While global trade liberalization is stalling and protectionist rhetoric is surging, a growing number of economists argue that the greatest threat to prosperity isn't tariffs or border taxes. Rather, it is the quiet spread of regulatory regimes within domestic markets. These range from crony subsidies to rules that entrench incumbent firms, market distortions that are eroding the principles of free competition, suppressing innovation, and fueling political backlash.
Shanker Singham, who chairs the Growth Commission, is working to expose and dismantle these hidden barriers to economic expansion. He believes they are deepening inequality and weakening global growth.
Singham is an authority on international trade, competition law, and economic policy, and has advised governments—from the U.S. Trade Representative to the U.K. Trade Secretary—on how to liberalize trade, reform regulation, and improve growth. He traces the arc of global trade liberalization back to the 1980s, when US-Japan economic tensions spurred early awareness of market distortions.
“We assumed that if we opened up trade at the border, competition inside the border would automatically follow, political democracy would follow, economic democracy would follow,” he says. In fact, “none of that happened.” Instead, economic gatekeepers gained disproportionate power, enriched themselves, and then lobbied for regulations that stifled new entrants and hurt consumers.
He points to Venezuela’s election of Hugo Chavez and the 1999 Seattle WTO riots as symptoms of rising public discontent. “People felt liberalization was helping others more than them—even though they were improving, just not as quickly as the elites,” Singham explains. Since then, serious multilateral trade liberalization has stalled. “For 30 years—nearly half the lifetime of the postwar GATT—we haven’t done serious multilateral trade barrier reductions.”
While bilateral and regional free trade agreements have made some progress, they’ve done little to curb what Singham calls “anti-competitive market distortions”—domestic policies that artificially benefit preferred firms. He argues these distortions, including regulatory favoritism and state subsidies, have proliferated unchecked. “That’s led to this retrenchment from classical free trade,” he says. “We’ve had 30 years of failure to deal with these things.”
His modeling suggests domestic distortions cost economies far more than traditional tariffs. “Far from this being icing on the cake, the effect of these distortions is about 3 to 6 times the effect of a conventional trade barrier,” Singham says. A machine learning study backs him up: “31 to 37% of market power increases by companies were attributable to… not cartels or monopolies, but regulatory distortions.”
Regulatory protectionism is more than a domestic problem. Singham emphasizes that it harms foreign competitors trying to access distorted markets. “The damage you’re doing to your own market correlates with the damage you’re doing to foreign producers,” he notes. The U.S., after decades of inaction, is finally responding—retaliating against distortions, particularly from China and the EU. “They’re retaliating in a very visible way, which is causing consternation. But they’d say, ‘Doing nothing hasn’t worked. We need a different approach.’”
Singham draws attention to the EU’s regulatory regime, particularly its SPS (Sanitary and Phytosanitary) rules, which he calls “a protectionist piece of regulation to prevent farmers from other countries accessing EU markets.” Despite voting against these policies while in the EU, the UK has now agreed to align with them post-Brexit. “It’s a bizarre situation,” he says. “We used to say these rules weren’t consistent with sound science; now we say we can’t live without them?”
The harmonization debate illustrates what Singham calls a global clash of operating systems. “One system says we’ll recognize your regulations if your goals align with ours–that’s the U.S. model.” By comparison, “the other says, ‘copy our regulation or you don’t get market access’-- That’s what the EU and China do,” he says. “Brexit should have moved the UK from the harmonization model to a mutual recognition model.” According to Singham, “it’s not clear they’ve followed through.”
For reform to succeed, Singham insists on two tools: quantification and pressure. “The people who benefit from distortions are very powerful.” That means, “persuasion alone doesn’t work,” he says. “You have to quantify the effect of these distortions and you have to use hard power.”
His team has calculated the opportunity cost of inaction. “If from 1990 to 2016 countries had improved competition and property rights as well as trade, global GDP per capita would be $40,000 higher.” He also estimates that the global economy would be three times larger.
At the core of his work is the principle of voluntary exchange. “Wealth is the realization of ideas,” he says.” And, “it’s not money—it’s how fast you go from an idea to a real product or service, and competition is the most powerful tool we have for that,” Singham says. “I don’t even use the word ‘capitalism’--that’s Marx’s word,” he says. He talks about “voluntary exchange—willing buyers and sellers, without distortion.”
Singham’s Growth Commission works to bring these ideas to G7 countries. It unites economists from the U.S., UK, Japan, India, Germany, and Mexico to produce policy recommendations. While some of the Commission’s work supports tariff actions, it’s with a long-term goal: “No tariffs, no subsidies, no barriers,” Singham says. “If we can use pressure to get there, it will have been a huge success.”
