Why trade matters
World trade receives a pretty bad press these days...
You might have heard the line that international trade is bad news for workers; that it destroys local communities; or that it degrades our planet.
Politicians often claim that trade deals are simply a tool to help big companies at the expense of the man on the street.
And all the while no one speaks up for the benefits of international commerce. So it’s no wonder that public opinion on trade is souring in many countries around the world.
We think it’s time to set the record straight.
We’re not going to tell you that the global trading system is perfect. We too think there is scope for positive change to enable trade to better serve the needs of families across the world.
But it’s only right that any debate on the role of trade in today’s economy is balanced and evidence-based. Policies based on myth, hearsay or political hyperbole rarely work out well. Take protectionism: sheltering industries from global competition might sound like a good idea, but evidence shows that it creates real hardship in the long run.
The case of Brazil
Brazil long shielded its local auto industry from international competition by using high tariffs. The result was that domestic industries missed out on the productivity gains that foreign rivals benefited from and were unable to sell their inferior products.
Brazil was unable to export their inferior automobiles and Brazilians had to pay twice what individuals in neighbouring countries were paying for their cars.
“We had adopted during the last years some protectionist measures for some sectors of the economy and the net result was not positive. At the end of the day, the products became more expensive and Brazil…became less competitive. We are moving toward a more open trade policy.”
Henrique Meirelles, Minister of Finance, Brazil