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Inclusive trade policies are integral to global poverty reduction and equity

Extreme worldwide poverty has seen a sharp decline coinciding with developing countries’ increased participation in trade. This has been linked to the increased number and quality of employment opportunities and the stimulation of economic growth that accompanies trade activities. According to the WTO, trade, as a proportion of global GDP, has approximately doubled since the year 1975. However, the extremely poor and other disadvantaged groups are often constrained in their capacity to benefit from liberal trade policies. Social exclusion has been shown to be a factor that inhibits individuals from harnessing opportunities created by trade.

The objective of an inclusive trade policy is one of poverty reduction, but also of fairer and more equitable access to the benefits of economic liberalization. The first step in this process would involve finding linkages between the country’s trade agenda and policy, and the developmental goals of the country, followed by a thorough analysis of how changes in trade will affect different economic and social groups. Accordingly, trade policies must focus on sustainable and fairer globalization, without negatively affecting vulnerable groups. In this context, positive discrimination, in terms of access to employment, technology, entrepreneurship, and finance, is often a pre-requisite to creating an environment that enables inclusive growth through trade and policy. Countries must also create targeted complementary policies so that vulnerable groups can benefit from trade practices. In sub-Saharan Africa, liberalization was shown to have limited or negative impacts on poverty due to a lack of compensating policies. Skill development training must also be provided to enable the poor to take advantage of benefits that arise as a result of growing industries.
 
Specialized Trade Policies

Poverty is multidimensional and attention must also be given to the various vulnerabilities that accompany it. For instance, a major aspect of poverty in the developing world is the lack of access to healthcare. Apropos, Goal 3 of the UN SDG is to ensure healthy lives and promote well-being. International trade is indispensable to achieving this goal. 1.7% of world trade in 2019, amounting to approximately $597 billion, was in products related to the COVID-19 crisis, such as medical supplies, medicines, personal protective products, and other medical equipment and technology. Liberalization of trade in medical goods and reduction in tariffs is integral to improving access to medical care among larger sections of society. To illustrate, presently, the average tariff on protective supplies needed during COVID goes as high as 27% in some countries, creating a hurdle for developing countries to procure quality supplies for its population.

Similarly, since climate change disproportionately affects the poor in developing countries, there is also a need to create more ambitious standards in order to balance trade and sustainable development. Tariffs on environmentally beneficial goods and services must be curbed or eliminated, and fossil fuel subsidies removed. Additionally, climate instruments such as the Paris Agreement must be integrated into trade agreements so as to provide for sustainable trade practices.

Support for small scale farmers and artisanal supply chains affected by climate change is also essential. This could be in the form of lowered trade costs, fair trading practices and financial and technical support. Regulatory or transparency mechanisms to ensure fairer supply chains are also ways to make the process inclusive. While inclusive trade practices alone will not provide the solution to poverty related to climate change, it will assist in making sure that vulnerable groups dependent on trade are not left behind.

 

The Role of the WTO

Trade liberalization is a means of reducing global inequities and the WTO has a role to play in this. The organization was first formed to provide a forum that would promote multilateral rules-based, mutually beneficial trade policies and agreements in an effort to ensure that trade would flow as smoothly and predictably as possible. With tensions in trade increasing, the appeals process suspended, and challenges to trade created by COVID-19, the WTO needs reform and reinvigoration to facilitate the liberalization of trade, to monitor trade policies, and to resolve disputes between its members.