Supply-chain barriers harm global trade more than tariffs

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This article originally appeared in WSJ.com's CFO Journal (may require subscription).

For decades, governments and companies have focused on tariffs as the biggest obstacle to global trade. The result: tariffs now stand at 30-year lows.

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Yet the international flow of goods remains seriously constrained, raising costs for both consumers and companies. Trade negotiators continue to focus on further tariff reductions—the issue at the heart of the deadlock in World Trade Organization talks.

There is a better way for both companies and policymakers to improve trade flows: focus efforts on supply-chain barriers to trade.

According to a new World Economic Forum (WEF) report, if countries could reduce just two categories of supply-chain barriers – border administration and transport and telecommunication services – halfway to global best-practice levels, the effect on world GDP would be six times greater than from eliminating all import tariffs. Such a move would create millions of jobs, aid companies large and small and offer disproportionate benefits to developing economies.

Read the full article here (may require subscription).

Mark Gottfredson is a partner with Bain & Company. Bernard Hoekman is director of the World Bank’s International Trade Department.