trade-poverty3

Ending Poverty Through Trade

How free trade can bring prosperity to people across the world.

David Abney | UPS

The playwright George Bernard Shaw once wrote that poverty is “the greatest of evils and the worst of crimes.” While Shaw penned those poignant words more than a century ago, the reality is that too many people still lead lives filled with hunger and hardship.

Most unjust is the number of children who grow up in poverty. According to UNICEF, more than 160 million malnourished children under the age of five suffer from stunted growth, and 22,000 children die each day from starvation or other health issues caused by poverty. Most die quietly, never able to fight for themselves.

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Sustained poverty reduction depends on economic growth, which depends on trade policy reform.

The good news is that gains have been made in reducing poverty. Between 1990 and 2010 – a period when communism fell and markets opened – the percentage of people living in extreme poverty in developing economies dropped by half, to 21 percent.

Still, that still leaves more than 1 billion people surviving on $1.25 or less a day. As Nelson Mandela once said, poverty is not an act of nature – it’s a man-made problem that can be overcome and eradicated by the actions of us all.

The World Bank has set an ambitious goal of bringing the last billion people out of extreme poverty by 2030, and it’s an endeavor we all should support. It truly will “take a village,” because the World Bank can’t end poverty solely through its development work.

The question then is what more can be done and, not surprisingly, there are reasonable differences on the other tactics we should employ. For instance, some call for forgiving the debts of poor countries, while others advocate for micro-financing programs that provide loans at the grass roots.

There’s another solution that has gotten little attention, yet is sitting right before us: enacting trade reforms that make it easier for every artisan, every entrepreneur, and every peasant farmer to sell their goods freely in other markets.

An Undeniable Impact

At UPS, we’ve always believed in the enabling power of trade, and I’m heartened this sentiment is gaining currency in development circles. For instance, the World Bank noted in a 2009 report that “sustained long-term poverty reduction depends on stimulating economic growth, which in turn depends on trade policy reform.”

History shows that nations that open their economies to trade become more prosperous over time. Liberalizing trade creates the supply and demand that prompts businesses to hire more employees, which in turn enables these workers to feed their families.

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History shows that nations that open their economies to trade become more prosperous over time.

Opening economies also forces businesses to become more competitive. The ones that rise to the challenge are often able to then export their goods and services to other countries as well.

But first we must enact the trade initiatives that are currently on the table. These include the Trade in Services Agreement, the Transatlantic Trade and Investment Partnership (TTIP), the Trans-Pacific Partnership (TPP), and the Trade Facilitation Agreement (TFA).

Collectively, these initiatives would further reduce tariff and non-tariff barriers, would liberalize services and public procurement, and promote greater co-operation among regulators. And they would bring jobs – and hope – to regions where these are in short supply.

The Peterson Institute for International Economics estimates that the Trade Facilitation Agreement alone would create 21 million new jobs, with 18 million of those coming in the developing economies.

Too Powerful to Ignore

Of course, these initiatives have encountered their share of political resistance. This resistance was to be expected, because trade pacts have always inflamed passions.

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The Trade Facilitation Agreement will create 21 million new jobs, with 18 million in the developing economies.

Nearly 200 years ago, British historian Thomas B. Macaulay observed that “free trade – one of the greatest blessings which government can confer on its people – is in almost every country unpopular.”

But recent history has shown how trade can lift developing economies and their people. We only have to contrast the China of today – prosperous and globally engaged – with its pre-liberalization days to see the benefits of opening markets that were long walled off.

History has also shown the need to help economies make the transition to an open market. For instance, while the benefits of trade are undeniable, there’s a reasonable argument for providing assistance to displaced workers who need time to learn new skills.

These issues aside, all of us have a moral obligation not to waver in our support because the benefits of trade – economic and humanitarian – are too powerful to ignore. But it will take an ongoing commitment by nations and their people, along with the efforts of public and private sectors, to end the injustices that poverty bestows on the least advantaged. goldbrown2

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Visit David Abney's Linkedin profile page. David Abney is Chief Executive Officer of UPS.

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Reprinted with permission of Longitudes, the UPS blog devoted to the trends shaping the global economy.

6 Comments

  1. onestran

    The world is getting smaller everyday. World trade and internet commerce have changed the way people shop for goods. It is a global marketplace and free trade will hasten the transformation.

    1. Janak Desai

      The world wealth and the rich people in each country is be coming to corrosive and limited to about 20% at the top in most counters .The are be coming like aristocratic of the old days with no beholden to the 80%!

  2. Janak Desai

    Thoms Paine “Common Sense” was the solution in the USA and put out the old order of the Europe.Note you can look the other way but as Disraeli said “Change is inevitable,Change is constant ” inUPS we have “The Standard”. It’s not just word trade it’s the movement of people is just as important .LET mey ask way we have 17.6millon households in the U.S.don’t have adequate resources to meet their basic food needs.It’s a crule irony that people in rural Iowa can be malnourished .Were did the Crop subsidies in the US give rise to “Common Sense”#Hungry!

  3. Pingback: TTIP: The New Trade Route to Prosperity | Longitudes

  4. Pingback: Ending Poverty Through Trade - Procurement Professionals

  5. Speak Truth to Power

    This arguement is compelling, however, “We only have to contrast the China of today – prosperous and globally engaged – with its pre-liberalization days to see the benefits of opening markets that were long walled off” ignores the enormous pollution that China endures and creates for its prosperity. This undermines your entire argument.

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