Working Paper Series
WP 09-2 MAY 2009
Policy Liberalization and US Merchandise
Trade Growth, 1980-2006
Matthew Adler and Gary Clyde Hufbauer
Abstract
This working paper draws on historical and contemporary data on tariffs, nontariff barriers, and transportation costs (for
the United States and its major trading partners) to estimate the role of policy liberalization in US merchandise trade
growth over the period 1980 to 2006. Both partial equilibrium analysis and computable general equilibrium analysis
are used to make the estimates. Both methods indicate that roughly 25 percent of US trade growth since 1980 can be
attributed to policy liberalization. Policy liberalization plays a larger role in US export growth (35 to 40 percent) than US
import growth (25 percent). According to these estimates, policy liberalization accounts for almost all US merchandise
growth in excess of growth that can be explained by expanding GDP in the United States and abroad.
Keywords: International trade, policy liberalization, tariff liberalization, nontariff barriers, transportation costs
JEL Codes: F1, F13, F15, F17, C68
Gary Clyde Hufbauer is the Reginald Jones Senior Fellow at the Peterson Institute for International Economics.
Matthew Adler is a research assistant at the Peterson Institute. The authors thank John Gilbert for his computable
general equilibrium analysis and helpful suggestions on the paper. They also thank Madona Devasahayam, Helen
Hillebrand, and Susann Luetjen for preparing this manuscript for publication. Larry Summers suggested the core idea
that inspired this paper: trying to distinguish the impact of policy liberalization from the effects of technology and falling
transportation costs in promoting the growth of trade and foreign direct investment. The foreign direct investment
portion of this question is addressed in Adler and Hufbauer (2008). The authors also thank the Sloan Foundation for
supporting studies on globalization and US competitiveness. This work on trade and the earlier work on foreign direct
investment are part of the larger project.
Copyright © 2009 by the Peterson Institute for International Economics. All rights reserved. No part of
this working paper may be reproduced or utilized in any form or by any means, electronic or mechanical, including
photocopying, recording, or by information storage or retrieval system, without permission from the Institute.
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