British Prime Minister David Cameron has rightly put free trade on the top of the G8 agenda. It is possibly one of the best ways we could help the world foster economic prosperity and development.
Cameron writes that comprehensive free trade “could boost the income of the whole world by more than $1 trillion.” As it turns out, this is likely a serious understatement.
The classic argument for free trade points out that specialization and exchange benefits everyone, because goods are produced by the countries that specialize in those goods and produce them most efficiently. The standard World Bank models show that realistic free trade, even just by the end of this decade would increase global GDP by several hundred billion dollars per year, with perhaps $50 billion accruing to the developing countries. Towards the end of the century, the annual benefit will likely exceed Cameron’s $1 trillion annually, with half going to the developing world.
