Bosnia and Herzegovina: a banking operation supported reforms to facilitate cross-border trade. The project has helped streamline government processes for issuing export import licences, simplifying approvals and reducing licensing costs. The completion of the project saved businesses $1.26 million in compliance costs, a reduction of approximately 4%. Reducing trade-related administrative costs has helped to strengthen the business environment and reduce business costs in the country. By removing trade barriers for businesses, this project has strengthened the competitiveness of Bosnia and Herzegovina and facilitated economic integration with the EU`s neighbouring market. These results underline the importance of quality. A naïve approach that only examines the impact of trade agreements on prices (uncorrected on quality) could wrongly conclude that trade agreements do not affect consumers. At least for trade agreements implemented by the EU, the overall effect translates into quality changes. Once we have adjusted prices to quality, we find that trade agreements have reduced quality-adjusted prices by almost 7%.

Indeed, the United States Free Trade Agreements (FTTs), which cover 20 countries, have had enormous benefits. The main criticism of free trade agreements is that they are responsible for outsourcing employment. There are seven global drawbacks: to ensure that trade continues to create jobs and benefit the poor, the world must do more to bring low-income countries into the global trading system. Developing countries can benefit from free trade by increasing their volume or access to economic resources. Nations generally have limited economic resources. Economic resources include land, labour and capital. The land represents the natural resources found within the borders of a nation. Improving market access for the poorest developing countries would give them the means to use trade for development and the fight against poverty.

Giving the poorest countries duty-free and quota-free access to global markets would have little cost to the rest of the world. Recent market opening initiatives in the EU and some other countries are important in this regard.10 To be absolutely effective, this access should be sustainable, extended to all products and accompanied by simple and transparent rules of origin. This would give the poorest countries the confidence to stick to difficult internal reforms and ensure effective use of debt relief and aid flows. Worse, we face truly pressing economic challenges that could contribute to the solution of smart international agreements. For example, we could harmonize international taxation for businesses and strengthen enforcement across national borders to address the problem of tax havens. And we could take steps to prevent countries from managing their exchange rates, from making competitive gains, a practice that has blown up the U.S. trade deficit in recent decades. And we could take a harmonized approach to carbon pricing to improve the effectiveness of global climate change mitigation. In industrialized countries, protection of manufacturing is generally low, but remains high for many labour-intensive products manufactured by developing countries. For example, the United States, which has an average import duty of only 5%, has peak tariffs on nearly 300 individual products.