trade the prices that consumers pay vary by from 30 to 50 percent. The study concludes that various protectionist measures boost consumer prices and make it harder for imported goods to gain market share.

A co-author of the study, Robert Lawrence of Harvard University, says that of eight countries studied, prices tend to be lowest in Canada and the United States.

"It's in North America that we've really seen a major integration of economies. Canada, in particular, has become a lot more open over the decade of the 90s. Europe has become more integrated but still remains fragmented and Japan as of 1999 still had high external barriers," he said.

The other author of the study, Scott Bradford of Brigham Young University, says the elimination of trade barriers likes quotas and special taxes would boost the exports of poor countries by up to 100 billion dollars per year. He says the trade gains would exceed the foreign assistance provided by the rich countries that are members of the Organization for Economic Cooperation and Development.

"That is about twice all the ODA development assistance) that the entire OECD (Organization for Economic Cooperation and Development-29 richer countries) gives developing countries every year. So in one sense we're giving with one hand and we're taking back with the other through these barriers that the rich countries have in terms of suppressing export opportunities of developing countries," he said.

The main conclusion of the study, entitled Has Globalization Gone Far Enough?, is that economic integration is lagging even in those countries with the lowest tariff barriers. Scott Bradford summarizes.

"We do believe that globalization is far from complete. We see a lot of evidence that it has not gone far enough in the sense of potential gains to both rich and poor countries if we were to work harder on removing (trade) barriers," he said.

The authors say that the world economy could gain $500 billion a year from the removal of non-tariff barriers in developed countries.