Blog Post

How Does Increasing International Trade Impact Societal Wellbeing?

International trade has grown significantly over the past 60 years; the WTO (2008) estimates that between 1950 and 2007, the rate of growth of world trade in real terms was 6.2 percent, compared to 3.8 percent growth in global GDP. The impact of increased world trade cannot be measured simply in terms of economic activity, however; issues like gender equity, health, and nutrition (all key aspects of societal wellbeing) are also affected.

That was the topic under discussion at the recent International Agricultural Trade Research Consortium Annual Meeting’s Theme Day, organized by Antoine Bouet, Senior Research Fellow at IFPRI. The Theme Day addressed four specific aspects of societal wellbeing: gender equity, health, -social justice, and nutrition.

David Laborde, another Senior IFPRI Research Fellow, examined the effects of global trade on food and nutrition by calculating the calorie, protein, and fat contents of agricultural trade flows over time. According to Laborde’s presentation, there has been a continuous trend toward more globalized food markets over the past four decades. In 1975, the share of produced calories crossing international borders was around 12.3 percent; in 2015, that share had grown to 19.1 percent. Laborde sees international trade contributing to food and nutrition security through three channels: (i) by improving the availability of food products and micro-nutrients; (ii) by lowering the prices of these products; and (iii) by improving the quality of these products.

Yana van der Meulen Rodgers, Professor and Undergraduate Director in the Women’s and Gender Studies Department at Rutgers University, discussed how increased international trade presents both opportunities and challenges for women in both developing and industrialized nations. Rodgers finds that female laborers are more vulnerable, relatively, than male workers in sectors exposed to international market. While trade has brought increased employment opportunities for women, these opportunities have often been centered in low paying sectors; in developing countries, particularly LDCs, this low pay is often coupled with poor working conditions. Women tend to have weaker bargaining power and lower status in the workplace, making it harder for them to negotiate higher pay, more benefits, or better working conditions.

At the same time, however, international trade can help decrease companies’ incentives to discriminate against women since such discrimination is costly and since international trade increases competitive pressure. Moreover, positive trade incentives can be used to improve working conditions in developing countries; one example is the US trade agreement with Cambodia, in which the quota for the amount of textile and apparel imports from Cambodia to the US will be increased by up to 14 percent if Cambodia’s garment sector complies with certain labor laws. Rodgers concludes that policymakers must be more aware of gender issues when enacting trade policies in order to increase and improve women’s participation in global markets. Such awareness could take the form of increased investment in education and vocational training for girls and women, as well as increased investment in social infrastructure such as childcare and health services. Finally, governments need to be more willing to enact and enforce anti-discrimination laws in the labor market in terms of both pay scale and employment level.

Chong Xiang, Professor of Economics at Purdue University, presented results of a study measuring the impact of firms’ export intensity on the incidence of depression, on-the-job injuries, and sick-leave days in Denmark between 1995 and 2006 and comparing the increase in on-the-job injuries with wage gains from globalization. Specifically, the study looks at manufacturing, agricultural and fishery, and mining firms with more than 50 employees. On the one hand, increased exports by these firms lead to gains in wages; on the other hand, however, the same increased exports seem to increase workers’ injury and illness rates. In fact, the total welfare loss in terms of sickness and injury amounts to 4.2 percent of the gain in wages for male workers and 18.8 percent for female workers. These results suggest that while increasing trade can be beneficial for workers from the standpoint of wages, it can also be detrimental for other factors that are important to overall wellbeing.

It is clear from recent trends that global trade is here to stay, and will likely only continue to grow. It is incumbent upon policymakers to take broader societal issues, such as nutrition, gender equality, and health, into account when considering the impacts of expanding their global trade.

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