Trade Details

The system of rules that governs world trade has developed since World War II through a series of major international negotiating “rounds.” Because rich countries have been able to call the shots, their barriers to some of the goods poor countries are best at producing—including crops— have largely stayed in place. Yet when rich countries tax food imports and subsidize their own farmers’ production, they cause overproduction and dumping on world markets, which lowers prices and hurts poor-country farmers. Industrial tariffs also tend to be anti-poor, with low rates for raw commodities and high rates for labor-intensive, processed goods. U.S. tariffs on imports from India, Indonesia, Sri Lanka, and Thailand brought in $2.06 billion in 2005—twice what the U.S. committed to these countries for tsunami relief the same year.

For the Index’s trade component, each country’s complex collection of tariffs and subsidies is converted into a flat, across-the-board tariff representing its total effect on developing countries. New Zealand does best on trade in the 2008 Index, with Australia, the United States, and Canada not far behind. In general, EU nations share common trade and agriculture policies, so they score essentially the same on trade. Japan’s rice tariffs have shrunk in recent years relative to the rising world price of rice, but are still high at 500 percent (equivalent to a 500 percent sales or value-added tax on imports). High tariffs on meat, dairy products, sugar, and wheat from poor countries put non–EU members Norway and Switzerland near the bottom. South Korea finishes last owing to 980 percent tariffs on rice, the highest of all CDI countries.

For more, go Inside the Index.