Trade Gains

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Published: July 13, 2015 12:21:56 AM

Opening up of trade has helped lift almost a billion out of poverty in the last two and a half decades

A World Bank-World Trade Organization study holds that the opening up of global trade in the past couple of decades has helped lift many out of extreme poverty and could, if facilitated further, cause poverty to decline drastically. The share of developing nations in global trade now stands at 48%, up from 33% in 2000. This trade upswing in such countries has coincided with a nearly 50% reduction in extreme poverty, mostly in these nations—the study defines extreme poverty as survival with less than $1.25 a day—over the last two and a half decades.

The opening up of trade by developing countries has created new sources of demand and supply, in the form of other developing nations. As a result, global South-South trade between developing countries now stands at 25% of the world trade, up from just 8% in 1990. Reliance on just domestic markets, the study notes, has not been able to sustain economic growth of nations while integrating with global trade has sustained impressive rates of GDP growth in many nations in Africa and South Asia that have enabled millions to climb out of extreme poverty. Given the gains that have come with trade in sectors such as education and healthcare, people in developing nations have also experienced qualitative improvement in their lives. For example, medical imports from 10 nations that contribute the bulk of drug R&D have significantly lowered mortality in many nations. The challenge for policy is to now further liberalise trade while ensuring that the poor are able to avail of the opportunities such opening up would offer.

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