Three leading global economic institutions – the World Trade Organisation, the International Monetary Fund and the World Bank – have delivered a powerful message in a new report about the broad and deep benefits of global trade. At the same time, the report convincingly argues for complementing more open markets with sound domestic policies to ensure that the benefits of trade can be more widely shared.
The report, entitled Making Trade an Engine of Growth for All, advocates strongly for global trade, cautioning that the world economy is at a critical juncture, with weak trade growth, a slowdown in trade reform and an uptick in protectionism. The paper provides a wealth of evidence to show that trade leads to productivity gains and to significant benefits for consumers, especially the poor. It hardly needs saying that well-functioning global trade is also critically important for small, distant and open economies, such as New Zealand – a theme underscored in the Government’s new trade strategy, Trade Agenda 2030.
The report recognizes that technological change is substantially responsible for the job losses that advanced economies have seen in recent decades. It acknowledges, however, that adjustment to more open markets can bring a human and economic downside that can be both “concentrated” and “sometimes harsh”. The report makes a compelling case for addressing these impacts through well-designed domestic labour policies and other transitional programmes that can help the unemployed get back on their feet and mitigate adjustment costs. It is particularly striking that two of the countries that have seen the greatest level of public disquiet over regional economic integration – the UK and the US – are among the lowest spenders on transitional adjustment, respectively 23rd and 29th out of 31 countries. New Zealand comes in at 21st place.
For “globalists”, this can be a dispiriting time, with a swing – at least at the rhetorical level – towards economic nationalism and a ceding of global economic leadership by the Trump Administration. Fears of tit-for-tat trade wars are in abeyance at least for now thanks to a modestly constructive recent meeting between Presidents Trump and Xi. But political and business leaders must continue to champion greater openness, and to talk about the very real benefits of globalisation. They must recognise that we cannot roll back the clock – and indeed trying to do so could well be catastrophic for the world economy and for their own communities.
In the Asia-Pacific – still “open for business” – this theme will be top of mind at the 26-29 April meeting in Seoul of the APEC Business Advisory Council, including New Zealand members Katherine Rich, Phil O’Reilly and Tenby Powell. ABAC has commissioned research looking in greater detail at these issues through an Asia-Pacific business lens. In the birthplace of the new business model of global value chains, and in a region committed to greater economic integration, there is a profound recognition that we are all in this together.