Lower trade barriers, stronger global trading system can help end extreme poverty
A greater and more sustained effort to deepen the integration of developing countries into the global trading system through lower trade costs and fewer barriers between countries is essential to eliminating extreme poverty, according to a joint World Bank Group and World Trade Organization report released today.
The report, “The Role of Trade in Ending Poverty,” points to trade as a key enabler of developing country growth, but says that efforts to lower trade barriers will need to be complemented by efforts to maximize gains for the poor in order to ensure that the benefits reach the world’s poorest and most vulnerable people.
“Trade plays an essential role in driving private sector-led growth and job creation and can be a powerful force in reducing poverty and increasing incomes,” said World Bank Group President Jim Yong Kim. “But we must do more than expand trade. We must also build roads that connect farmers to markets, and empower women to be full participants in the labor market. We must always connect the poorest to trade opportunities.”
“By supporting growth and development around the world, trade has proved to be an essential tool in tackling poverty. This report is a blueprint to enhance this role so that trade can do even more to improve the lives of the poorest and most vulnerable,” said World Trade Organization Director-General Roberto Azevêdo.
“A combination of the right practical support and domestic policies can make a big difference here. By helping the poor to help themselves we can better ensure that developing countries more actively participate in the global trading system and reap the benefits that trade has delivered to so many in the recent past.”
Dr Kim, and Director-General Azevêdo launched the report today (30 June) at the 5th Global Review of Aid for Trade taking place from 30 June to 2 July at the WTO’s Headquarters in Geneva, Switzerland.
Since 1990, 1 billion people have been lifted out of poverty. Trade has played a key role, helping to lift growth in developing countries. To further harness the power of trade in helping the nearly 1 billion people still living on $1.25 per day, a sustained effort is needed to address the key constraints that limit the poor from benefiting from wider economic gains.
Among the key strategies for extending the benefits of trade to the poor are lowering trade costs through such means as the WTO’s pdf Trade Facilitation Agreement (150 KB) and through policies which make markets more accessible for poor people, especially those in rural and conflict-affected areas, making it easier for them to take advantage of trade opportunities.
The report highlights three main messages:
A sustained effort to deepen economic integration and further lower trade costs is essential for ending poverty. Strong growth in developing countries will be needed to achieve the end of poverty, and trade is a critical enabler of growth, facilitating opportunities for new and better work for the poor. Although great progress has been made in reducing trade costs and integrating low-income countries into the global economy, more needs to be done.
Lowering tariffs and non-tariff barriers between countries are essential elements of this agenda, but this must form part of a wider approach that recognizes the specific constraints facing the extreme poor – and for many, their disconnection from markets – if they are to benefit from trade. This includes challenges facing women, the rural poor, those in the informal economy, and those in fragile and conflict affected states. For trade to generate the maximum impact and contribute most productively to ending poverty, trade policy must be complemented by other areas of policy. This entails deeper cooperation across sectoral lines, government agencies, and a wider range of stakeholders.
The WTO and World Bank Group have made substantial contributions to trade and poverty reduction. However, a great deal more remains to be done to end poverty, and both institutions and other partners must constantly review their activities in support of poverty reduction to ensure they adapt most effectively to a rapidly changing world.
During the Global Review meetings, the two institutions announced an effort to address information gaps on trade and poverty by establishing improved indicators for the tracking of trade costs that most affect the poor. Dr Kim and DG Azevêdo also announced that the Aid for Trade Initiative, coordinated by the WTO, will focus more in future on amplifying the opportunities for the poorest to benefit from trade. The Aid for Trade Global Review is held every two years and serves to monitor the extent to which progress is being made.