Resident Fellow Roger Bate

As the USA heads into recession, protectionists are smiling. As always, they hide their self-interest behind concern for the environment, labour standards and health (such is the rhetoric of Presidential candidates Obama and Clinton). Indeed global competition can drive wages down and can make companies cut corners on health care. But, as a recent article, 'Is Trade Good for Your Health?' (Review of International Economics, Vol. 15, Issue 4, 2007) by economists Ann Owen and Stephen Wu of Hamilton College reveals, there are enormous health benefits from free trade.

By analysing a variety of data from 219 countries over 35 years, they demonstrate that the citizens of economically freer nations are healthier than those where the economy is more tightly controlled. They conclude that openness to trade and higher volumes of trade are robustly associated with reductions in infant mortality and increases in life expectancy, particularly among males in developing nations. Interestingly, the effect is even more marked for the poorest of the poor: a small opening up of trade in the poorest developing countries gives disproportionately larger health benefits to that country's citizens, than to the citizens of richer nations. In terms of health, the worst off gain the most from more open trade.

In some ways, the authors' findings are intuitive. If medications and vaccines are allowed free movement across borders, it makes sense that they would therefore save more lives. But Owen and Wu also suggest that the transfer of something less concrete matters more: beneficial knowledge that spills over simply from the act of trading with other nations. '[I]f trade facilitates the transfer of knowledge,' they write, 'then countries that import goods from healthier partners should receive more knowledge.' They claim that knowledge of disease treatment, good health practices, and design and administration of health programmes comes about because of the associations from trade. For the key diseases affecting the poorest nations, such as malaria, TB, HIV, dysentery, one might expect disease prevention techniques to be mentioned alongside those listed above, but the authors do not mention it. This might be an error, but one can argue that prevention is driven and often funded by advice from wealthy countries whose governments may not promote the objectively best policies but those most closely aligned to key domestic constituencies (environmental lobbying against DDT for malaria control and social conservative promotion of abstinence for HIV control spring to mind).

The authors spend nearly half the paper testing its validity. In their successful quest to demonstrate that variables omitted from their model, such as income inequality and resource endowments across countries, and fiscal aid received by poorer countries, do not undermine its accuracy, they unveil several startling points of discussion. Most notably, they find that most foreign aid has no significant impact on a country's health (assistance providing clean water appears to be an exception); and that opening up trade causes improvements in health, but improving health does not lead to open trade (and hence wealth).

These two findings undermine the economic arguments put forward by aid activists for increases in healthcare spending by donors. International aid cheerleaders such as economist Jeffrey Sachs say that we must vastly increase aid in order to improve health so that people can trade, create better institutions and draw themselves out of diseased poverty. But research supports Owen and Wu's conclusions. Numerous countries have been given foreign aid to improve health but only those which have developed sensible domestic policies and embraced international trade have sustained improvement.

This idea gives extra impetus for nations to open their borders, and for the World Trade Organization (WTO) to complete the Doha Round of trade talks. My own research has demonstrated that tariffs on medicines significantly lower access to those medicines, notably in places with high tariffs such as Nigeria. The US Trade Representative (along with representatives of Singapore and Switzerland) has tried to encourage their removal through the WTO. Owen and Wu add extra impetus to this effort and expand the target areas to a far greater range of tariffs.

Owen and Wu's analysis implies that a future US President could do more for global health simply by lowering US agricultural subsidies, and increasing trade with poorer nations than all its worthy aid programmes will do.

Roger Bate is a resident fellow at AEI.