Analysis with econometric models that quantifies macroeconomic benefits associated with broad-based trade and investment liberalization, diffusion of networked technologies into business, and domestic policy reforms that ensure that resource reallocations can take place; Analysis that compares the relative macroeconomic benefits from liberalization of different types of trade—agriculture, manufacturing, and services. The service sector is an area of particular interest because of its key role in access, use, and diffusion of networked information technologies throughout the economy. Time-series analysis of efficiency gains:
The cost savings associated with the networked information technologies and financial exchange of business-to-business electronic commerce is substantial and pervasive across manufacturing, industrial supplies, and services. Martin Brookes and Zaki Wahhaj of Goldman Sachs estimate cost savings ranging from 10 percent in sectors such as aerospace, paper and steel, and communications bandwidth and media advertising, to more than 20 percent in electronic components and machining, forest products, and freight transport. 43 Cost savings of this magnitude have been confirmed by individual case studies.
44 Because the use of these technologies for business-to-business sales and purchases is so pervasive, cost savings of this magnitude could impact about one-third of US GDP and increase the efficiency of resource utilization. Together these translate into faster productivity growth, which supports a higher sustained rate of GDP growth. Brookes and Wahhaj apply their evidence on cost reductions in an econometric model (“Multimod” used at the International Monetary Fund). This econometric model of the global economy uses time-series data on many economies in a set of complex models of the individual macro economies as well as their global inter-relationships.
The BW simulations suggest that GDP in the specific industrial economies examined (US, France, Germany, UK, Japan) would be almost 5 percent higher after ten years, and the annual growth rate of GDP would be about 0.25 percentage points higher during this period. (A figure that is similar to the increase in productivity growth estimated by Litan and Rivlin.) For example, for the United States, GDP would be higher by about $400 billion at the end of the 10 years on account of the use and diffusion of networked information technologies. Broad analysis of policy reforms:
The OECD and UNCTAD 45 have investigated the potential benefits for the global economy and for regions of the world from broad-based reforms that incorporated not just trade liberalization but also domestic policy reform and structural adjustment. The approaches are different, but the conclusions are the same: The potential gain to economic well-being is huge 43 Martin Brookes and Zaki Wahhaj, “The Shocking Economic Effect of B2B,” Goldman Sachs Economics Paper No. 37, 3 February 2000. 44 Robert Litan and Alice Rivlin, (July draft 2001) Beyond the Dot-Coms: The Economic Promise of the Internet. Washington: The Brookings Institution. 45 OECD, World in 2020; UNCTAD, Building Confidence. - 31-