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Has Globalization Gone Far Enough?: The Costs of Fragmented Markets

Has Globalization Gone Far Enough?: The Costs of Fragmented Markets

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How important are the remaining barriers to integration in international goods markets and how would eliminating them affect global and individual countries’ welfare? Major current initiatives, such as multilateral trade liberalization in the Doha Round and the efforts to complete the European Common Market, imply that additional integration is highly desirable, while the widespread use of the term "globalization" to describe our era suggests that it is already almost complete.

Has GlobalizationGone Far Enough: The Cost of Fragmented Markets studies these questions using the most comprehensive price data available. The authors, Scott C. Bradford and Robert Z. Lawrence find that there is considerable international market fragmentation among industrial countries—this, firms charging different prices for similar productions in different national markets—even among countries with low tariff barriers.

Bradford and Lawrence estimate that integration among the eight countries in their sample—Australia, Canada, Germany, Italy, Japan, the Netherlands, the United Kingdom and the Untied States—would raise global GDP by more than $500 billion. This would increase the size of the world economy by over 2 percent. Remarkably, almost half the global gain in these eight countries could be reaped if Japan alone eliminated its international fragmentation.