The wider benefits of The wider benefits of international tradeinternational trade

• Expanding trade by collectively reducing barriers is the most powerful tool that countries, working together, can deploy to reduce poverty and raise living standards (James Wolfensohn, Former President of the World Bank

• A growing body of evidence shows that countries that are more open to trade grow faster over the long run than those that remain closed.

• static gains from trade (i.e. improvements in allocative and productive efficiency)

• the dynamic gains (the gains in welfare that occur over time from improved product quality, increased choice and a faster pace of innovative behaviour)

Some of the broader gains from Some of the broader gains from free trade are outlined below:free trade are outlined below:

• Welfare gains – allocative efficiency: Free trade can be shown under certain conditions to lead to significant increases in welfare.

• Economies of scale• Competition / market contestability – trade

promotes increased competition particularly for those domestic monopolies that would otherwise face little real competition.

• Dynamic efficiency gains from innovation - . Trade in ideas stimulates innovations that generates better products for consumers and enhances the overall standard of living.

• Access to new technology: Trade, like investment, is also an important mechanism by which countries can have access to new technologies

• Rising living standards and a reduction in poverty :growth directly benefits the world's poor. A one percentage point increase in growth on average reduces poverty by more than 1.5 per cent each year.

Virtuous tradeVirtuous trade

• “Trade's virtuous effects are of two distinct kinds. • First, trade helps countries make the most of

what they already have. It frees countries to allocate their resources as efficiently as possible

• secondly, trade can also allow countries to accumulate resources more quickly. Indeed, the biggest prizes lie in faster growth, not heightened efficiency; in accumulation and innovation, not allocation.”