The Heritage Foundation
The latest rankings of trade freedom around the world, developed by The Heritage Foundation in the 2017 Index of Economic Freedom, once again demonstrate that citizens of countries that embrace trade freedom are better off than those in countries that do not. The data continue to show a strong correlation between trade freedom and a variety of positive indicators, including economic prosperity, low poverty rates, and clean environments. Worldwide, the average trade freedom score improved just barely over the past year, from 75.6 to 75.9 out of a maximum score of 100. The improvement was due to a small decline in average tariff rates among the countries measured.
Why Trade Freedom Matters
A comparison of economic performance and trade scores in the 2017 Index of Economic Freedom demonstrates the importance of trade freedom to prosperity and well-being. Countries with the most trade freedom have higher per capita incomes, lower incidences of hunger in their populations, and cleaner environments.
Boosting Trade and Economic Freedom
Since World War II, government barriers to global commerce have been reduced significantly. Today, the average worldwide tariff rate is less than 3 percent. The average world tariff rate has fallen by one-third since the turn of the century alone. Sixteen countries have an average tariff rate of 1 percent or less.
These countries with low tariffs and few non-tariff barriers benefit from stronger economic growth. But more open trade policies do not just promote economic growth, they encourage freedom—including protection of property rights and the freedom of average people to buy what they think is best for their families, regardless of attempts by special interest groups to restrict that freedom.
But not all countries have embraced openness to trade. Double-digit tariff rates are applied in 34 countries, and even countries with low average tariff rates often have high tariff peaks for some items. In the United States, for example, the average tariff rate is just 1.4 percent, but pickup trucks face a prohibitive 25 percent tariff, and many types of clothing are subject to double-digit tariffs.
Threats to Trade
The volume of U.S. and world trade in goods and services plummeted during the global recession, declining by roughly 20 percent between 2008 and 2009. From 2009 to 2014, U.S. and world trade volume increased by around 50 percent, followed by a 10 percent drop in world trade volume in 2015, along with a 4 percent decline in U.S. trade volume. The World Trade Organization (WTO) predicts an increase in global trade of just 1.7 percent in 2016.