Saturday, September 20, 2008

Report Finds Hong Kong and Singapore Most Open to Foreign Trade

Two small Asian economic dynamos, Hong Kong and Singapore, are the most open to foreign trade of all the world's countries and entities, according to a new study.

The Global Enabling Trade Report 2008 ranks 118 countries according to how well they enable the free flow of goods and investments through their borders. Ranked after the top two are Sweden and Norway. They are followed in the top 10 by Canada, Denmark, Finland, Germany, Switzerland and New Zealand. Hong Kong is a special administrative region of China.

The report was published by the World Economic Forum, a nonprofit group based in Switzerland that promotes dialogue among political and business leaders from around the world. A yearly gathering hosted by the forum in Davos, Switzerland, typically attracts several heads of state and considerable media attention.

The report calls openness to international trade part of a "successful economic development strategy."

Robert Z. Lawrence, a professor of trade and investment at the John F. Kennedy School of Government at Harvard University and one of the report's authors, said there is "very strong evidence" that countries whose economies are growing fast tend to be open to imports and foreign investments. He pointed to China and India as examples of major economies that have grown strongly in recent years as they have reduced import barriers.

The report "will be particularly useful for policymakers interested in benefiting from trade," he said. Countries can use the report to benchmark performance on factors that influence how freely goods flow into a country and on to their final destinations.

The United States ranks 14th. The report says the United States offers good market access and a low level of tariffs and nontariff import barriers. However, U.S. customs procedures are deemed "comparatively burdensome." In addition, new constraints on imports and limitations on foreign investments in areas including airlines and ports have come from security regulations adopted since the September 2001 terrorist attacks, the report says.

Internationally, tariffs and other formal barriers to trade have been reduced in recent decades through successive rounds of multilateral trade talks. While most economists agree that opening markets benefits all nations involved, cheap imports can hurt certain sectors of a country's economy and sometimes provoke strong political opposition.

The report looks at traditional barriers, and other, less obvious obstacles. The report considers four major issues:

  • market access -- tariffs, product regulations, a country's participation in trade talks
  • border administration -- the cost and speed of fulfilling customs requirements and the extent of corruption at the border
  • transportation and communications infrastructure -- the availability, efficiency and cost of telephone and computer communications and road, rail, ship and air transportation
  • business environment -- the risk of crime and terrorism, the reliability of police services to protect businesses from criminals, and the extent to which foreign investment is encouraged.

The World Economic Forum intends to follow this first Global Enabling Trade Report with yearly updates, eventually including the huge and growing trade in services.

The full report ( http://www.weforum.org/getr08 ) and country profiles are on the World Economic Forum's Web site.