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Africa: Advantages of International Trade
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Business Daily (Nairobi)
OPINION
21 February 2008
Posted to the web 21 February 2008
Pascal Lamy
As I see it, the lessons of 60 years, the challenges facing WTO and the system and shape of things to come can be explained best by focussing on five key elements that have been and continue to be crucial to international commerce - trade and growth, development issues, regionalism, globalisation and what we can learn for global governance.
Since 1950, world trade has grown more than 20 fold and has expanded three times faster than world output growth. International trade has been a great stabiliser for many countries, contributing to economic expansion even at times of slackening domestic demand.
Welfare and efficiency gains derived from international trade are considerable but are not easily perceived by the public. Import competition translates into improved consumer welfare by increasing choice and quality which leads to lower prices for goods and services. Local producers find cheaper and better quality inputs, which in turn allows them to produce more competitively for local or export markets.
Today we know that the highest share of the gains from trade accrue to countries which open up their markets to foreign goods and services. In part this is true because better imports translate into better exports.
Typically, gains are spread across the vast majority of silent consumers and input users.
All the economic evidence suggests that the vast majority of people benefit from trade.
But there is no denying that there are losers too and often those who lose out are generally better-organised and more vocal about the costs of trade opening. In many of our societies trade is the scapegoat for job destruction and declining living standards.
On this point too, there is general agreement among economists that it is not trade but productivity enhancements arising from technology improvements which primarily responsible for a loss of manufacturing jobs. It is true that international trade contributes to a faster transfer of technology.
It is also clear that the economic growth resulting from the expansion of world trade has not been equitably distributed inside our societies, which have seen a rise in inequality and disruptions in their economic and social fabrics.
These issues, which are about fairness, draw our attention to what may be the most important lessons of these 60 years, which is that whether we speak of developed or developing countries, there must be a continuum in the articulation of trade and domestic policies.
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Lamy is the Director-General of the World Trade Organisation.
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