Free Trade Policies Advance Despite Global Recession: New Study Links Prosperity and Trade Freedom

Sep 29, 2010, 14:00 ET from The Heritage Foundation

WASHINGTON, Sept. 29 /PRNewswire-USNewswire/ -- Despite the ravages of a global recession, free trade policies are more popular around the world today than ever before, according to a new study from The Heritage Foundation.

The Washington-based think tank today released its 2011 report rating the state of trade freedom in 179 nations.  The study pegs the average score for trade freedom at 74.8 (out of a possible 100).  Though only marginally higher than last year's average of 74.2, it's the highest global score registered since the foundation began tracking the numbers in 1995.

The up-tick in global trade freedom was both a surprising and a welcome discovery, said Bryan Riley, the Jay Van Andel Senior Analyst in Trade Policy at Heritage. "Recessions typically spark short-sighted calls for protectionism, so you'd expect a broad retrenchment of trade freedom during a global recession," he said.  Instead, Heritage found the vast majority of countries last year maintained or even strengthened their commitment to free trade.  

"Rather than retreat, the world-wide movement toward freer markets continued apace," Riley said, noting that over the last decade, trade scores have improved for 142 countries and deteriorated in only 11 states.  Today, he said, "Trade freedom stands at a record high."

And that, he stressed, is a good thing.  "Prosperity and economic progress are strongly linked to trade freedom.  Countries with the highest per-capita GDP, the lowest poverty rates and the least amount of income inequality all have above-average trade freedom scores," he observed.

Overall, Heritage found 85 countries improved their score from a year ago – 39 by a full point or more.  Only 36 regressed.

The United States was one of those nations that regressed.  Its rating declined slightly, to 86.4, due to a small increase in the average tariff rate imposed on imports.  Mexico's score also declined, while Canada's remained unchanged.

Canada remained in the top 10 globally, its 88.1 rating good for eighth place  Chile, tied with Mauritius for ninth place, was the only other nation in the western hemisphere to crack the top 10.  Topping the list, with identical ratings of 90.0, were Hong Kong, Macau, Singapore and Switzerland.

The trade freedom score reflects a nation's overall trade policy – its tariffs, non-tariff trade barriers and trade agreements, among other factors. Trade freedom is one of 10 key categories that Heritage assesses in compiling its annual Index of Economic Freedom. The full Index will be released in January.  Heritage releases the trade freedom ratings early because Millennium Challenge Corporation uses them to assess the credit worthiness of countries seeking financial assistance.  The MCC makes loans only to countries that commit to free-market economic policies.

SOURCE The Heritage Foundation