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GENEVA: A new World Trade Organisation (WTO) report has stated that global commerce has played a critical role in reducing extreme poverty from 40pc to 11pc.
Global trade has created “shared prosperity” since the WTO was created in 1995, the report said, while calling for supportive policies to “mainstream more economies” and people across the globe.
The World Trade Report 2024, released on Monday, said the world had witnessed a period of unprecedented income growth.
“Between 1995 and 2023, global per capita income, adjusted for inflation, increased by approximately 65 per cent, while the per capita income of low-and middle-income economies almost tripled.” This “impressive economic growth” significantly contributed to reducing poverty, malnutrition and infant mortality, and improved access to education, healthcare and electricity.
New report says poorer nations suffer due to high tariffs, red tape, poor infrastructure
The report also raised concerns over persisting income inequalities, which are still high in most economies, as 712 million people were still living in extreme poverty.
According to WTO Director-General Dr Ngozi Okonjo-Iweala, the biggest takeaway from the report was its “reaffirmation of trade’s transformative role in reducing poverty and creating shared prosperity”.
The reaffirmation, according to Dr Okonjo-Iweala, contradicts the perception that trade and institutions like the WTO have not been good for poverty or for poor countries and are creating a more unequal world.
The report also noted that between 1995 and 2022, the share of low and middle-income economies in global trade grew from 21pc to 38pc, while the share of trade between developing economies in global commerce almost quadrupled, increasing from 5pc in 1995 to 19pc in 2021.
However, this “economic convergence” is threatened by geopolitical tensions, technological revolution and climate change.
Challenges to global trade
The report also pointed out the challenges faced by low- and middle-income economies that engage less in international trade, receive less FDI, rely more on commodities, export less complex products, and trade tend to be concentrated among fewer partners.
Among the reasons these economies are not benefiting from globalisation are high tariffs at home and abroad, low regional integration, administrative red tape, poor physical and digital infrastructure, geographical remoteness and weak institutions.
No wonder exporters in poor economies often lack the capacity to comply with foreign market standards and technical regulations and may struggle to utilise preferential access to large markets, according to WTR2024.
The report also noted that some of the economies that are an active participant in global trade failed to leverage trade for development due to a lack of diversification in their production and export baskets.
For example, economies that specialise in capital-intensive extractive and primary sectors can be vulnerable to commodity price volatility and fail to achieve sustained growth because of macroeconomic instability.
The report observed that impediments to structural transformation and a limited ability to adopt foreign technologies could also prevent certain economies from reaping the gains from trade.
“Trade fosters growth by enabling the import of technology and know-how, and by leveraging external demand to shift workers and resources from subsistence work to more productive,” the report said and called upon the low- and middle-income countries to bridge the digital divide and tackle regulatory capacity and compliance issues to take full advantage of global trade opportunities.
“Complementary domestic policies are required to make trade more inclusive.”
The countries must ensure that every citizen benefits from the opportunities created by open and rule-based international markets, the report suggested.
This means investing in education and infrastructure, maintaining an appropriate competitive environment, implementing effective adjustment and redistribution policies, including labour market support.
According to WTO Chief Economist Ralph Ossa, the bottom line of the analysis is that less trade will not promote inclusiveness.
“True inclusiveness demands a comprehensive strategy — one that integrates open trade with complimentary domestic policies and effective international cooperation.”
For the WTO, the immediate priority is to uphold an open, predictable, and nondiscriminatory multilateral trading system — a task that is becoming increasingly challenging in today’s complex environment, he added. “This includes restoring a fully functioning and accessible dispute settlement system, a goal that WTO members are actively pursuing.”
Published in Dawn, September 10th, 2024
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