Pandemic, Trade and SDGs -2
The COVID-19 recession is likely to have a harsher impact on women
Developing countries have played an increasingly impactful role in the global economy and global politics since the 1990s. Broadly speaking, developing countries have recorded high growth rates and made significant progress in reducing poverty. In fact, between 1990 and 2015 the global rate of extreme poverty fell from 36.2% to 10.1%, a rate of about 1 percentage point per year. This process has gone hand in hand with their progressive integration in the global economy. However, new estimates from the World Bank show that poverty reduction has slowed down in recent years and that global poverty fell from 10.1% to 9.2% between 2015 and 2017, less than half a percentage point per year.
Also read: Trade can help put UN Sustainable Development Goals back on track: WTO DG Okonjo-Iweala
Although other factors affect poverty reduction, robust trade driven growth in developing countries has been the strongest driver for the reduction by half of the number of people in extreme poverty between 1990 and 2010. Not only does GDP growth help generate resources needed to improve standards of living, access to healthcare and health outcomes, education, safe water, and housing, trade directly contributes to job creation and welfare gains. According to the widely accepted Ricardian model of comparative advantage, countries specialise in the production of the goods in which they have a comparative advantage creating jobs in these more productive industries and ultimately resulting in higher standards of consumption and living. Moreover, the advent of global value chains (GVCs) has created a large number of manufacturing jobs in many developing countries including Vietnam, Indonesia, and Mexico, and was essential to the industrial transformations of China and India.
Trade contributes directly to poverty reduction. It makes goods more affordable, enabling poorer households to purchase more without changing their income, particularly food, resulting in high welfare gains for the poorest. Moreover, a reduction in trade barriers exerts downward pressure on high prices maintained by national cartels and monopolies. Furthermore, access to foreign markets for the goods can create new employment opportunities. Indirectly, trade openness is associated with poverty reduction by raising both growth and income. Studies indicate that increases in the real incomes of the poorest quintile of the population is strongly correlated with increases in trade openness. Numerous studies show that trade plays a positive role in raising incomes. In fact, exporting firms are typically more productive and pay higher wages than non-exporting firms.
Trade also contributes directly to poverty reduction by making goods more affordable, enabling poor households to purchase more with their income. Additionally, trade liberalization increases access to foreign markets for the goods, for example agricultural goods, that the rural poor produce, opening new employment and income opportunities for poor farmers. From a gendered perspective, trade has also substantially improved economic outcomes for women.
Trade driven by comparative advantage is probably the driving force of the increase in women participation in the labour force in developing countries, especially for those specialising in textiles. Economic theory suggests that trade reduces firms’ incentive to discriminate through its competition effects as such trade is associated with more, better paid and better-quality jobs for women at the country, sector and firm levels. Furthermore, firms that engage in international trade employ substantially more women than non-exporting firms. Furthermore, trade has also increased female social political and economic bargaining power. Increased employment and income earning among women allows them to increase investments in education and delay marriage.
There are further knock-on effects including better nutrition and health outcomes. Unfortunately, the COVID-19 recession is likely to have a harsher impact on women as the sectors in which they are prevalent are among those most affected by COVID-19 associated social distancing measures. Furthermore, women in least developed and developing economies are expected to be particularly affected for several reasons. Firstly, trade in services in developing countries is highly exposed to travel restrictions as these services tend to focus on physical proximity between suppliers and consumers, for example tourism and recreational services. Simultaneously, many developing countries closed their borders for a significant number of days Secondly, women are less likely to telecommute in low-income countries. Thirdly, women in developing economies are more likely to work in the informal sector and are particularly sensitive to economic shocks like COVID-19. Finally, poor IT skills, limited digital connectivity and access to technology reduces the ability of women in developing economies from making use of digital technologies to mitigate the adverse economic effects of the pandemic. In that context, specific gender-sensitive social protection initiatives such as cash transfers, food, vouchers, paid sick leave and childcare subsidies are needed to mitigate the effect of the pandemic on women specifically.
*Excerpted from report on WTO Contribution to the 2021 High-level Political Forum
– global bihari bureau
