Introduction to trade liberalisation
All countries that have had sustained growth and prosperity have opened up their markets to trade and investment. By liberalising trade and capitalising on areas of comparative advantage, countries can benefit economically. Use of resources - land, labour, physical and human capital - should focus on what countries do best. Trade liberalisation measures should be taken on a multilateral basis and complemented by appropriate employment, labour and education policies, so that the benefits of trade can be shared.
Who benefits from trade liberalisation?
Consumers ultimately benefit because liberalised trade can help to lower prices and broaden the range of quality goods and services available. Companies can benefit because liberalised trade diversifies risks and channels resources to where returns are highest. When accompanied by appropriate domestic policies, trade openness also facilitates competition, investment and increases in productivity.
Is there a downside?
Trade reforms, even if beneficial for a country overall, may negatively affect some industries or some jobs and many commentators worry about negative effects on the environment. The solution to these problems is not to restrict trade. They should be tackled directly at source through labour, education and environmental policies.
What is OECD's role?
While many international, national and private organisations are involved in this type of research, the OECD through its multi-disciplinary approach, enjoys a distinct advantage in addressing the complex economic effects of trade liberalisation. OECD aims to create better understanding of how trade openness can best influence economies in member countries as well as in the major emerging and non-member economies.
If G20 economies reduced trade barriers by 50%, they could gain:
- More jobs: 0.3% to 3.3% rise in jobs for lower-skilled workers and 0.9 to 3.9% for higher-skilled workers, depending on the country.
- Higher real wages 1.8% to 8% increase in real wages for lower-skilled workers and 0.8% to 8.1% for higher-skilled workers, depending on the country.
- Increased exports: All G20 countries would see a boost in exports if trade barriers were halved. In the long run, many G20 countries could see their exports rise by 20% and in the Eurozone by more than 10%.
See Trade Liberalisation: Boosting Employment and Growth (pdf, 2 pages, 133 KB) and The Impact of Trade Liberalisation on Jobs and Growth (OECD Trade Policy Working Paper No. 107)
Protectionism - the case against
Trade barriers such as tariffs and quotas are counterproductive, usually backfiring against the firms, consumers and economies they intend to 'protect'. This collection of OECD videos, publications and blog posts explains why.
Trade and employment
Open trade, combined with properly-designed employment and social policies, can help create jobs, as OECD analysis shows.
Export restrictions on raw materials
Businesses and policymakers have been concerned by recent trends in export restrictions used by some producer countries on certain raw materials. OECD is working to bring more transparency to the use and regulation of these restrictions.
See our latest news and reports on:
Benefits of trade liberalisation
Trade and development