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in agricultural products, while such production expanded in developing countries having adequate land and water. Developing countries would also expand production and export of laborintensive manufactures, whereas developed country production would tend to shift into heavy machinery, technologyintensive products, and services. But beyond these static gains, there are also important dynamic benefits. The dynamic effects are hard to quantify, but they are arguably more important than the static gains. 3 What we mean by dynamic benefits is that connecting to a large, global market tends to stimulate innovation and productivity growth at the firm level. Innovation is not just major technological breakthroughs。s development round that would provide benefits in particular to developing countries, which are home to 1 billion people living on less than $1 per day and billion living on less than $2. How would a new round of trade liberalization help poor countries? Opening Agricultural Markets The most obvious issue— and the one that has received the most attention— is the ongoing agricultural protection of rich countries. Japan protects rice and other markets. The United States and Europe subsidize and protect farmers. Completely liberalizing agricultural markets in rich countries would provide an immediate annual benefit to developing countries of $26 billion, according to a recent World Bank estimate. To put this number in context, it is about onehalf of the annual flow of foreign aid from rich countries to poor ones. Thus, opening agricultural markets in rich countries is one important issue. Less well publicized is the fact that opening the agricultural markets of developing countries would provide to these countries a similar— even slightly larger— gain of $28 billion per year. This gain es partly from the fact that trade liberalization will enable each country to expand production of goods and services that the country makes efficiently and sell them at better prices. Another benefit from trade is that consumers will buy at lower prices goods and services that their country does not produce so well. In addition, developing country liberalization wou