The World Trade Organisation (WTO), the International Monetary Fund (IMF) and the World Bank have published a joint report defending free trade as fear of protectionist agendas grows.
The report argues that increased trade integration helped drive economic growth in both advanced and developing economies of the world in the latter part of the 20th century but that there has been an uptick in protectionism in the post-crisis era.
The trio points out that job losses in certain sectors or regions have resulted largely from technological changes rather than from trade, which is often identified as the guilty culprit.
The report, however, admits that trade has left “too many individuals and communities behind”, including in the more advanced economies, and calls on country leaders to put the right policies in place.
“The role of trade in the global economy is at a critical juncture,” says the report, Making Trade an Engine of Growth for All: The Case for Trade and for Policies to Facilitate Adjustment.
“With the right policies, countries can benefit from the great opportunities that trade brings and lift up those who have been left behind. Those policies ease adjustment to trade, as well as strengthen overall economic flexibility and performance.”
Among its proposals, the report suggests active labour market policies that ease worker mobility across firms, industries and regions to minimise adjustment costs and promote employment. Policies should be tailored to country circumstances to facilitate reemployment and augment worker skills through job search assistance, training programs and, in some situations, wage insurance. Further, the paper calls for education systems to prepare workers for the changing demands of the modern labour market as well as policies in areas such as housing, credit and infrastructure to facilitate mobility.
The report also acknowledges that while bilateral and regional trade deals have a role to play, a strong global trading system based on the WTO is critical: “Strong, well-enforced trade rules help to promote competition and to reassure citizens that international trade is evenhanded,” it says.
The defence of trade and multilateralism comes just one week before the IMF and World Bank are to hold their spring meetings in Washington DC – the first since Donald Trump won the US presidential election in November.
Work on the report began after the September G20 summit in Hangzhou, China, following the UK’s decision to leave the European Union, and as Trump’s presidential campaign picked up pace – raising fears of growing populism. The three committed to doing more to communicate the benefits of trade and to help those left behind.
Trump won on a protectionist manifesto that threatened to pull the US from various trade deals and organisations, including the WTO. The US is the biggest shareholder of the World Bank and the IMF, and the meetings next week are expected to be dominated by questions regarding the president’s plans for the two multilateral agencies.