The Americans for Tax Reform Foundation today released the 2021 International Trade Barrier Index. Singapore, New Zealand, and the Netherlands scored the top spots for trade liberalization. While India, Algeria, and China ranked the worst for deploying the most protectionist trade barriers. Due to Brexit, the UK is the most improved moving from 8th to 4th as it implements its own tariff schedule reducing trade barriers between it and the rest of the world.
Trade barriers on the rise
The TBI measures the direct and indirect trade barriers imposed by 90 countries affecting 84% of the world’s people and 95% of world GDP. The 2021 edition records a global .5% increase in the use of trade barriers from the first edition in 2019.
Western Europe, as a region, leads the world in open trade. Yet the region was held back by a large number of new digital trade barriers that impose cross-border data restrictions, content moderation, and limit the scope of intermediary liability. Only India, Indonesia, and China impose more digital trade restrictions than the European Union.
Barrier-free trade is associated with beneficial social and economic outcomes. The Index finds countries with lower trade barriers experience more prosperity, economic freedom, and human development; while countries with higher trade barriers perceive greater rates of corruption, abuse of the press, and illicit trade.
The United States largely maintained its restrictive trade profile, improving slightly from 54th to 51st mainly due to nominal reductions in non-tariff measures as a response to COVID-19. Yet the U.S. position as a global rule maker may be in jeopardy as the UK, China, the European Union, and each the 90 countries in the TBI on average signed at least one additional trade agreement granting comprehensive market access and cementing new rules. China also improved its score by reducing its average applied MFN tariff rate.
India increased use of trade barriers to maintain the last spot on the Index. Not only did India increase its MFN average applied tariff rate; at the start of the COVID pandemic India had one of the world’s highest tariff rates on medicines and medical equipment and during the pandemic India added the most restrictive non-tariff barriers on medical equipment and vaccines.
Only six countries with a combined population of 142 million people enjoy the highest level of barrier-free trade, with a TBI score below 3.0 Meanwhile, 13 countries remain in the “highly protected” range with TBI scores above 5.0, where 3.8 billion people have severely limited access to barrier-free trade.
Philip Thompson, author of the Index remarked “it is people who trade, and when barriers are in the way it’s harder to source material, respond to consumer preferences, and create win-win exchanges to recover from a pandemic.”
The Index includes eight case studies from leading free-market think tanks around the world that examine harms trade barriers impose from the availability of affordable housing in Sri Lanka to diversion of legitimate market activity to criminal syndicates in the illicit market.
- Mercosur and the Automobile Industry: Trade Diversion and Protectionism in the Southern Cone; By Pedro Raffy Vartanian & Vladimir Fernandes Maciel, the Mackenzie Center for Economic Freedom, Brazil
- South Africa’s Next Steps for Trade Liberalization, By Christopher Hattingh, Free Market Foundation, South Africa
- Benefits of Bilateral and Multilateral Free Trade Agreements; By Natalia Gonzalez & Tomas Flores, Libertad y Desarrollo, Chile
- The Effects of Pre-Shipment Inspections (PSI) on Food Trade in Indonesia; By Kukuh Sembodho & Arumdriya Murwani, Center for Indonesian Policy Studies, Indonesia
- Protectionist Tariffs Compromising Sri Lanka’s Middle-Income Earners’ Right to Shelter; By Sathya Karunarathne & Aneetha Warusavitarana, Advocata, Sri Lanka
- The Illicit Trade of COVID-19 Items: Poor Trade Enforcement as a Barrier to Access; By Giorgina Agostini, Rowan Saydlowski, & Philip Thompson, Property Rights Alliance, U.S.A
- The Proliferation of Digital Trade Barriers Threatens Innovation, Free Trade; Competition, and Free Speech; By Philip Thompson & Andreas Hellmann, Americans for Tax Reform, USA
- Lessons in High Tobacco Taxes and Smuggling in the Philippines; By Bienvenido S. Oplas, Jr., President, Minimal Government Thinkers, Philippines