U.S. slides down economic freedom ranking

Nine other countries (Hong Kong, Singapore, New Zealand, Luxembourg, Ireland, Estonia, the United Kingdom, Denmark and Switzerland) now rate higher than the United States in terms of economic freedom, according to the 2004 Index of Economic Freedom published by the Heritage Foundation and the Wall Street Journal.

Ana Isabel Eiras of the Heritage Foundation says America has fallen from the fourth most economically free nation to tenth partly as a result of burgeoning budget deficits and protectionist trade policies. She recommends cutting or slowing the growth of entitlement programmes and eliminating agricultural subsidies and anti-dumping provisions.

In addition, relative to the United States, other countries have simply made bigger strides in freeing up their markets:

On trade policy, countries such as Hong Kong, Singapore and Estonia are virtually duty free, with a weighted average tariff rate of less than 0.5 percent; by contrast the United States has an average rate of 1.8 percent and has numerous other non-tariff barriers.

America's top income tax rate of 35 percent does not compare favourably with the top rate of 11.5 percent in Switzerland and 15.5 percent in Hong Kong, among others.

Countries like New Zealand, Hong Kong and Ireland have fewer restrictions on foreign investments and on the free movement of capital than the United States.

Eiras says the perception of the United States as the most attractive place to do business has changed. Unfortunately, this trend will worsen as the U.S. federal deficit swells, Congress threatens more trade tariffs and un-funded transfer programs like Medicare and Social Security go unreformed.

Source: Ana Isabel Eiras, The United States is No Longer the Champion of Economic Freedom, Heritage Foundation, Backgrounder No.1781, July 23, 2004.

For text http://www.heritage.org/Research/TradeandForeignAid/bg1781.cfm

For more on Economic Freedomhttp://www.ncpa.org/iss/int/

FMF Policy Bulletin/5 October 2004