Trade Barrier Index
The International Trade Barrier Index (TBI) follows on the success of its sister index the International Property Rights Index used by think tanks, governments, private industry, and academics from around the world to assess their property rights environment.
After observing rising trade tensions across the world, the need was made clear for a tool that could reveal trade barriers, in all their various forms, as the barriers to economic and individual freedoms they are. The problem: too often the trade debate is dominated by political posturing and statistics that treat individuals, and their freedoms, as bystanders. However, without in a digestible format there is little hope the problem can be seen and addressed.
The Trade Barrier Index is the response to that need. The 2019 TBI provides data on tariffs, non-tariff measures, services restrictions, and facilitation limitations for 86 countries in an easily comparative format.
The TBI is designed to be used as tool for policymakers, business communities, and civic activists to highlight the harms cause by trade barriers and the net befits to be gained from reducing them. More than the sum of its parts, free trade, unhampered by artificial restraints, allows individuals to exchange ideas, social customs, goods, and services on mutually beneficial terms they determine. It rewards the most efficient allocation of resources and celebrates specialization. The next iterations of the TBI will be able to reflect changes over time and deliver more tools to aide in the research of trade barriers.
Learn more about the Property Rights Alliance.
Dr. Christopher Lingle
Proponents of free and open commerce should applaud the appearance of the Trade Barrier Index (TBI), another outstanding initiative of the Property Rights Alliance, an affiliate of American’s for Tax Reform. This worthy project provides yet another important indicator of how government’s intervene and interfere with the market process, itself the outcome of voluntary and purposeful human actions.
The timing of this first attempt to rank countries based upon their imposition of policy-induced obstacles to international trade flows is especially auspicious. As it is, reactionary policy decisions are being made based on misguided interpretations of trade “imbalances” that are themselves nothing more than arbitrary and artificial macroeconomic aggregates.
Alas, the unfortunate use of the term “trade war” is designed to inflame nativist instincts that serve political ends while ignoring the human consequences of interfering with voluntary trade. Hopefully, the TBI will become another useful tool to counter neo-mercantilism and the tit-for-tat power politics that cast aside individual freedom as collateral damage.
In considering the TBI, one must resist the temptation to over-simplify the impact of international trade. The competition generated by free and open trade provides wide societal benefits with concentrated costs in both importer and exporter countries.
Clearly, many imported products have similar impacts as does “creative destruction” whereby new rivals challenge existing producers, causing localized job losses and undermining the value of capital, this is only one part of the story. On the one hand, interfering with the impulses to import is as destructive to economic progress as prohibiting technical or management innovations. It turns out that many imports do not threaten or offset rational domestic production.
On the other hand, as Adam Smith pointed out in his “Wealth of Nations”, the primary benefit of international trade arises from imports. Allowing domestic consumers to buy the cheapest or best products available leads to rising living standards so they can spend more on domestic products. Similarly, when domestic producers can access the cheapest and best inputs, they are more likely to be able to compete as exporters on international markets. And then, the process of purchasing from trading partner provides them with the means to repay the favor using the monetary means used in the transfers.
When examining the rankings of the TBI, itself an aggregated measurement, one must reflect on the underlying reality of human harm arising from trade barriers. In other words, our primary concern should be how trade barriers harm individuals as consumers and producers rather than to see them as actions against governments, per se. In all events, the notion of a country or nation is an artificial and subjective reference to a collective that distracts from the fact that the proper focus of the impact of trade policies is on humanity.
While the economic argument against trade barriers are well understood and widely accepted, these tend to wilt against irresistible and recurrent political instincts that can be understood by considering Public Choice analysis. Public reaction to trade barriers is partly a problem of the “seen and unseen” (or felt and unfelt). Since the negative impact of trade barriers is relatively small on the individual, they have weak incentives to recognize them and organize collective action demanding change. Meanwhile, those involved in protected activities have strong individual incentives to lobby for barriers to international competition. This is all compounded by the presence of “rational ignorance” concerning the nature and impact of protectionist policies.
Praise is in order for the careful construction of the TBI to capture and measure relevant issues concerning the nature of trade barriers arising from public policies. And it gives some hope that the rankings of the TBI will put pressure on governments to consider the destructive effects of their trade policies that that benefit a few at the cost of reduced human welfare and economic progress of the whole.
Dr. Christopher Lingle
Lorenzo Montanari, is Executive Director of the Property Rights Alliance (PRA), an advocacy group/think tank based in Washington, DC USA, affiliated to Americans for Tax Reform, committed to the protection of physical, legal and intellectual property rights around the world. At Property Rights Alliance, Lorenzo is in charge of publishing and editing the International Property Rights Index, an international comparative study focus on intellectual and physical property rights. Previously, he worked for a public affairs firm and at the international department of the GSPM/George Washington University in Washington, DC and as a political analyst and electoral observer in Latin America. Lorenzo holds a BA in Political Science and in International Relations from the University of Bologna and MA in Political Management from the George Washington University. He collaborates with Forbes.
Philip Thompson is a Policy Analyst at PRA specializing in international intellectual property legislation and trade policy, in addition, Philip also supports the International Property Rights Index an annual publication of PRA. Before joining PRA Philip coordinated youth community development programs in the U.S. and the Caribbean for five years, he has also interned at the American Legislative Exchange Council’s foreign affairs task force and at the Cato Institute’s trade policy center. Philip holds a BA in International Conflict and Resolution and an MA in International Commerce and Policy, both from George Mason University.