relationship between trade and employment is complex. So is the
relationship between trade and equality.
and more stable trade boosts economic growth. It has the potential to
create jobs, it can help to reduce poverty, and frequently it does
biggest beneficiary is the country that lowers its own trade barriers.
The countries exporting to it also gain, but not as much. In many
cases, workers in export sectors enjoy higher pay and greater job
producers and their workers who were previously protected clearly face
new competition when trade barriers are lowered. Some survive by
becoming more competitive. Others don’t. Some adapt quickly (for
example by finding new employment), others take longer.
particular, some countries are better at making the adjustments than
others. This is partly because they have more effective adjustment
policies. Those without effective policies are missing an opportunity
because the boost that trade gives to the economy creates the
resources that help adjustments to be made more easily.
WTO tackles these problems in a number of ways. In the WTO,
liberalization is gradual, allowing countries time to make the
necessary adjustments. Provisions in the agreements also allow
countries to take contingency actions against imports that are
particularly damaging, but under strict disciplines.
the same time, liberalization under the WTO is the result of
negotiations. When countries feel the necessary adjustments cannot be
made, they can and do resist demands to open the relevant sections of
are also many other factors outside the WTO’s responsibility that
are behind recent changes in wage levels.
for example is there a widening gap in developed countries between the
pay of skilled and unskilled workers? According to the OECD, imports
from low-wage countries account for only 10–20% of wage changes in
developed countries. Much of the rest is attributable to
“skill-based technological change”. In other words, developed
economies are naturally adopting more technologies that require labour
with higher levels of skill.
alternative to trade — protection — is expensive because it raises
costs and encourages inefficiency. According to another OECD
calculation, imposing a 30% duty on imports from developing countries
would actually reduce US unskilled wages by 1% and skilled wages by
5%. Part of the damage that can be caused by protectionism is lower
wages in the protectionist country.
the same time, the focus on goods imports distorts the picture. In
developed countries, 70% of economic activity is in services, where
the effect of foreign competition on jobs is different — if a
foreign telecommunications company sets up business in a country it
may employ local people, for example.
while about 1.15 billion people are still in poverty, research, such
as by the World Bank, has shown that trade liberalization since World
War II has contributed to lifting billions of people out of poverty.
The research has also shown that it is untrue to say that
liberalization has increased inequality.