Don’t let shifts in trading policies throw poor countries off balance
Developing countries are in desperate need of trade to fight the corrosive effects of unemployment and tackle inequality. With the US election decided and the terms of Britain’s departure from the EU still unclear, many people
Developing countries are in desperate need of trade to fight the corrosive effects of unemployment and tackle inequality.
With the US election decided and the terms of Britain’s departure from the EU still unclear, many people are waiting to see how these two countries will change their trading policies, patterns and relationships. But not everyone is in a holding pattern.
Countries in the global north may be getting cold feet on trade, but poorer nations are rushing in the opposite direction. They do not have a choice.
In developing countries, especially in Africa – such as in Kenya where I was once the minister of trade – job creation is the number one consideration. It is not only that unemployment has a corrosive effect on society. It is also that each year thousands of our people are drowning in the Mediterranean, lured by the hope of jobs abroad. Unless we can create more work opportunities, this problem will only grow. Our populations are rising fast, and so is unemployment.
When it comes together, Africa’s Continental Free Trade Area will unite 54 African countries in a single market with a combined population of more than 1 billion people (pdf) and a total gross domestic product (GDP) of more than $3tn (£2.4tn).
Meanwhile, to the east, China’s One Belt, One Road project is connecting some 60 countries by road and rail. Anticipated to cost between $4tn and $8tn, it will cover about two-thirds of the world’s population and one-third of its GDP. And this is all in the name of trade.
And last weekend, 21 leaders from the Asia-Pacific region met in Lima, Peru, where they reaffirmed their confidence in international trade and the ways in which cooperation between their economies can help to reinvigorate it, opening opportunities for small business.
To blame trade for job losses is to use a convenient scapegoat, but it ignores both the benefits of trade and the disruptive nature of technology. Trade does not explain the relative decline in labour productivity. Nor does it account for the erosion in social protection.
This is why policymakers in developing countries are so astonished to see northern countries blame every social malaise on trade. This is not to downplay the pains of change felt by so many people in rich countries. But reluctance to trade on the part of politicians is a worrying sign of a growing isolationism that is unlikely to benefit anyone.
Of course, healthy trading relationships require careful management and a large degree of trust. Global trade requires that countries work together for the mutual benefit of all. As we can see, from Eritrea to North Korea, nobody benefits from isolation.
Nor do developing countries want unregulated trade. International trade has hurt the poorest countries most, nations that struggle to escape the pattern of exporting cheap primary commodities and buying expensive processed goods in return.
And when developing countries open their economies, inequality often rises. Trade is arguably the biggest contributor to poverty reduction, but – as we saw with Mexico and Nafta – unregulated trade can lead to big company dominance of the market at the expense of individuals.
Despite these misgivings, developing countries are sharply focused on job creation, for which more trade is critical – and it’s also vital for achieving the sustainable development goals. Trade means exports. And this means critical jobs.
As an ex-politician myself, I know that politicians must do a better, more honest job of discussing the costs and benefits of trade. Too often in the global north, leaders, dictated by electoral needs, talk down trade, storing up problems for the future.
Employees work on stent graft components at an assembly plant in Tijuana, Mexico. Photograph: David Maung/Bloomberg/Getty Images
They may wish to point out, for example, that although trade with China caused the loss of some 2.4m jobs in the US between 1999 and 2011 (pdf), the US has a dynamic economy – and most economists now consider it to be near full employment.
Of course, change brings winners and losers. Policymakers should manage these dislocations much better. They must protect those affected and help them to adapt by, for example, providing social insurance and retraining.
At the international level, trade deals need social and environmental safeguards. Competition policy and consumer protection can help to defend small businesses against the excesses of corporate power.
The nature of trade is changing, shifting to services, to developing countries, and to more being done online. But it is always going to generate jobs. And this is an urgent priority for any sensible politician.
The caveats about change and technology notwithstanding, we – the global community – must work together to restore the virtuous cycle of trade and jobs. It’s in all of our best interests.
- Mukhisa Kituyi is secretary general of the UN conference on trade and development (Unctad)