Lower and more volatile growth prospects brought about by recent crises are increasing the risks of deepening economic divide between and within countries. Not only is income inequality rising in many economies but inequality of opportunity is also increasing. There are also strong disparities among regions, with lagging regions suffering lower productivity, growth and employment opportunities
Making trade work for all
Uncertainty and tensions in the trading system alongside heightened public concerns about globalisation are putting open trade under threat. While in many developing economies, trade is still generally regarded positively as a source of growth, development and jobs, some advanced economies (even where people support trade in principle) have more mixed views about particular trade agreements and trading relationships. With the COVID-19 pandemic, it became evident that no country is able to meet all of its needs, and international trade was crucial to ensure a resilient supply of a wide range of essential goods, including for producing and distributing vaccines. Notwithstanding this realisation, many continue to believe that the current system is unfair and is not working for them.
Key links
Key messages
More needs to be done to ensure that more businesses are sharing the benefits of globally-integrated markets, both as exporters and importers. Small- and medium-sized enterprises (SMEs) tend to be under-represented in international trade. More broadly, there are concerns around the world that competition in the global economy is distorted by market barriers and government actions. From local content requirements to subsidies, to behind-the-border regulatory measures seen as favouring domestic companies and products, countries are concerned that others are not playing fair.
While information and communications technologies proved critical during the COVID-19 pandemic and are contributing to increased productivity, wellbeing and employment, there are also concerns due to the digital divide and as the breadth of the transformation comes into view. On average across countries, an estimated 14% of jobs are at high risk of being automated. Although some workers will have the skills to adapt, and productivity gains and technology will see new jobs created, it is clear that workers will be displaced. Some import-competing industries in advanced countries have also seen significant job losses. So, as well as ensuring people are able to take advantage of opportunities from trade and technology, helping those facing hard adjustment is critical.
The reality is that trade alone did not cause all of the problems that concern so many today, and trade alone will not solve them either. Governments need to act across many fronts simultaneously, recognising that the impact of global trade on people depends both on the national policy settings of the countries in which they live and on the nature and degree of international economic cooperation.
This implies working across silos and taking a much more integrated policy approach, both domestically and internationally, in order to make the whole system work better and for more people.
Context
SMEs are underrepresented in international trade
While a few “born global” firms and highly-innovative SMEs are fully integrated into global markets, and a sizeable share of SMEs participates in global value chains (GVCs), as suppliers of exporters, for many SMEs export relationships can be short-lived – only one or two years in many countries.
