Indeed, the United States Free Trade Agreements (FTTs), which cover 20 countries, have had enormous benefits. We provide estimates of the overall impact of 39 trade agreements implemented during our sampling period on consumer well-being and break down the overall contribution effect resulting from changes in price, quality and variety. Everywhere, we define the EU as the 12 Member States before enlargement in 1995 (EU 12) in order to maintain a coherent group of countries for analysis. Many developing countries themselves have high tariffs. On average, their tariffs on the manufactured goods they import are three to four times higher than those in industrialized countries and have the same characteristics as tariff spikes and escalation. Agricultural tariffs are even higher (18%) for manufactured goods8.8 We find that the cumulative decline in the consumer price index over the period 1993-2013 was 0.24% in our baseline estimate due to trade agreements. Of this overall effect, we account for about 55% of the direct impact on the prices and quality of imported products. The remaining 45% is due to lower input prices, adjusted for quality, which reduces the prices of domestic products. Although this is not a major effect, it represents a considerable saving for EU consumers, around EUR 24 billion per year. We calculate the overall impact of the CPI content of EU trade agreements by comparing the current situation to a counterfeit scenario in which the EU has not signed trade agreements. The comparison of the consumer price index in the two scenarios allows us to answer the question of the extent to which poorer EU12 consumers would have been real without trade liberalization on the basis of agreements over the past two decades. Globalization and trade offer new opportunities, but are not without challenges.
For many reasons, developing countries may find it difficult to compete globally. There are also the consequences of the distribution of increased trade. While economies as a whole benefit enormously from increased trade, as competition intensifies and many good jobs are created in export sectors – wages for workers in import-competitive industries could suffer or some workers will lose their jobs. The failure to open a new round of multilateral trade negotiations at the 1999 WTO conference in Seattle was a setback for the international trading system. Such large-scale multilateral negotiations are particularly important because they provide countries with the opportunity to obtain visible benefits for their exporters from the opening of markets by other countries. This perspective provides more incentives for countries to open their own markets and overcome the resistance of entrenched, protected interests. In this way, the trade liberalisation packages that are under way for these negotiations will ensure that they benefit all participating countries. To ensure that trade continues to create jobs and benefit the poor, the world must do more to bring low-income countries into the global trading system.
We start with the development of price scales, quality and varieties. Prices and the number of countries of origin for each product (our variety level) are easily observed in international trade data. Free trade agreements should stimulate trade between two or more countries.