The system of rules that govern world trade has developed since World War II through a series of major international negotiating “rounds.” Because rich countries call most of the shots in this intensely political process, some goods that poor countries are best at producing—including crops—still face high trade barriers in rich countries. When rich countries tax food imports and subsidize their own farmers’ production, they cause overproduction and dumping on world markets, which lowers world prices and hurts poor-country farmers. (CDI countries spend some $91 billion per year subsidizing their own farmers, a substantial fraction of the $142 billion they spend on aid.) Industrial tariffs also tend to hurt the poor, with low rates for raw commodities and high rates for labor-intensive, processed goods.
Because the ability to sell in rich-country markets is crucial for developing countries, the CDI trade component ranks wealthy countries according to how open they are to imports from developing countries. It also looks at the degree to which countries have streamlined their importation processes to reduce delays and red tape and whether or not they have legal restrictions on purchasing services from other countries.
New Zealand does best on trade because of its low agricultural subsidies and low tariffs on imports from developing countries. It also ranks top in the Service Trade Restrictions Index (followed by Poland and the Netherlands). Australia, the United States, and Canada limit agricultural subsidies and impose low tariff barriers and administrative impediments to imports. Imports to the United States and Denmark require the least documentation while imports to France, South Korea, and Sweden take the least amount of time. In general, EU nations share common trade and agriculture policies and therefore score almost exactly the same on trade. Japan’s rice tariffs have shrunk in recent years relative to the rising world price of rice, but they are still high, equivalent to a 512 percent sales or value-added tax on imports. South Korea, Norway, Japan, and Switzerland are the worst performers because they all impose high tariffs. Norway and Switzerland have high tariffs on meat, dairy products, and grains from poor countries; Korea and Japan maintain the highest tariff rates on rice, and Korea imposes by far the highest tariffs on grains, seeds, and nuts.
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