International trade and national social divides: a new vision of trade

  • A new vision for the world trading system must encompass equitable access to the benefits of trade for all of society, and some countries have expressed support in this regard.
  • Trade policy reforms could have a significant impact on national economic inequalities if a series of concrete measures are taken.
  • The WTO, and trade policy and practice more generally, can be reframed to reflect the notion of economic justice, and the time has come to make that change.

Divisions and discrimination within countries based on race, ethnicity, gender and indigenous identity have created long-standing social, economic and political challenges. The Covid-19 pandemic further exposed the glaring inequalities between social groups.

Yet resistance and restorative action have also spread. Social movements for racial justice in the United States have inspired similar initiatives by other countries. The #MeToo movement has shed light on sexual abuse and harassment and catalyzed broader conversations about women’s participation in economic, social and political life. Meanwhile, some governments are accepting their historical and current treatment of Indigenous peoples.

In this context, a new vision of the world trading system must encompass equitable access to the benefits of trade for all segments of society. This is an important aspect of strengthening trade support, as emerging research indicates that minority groups are often either negatively affected by trade shocks or do not have equitable access to the opportunities they offer.

Some countries have expressed their support in this regard. For the first time, the The United States’ trade agenda understands the goal of racial equity. Canada, Chile and New Zealand signed a Global Agreement on Trade and Gender in August 2020. The relationship between trade and the rights of indigenous peoples is increasingly recognized in international economic agreements, including the Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP) and the Canada-United States-Mexico Agreement (CUSMA).

Image: Usman Ahmed and Aditi Sara Verghese (2021)

Understand the problem

The effect of trade on inequalities between countries is well covered in the economic literature. The differentiated impacts of trade within countries between different income groups, between small and large firms, and on labor are well studied and discussed.

The effects of trade on different social groups within countries – whether based on race, ethnicity, nationality, indigenous identity or gender – have received less attention. This may be because national policies are seen as the most direct way to tackle these inequalities. However, trade constitutes 58% of global GDP and is an important aspect of economic empowerment. And, while national policies can help address the inequalities created by trade if properly designed, trade policy reforms could also have a significant impact on national economic inequalities if a series of concrete steps are taken.

Develop and implement an inclusive policy

Better policy making starts with better data. Governments need to understand the industries in which underserved populations are most likely to own and work or rely on inputs and end products. For example, in 2016, minority-owned businesses accounted for 19% of US companies, but only 12.8% of US manufacturing companies. Governments should examine tariff lines to determine whether they discriminate against sectors that have a disproportionate representation of minority businesses and workers.

Under-represented groups should be actively invited to participate in trade policy-making and negotiating positions. The advantages of such a commitment were apparent in the aboriginal peoples provisions in Canada’s trade agreements, for example. New Zealand has carved out a exceptions in their agreements to honor commitments made to the Maori.

Trade agreements can also improve labor standards and eliminate discrimination against minorities, migrants and women workers through labor chapters. These should include commitments by advanced economies to support and strengthen the capacity to implement the national reforms needed by trading partners.

Technical assistance and capacity building efforts that often accompany trade agreements must take equity considerations into account. Organizations should actively measure the impacts of their initiatives on women and minority groups.

Inclusive trade in practice

Businesses also have an important role to play in fostering inclusive trade. Many mobilized to publicly support movements for minority rights and inclusion. Investments in minority businesses can help improve the general well-being of underserved communities. Supplier diversity programs can help women-owned, minority and Indigenous-owned businesses meet sourcing standards, access financing, and comply with export and import requirements.

Access to trade finance for micro, small and medium enterprises (MSMEs) could lead to significant gains for these under-represented groups and for the economy in general. The IFC estimates that 70% of formal female-owned MSMEs in developing countries are unserved (or underserved) by financial institutions, with a funding gap estimated at $ 285 billion.

New technologies and digitization can also make commerce more inclusive, whether that’s by allowing MSMEs to connect and deal with international buyers, providing natural language processing for translation, or automating business processes that could otherwise lend themselves to discriminatory practices.

Public-private partnership for economic inclusion

The active engagement of all stakeholders at all stages of the process – from research, consultation and policy development to implementation and capacity building – will be essential to achieve a truly inclusive approach Trade.

Businesses and civil society organizations have the opportunity to express their support for government action through the World Trade Organization on these issues as the process approaches. 12th Ministerial Conference. Additionally, governments can work with the private sector and civil society organizations to create programs such as trade finance guarantees targeting underserved populations.

This is an annual meeting showcasing the best examples of public-private cooperation and Fourth Industrial Revolution technologies used to develop the sustainable development agenda.

It runs alongside the United Nations General Assembly, which this year hosts a one-day climate summit. This is timely given growing public fears – and citizen action – about weather conditions, pollution, the health of the oceans, and dwindling wildlife. It also reflects the understanding of the growing business case for action.

The UN Strategic Development Goals and the Paris Agreement provide the architecture to resolve many of these challenges. But to get there, we need to change the way we produce, operate and consume.

The work of the World Economic Forum is essential, with the summit providing the opportunity to debate, discuss and engage on these issues at the global political level.

International trade has done Yeoman’s job lifting millions out of poverty, stimulating economic growth, and encouraging economic integration that has reduced the incentives for armed conflict between nations. There are green shoots that make the present moment an ideal time for trade to tackle national socio-economic divisions.

We believe that the World Trade Organization, and trade policy and practice more generally, can be reframed to reflect the notion of economic justice and that the time has come to make this change.

Read the Global Future Council on Trade and Investment document on “International Trade and Economic Justice” here.

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