The WTO 2024 Report reveals that Trade has been a crucial factor in reducing the global economic gap since the creation of the WTO 30 years ago.. Despite criticism suggesting that trade has exacerbated inequality, the analysis published today (09.09.2024) shows that it has been a key element in reducing income disparities between countries.
“The main conclusion of the report is the reaffirmation of the transformative role of trade in reducing poverty and creating shared prosperity, in contrast to the notion that trade and institutions such as the WTO have not benefited poor countries and are generating more inequality,” he says. Ngozi Okonjo-Iweala, Director-General of the WTO, in the report's foreword.
The paper reveals that a high share of trade in GDP is correlated with faster economic growth in low- and middle-income countries, bringing them closer to the income level of advanced economies. Between 1996 and 2021, member countries of the WTO and its predecessor, the GATT, experienced an average increase of 140% in its trade, while those that went through WTO accession processes grew by 1,5% faster during its period of accession.
Furthermore, the reduction in trade costs between 1995 and 2020 facilitated a convergence of income between a 20% and an 35% faster for the developing economies. However, the WTO points out that many economies with low trade participation and high dependence on commodities are still lagging behind.
Additionally, the WTO maintains that the reduction of physical and commercial costs has driven exponential growth in world trade, with a expansion rate of 5,4% annually between 1950 and 2022. More recently, sectors such as trade in services and trade in renewable energy goods have grown even faster.
However, the report stresses that while inequality remains a challenge, it is not directly linked to competition and trade openness. Ralph Ossa, WTO Chief Economist, emphasises: “Lower trade volumes will not promote inclusion, nor will trade alone.” True inclusion requires a comprehensive strategy that combines open trade with supportive domestic policies and strong international cooperation.
The report calls on countries to implement complementary policies such as vocational training, unemployment benefits and education for a more skilled workforce. It also highlights the importance of reducing trade costs, narrowing the digital divide and updating WTO rules to reflect the growing importance of trade in services and the digital and green sectors.
Finally, the 141-page report notes that expanding global demand is creating new opportunities for trade-led growth. Developing economies can now look to export to rapidly expanding emerging markets, which are creating huge demand for food, energy and raw materials.
And concludes with a call for a better coordination among international organizations to maximize such synergies between trade and complementary policies, and strengthen their impact on global economic inclusion.World Trade Report 2024 — Trade and Inclusivity: Achieving trade that benefits all)
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