Maximising benefits of trade

The World Trade Report 2008, released by the WTO just a few days before the mini-ministerial meeting on Doha development round got under way in Geneva, is significant for its finding that trade and globalisation have brought greater prosperity to a very large number of people and greater stability to nations. This broad conclusion will remain valid, even if the Doha trade talks flounder yet again. As the WTO report notes, deeper integration into the world economy has, of course, not always been popular; nor have the benefits of trade and globalisation reached all sections of the people. Trade which has consistently been growing faster than output at the global level has raised the level of interdependence between nations. That has mostly worked for the common good. For instance, specialisation and economies of scale have enabled countries to boost trade. However, the gains of exponential growth in global trade have not been spread evenly among nations. Governments need to be proactive in securing the equitable distribution of benefits from globalisation. Very often, complementary domestic policies become necessary to achieve this. For example, manufactures account for an expanding share of world trade. Modern production is getting increasingly fragmented with supply chains emanating from different countries. It is for individual governments to lay down investor-friendly policies and attract foreign capital flows that have become a concomitant of the process. Also, the development of physical infrastructure has been a thrust area in all countries that have benefited from trade.

The negative public perceptions of globalisation and trade are traceable to two factors. Technology changes that boost productivity benefit only the skilled through higher wages, and the unskilled are left behind. Secondly, as a result of trade, the demand for unskilled workers might fall in the developed world as specialisation takes away several jobs to the developing countries, where as a rule the skills and technology levels are lower. Among the developing countries, trade liberalisation has not always gone hand in hand with reduction in inequality. Although trade has contributed to higher incomes in poorer countries, the relationship is complex and has to be gauged against several parameters such as employment, revenue, and consumer prices. Finally, in what seems particularly significant in the context of the ongoing Doha round, the WTO report finds stronger support for globalisation in some emerging economies than in industrial countries.

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