The Welfare Effects of Trade Liberalization

Harold W. Wisdom

Abstract


Despite an unprecedented reduction in trade barriers since World War II, some countries continue to impose sizable tariffs on forest products imports. The Vancouver Agreement of the APEC countries calls for the elimination of all tariffs on paper products by the year 2002 and on wood products by the year 2004. However, several APEC countries are strongly resisting tariff removals. Protected industries emphasize the potential job loss of trade liberalization, but liberalization also benefits consumers by lowering the cost of the good and offering a wider choice of goods. This paper presents an empirical model for comparing the benefits and costs of trade liberalization. The model is applied to the elimination of the Philippine tariff on lumber imports. The results of the analysis suggest that the welfare gains from removing the tariff substantially exceed the job displacement costs.

Keywords


Employment;forest products;international trade;labor;lumber;Philippines;tariffs;trade;trade liberalization

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