Trade leads to productivity gains and significant benefits for consumers, especially the poor, but can also be responsible for job displacement that must be addressed through sound domestic policies that can help the unemployed get back on their feet, say economists from the World Trade Organization, the International Monetary Fund and the World Bank.
In a study released today entitled “Making Trade an Engine of Growth for All”, the economists argue that the benefits from opening trade are broad and deep. Trade liberalization has generated higher living standards through greater productivity, increased competition, more choice for consumers and better prices in the marketplace. At the same time, it is clear that some parts of the world have suffered from the impact of import competition. This requires a policy response — but that response should also recognise that trade is just one factor contributing to economic change and labour market disruption, alongside other drivers such as technology and innovation.
To address these issues, economists from the three organizations, have called on governments to pursue both “active” and “passive” labour market policies. Well-structured active labour policies, such as training programmes, job search assistance and wage insurance, can facilitate the reintegration of displaced workers into the job market. Passive labour market programmes, such as unemployment benefit and income support, can also stabilize working families in the short term until those who have lost their jobs can get back to work. The economists stressed that programmes must be tailored to the specific circumstances of each country to ensure that they produce the desired results. Moreover, the policy response must extend beyond labour market policies. For example, effective education and skills policies will be essential in preparing workers for the changing demands of the modern economy.
Director-General Roberto Azevêdo said:
“The challenge before us is to support the workers of today and train the workers of tomorrow, while also ensuring that the trading system is more inclusive. Trade has had a very positive impact on the lives and livelihoods of many millions of people in recent decades. I recognise that there are very real concerns, but the answer is not to turn against trade, which would harm us all. Instead, trade must be part of the solution, and we must ensure that its benefits reach more people. As part of the right policy mix, trade will continue to create new jobs and support continued growth and development. This report is a welcome contribution to the debate.”
The report also argues that a strong global trading system with the WTO at its core “remains” critical. The WTO has a unique role to play in fostering stable, predictable and equitable trading relations across the world, the economists said. These benefits are underpinned, the report says, by common rules agreed by all WTO members, by a well-respected, independent and effective dispute settlement system and by the many WTO forums for discussion and information sharing.
DG Azevêdo was joined by IMF Managing Director Christine Lagarde and World Bank President Jim Kim at an event to launch the report on April 10, 2017 at the Association of German Chambers of Commerce and Industry in Berlin.
To read the full report – Making Trade an Engine of Growth for All – click here