The Impact of Trade Liberalisation on Jobs and Growth

Abstract

This report shows how more open markets in goods and services can contribute to creating jobs and increase incomes. Reducing tariffs and non-tariff barriers can help in the short run where the economic crisis has led to significant involuntary unemployment by reducing costs of imported products for consumers and by providing new market opportunities for exporters. Taking a longer term view of a more healthy global economy, lasting gains can be found from reallocation of resources across sector and from productivity growth. Reducing barriers to foreign direct investment in services is found to particularly increase demand for higher skilled labour, while the offshoring of services is not found to shift jobs abroad. The report presents in detail new results based on two large scale global computable general equilibrium models, one for goods and one for services, using novel approaches to assess the effects of reducing trade costs related to non-tariff measures, and to assess the effects of regulatory impediments to foreign direct investment in services. The analysis disentangles the effects of actions that the G20 economies could take from the potential effects of global tariff liberalisation efforts in which all countries would participate.

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