All but a very small number of developing countries, mostly in sub-Saharan Africa, stand to gain more than they lose from successful completion of the Doha Round of multilateral trade talks, according to a new OECD publication, Trade and Structural Adjustment: Embracing Globalisation.
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| OECD Report: "One clear pattern over time, and an important frame of reference for this study, is the marked shift in the structure of global economic activity that has occurred over the past 20 years. As Table 1.1 shows, services have assumed greater importance in all country groupings and account for the largest share of GDP in high-income countries (71%), middle-income (57%) and low-income countries (45%). In high-income and middle income countries the rise in the share of services has been achieved at the expense of both agriculture and industry. In low-income countries as well, agriculture’s share of GDP has fallen although industry’s share has risen slightly. A factor that has contributed to the increased share of services is the fact that exposing domestic service providers to foreign competitors tends to contribute to a deepening of service intensity in the economy (OECD, 2004a). Indeed, as service industries in OECD economies are more exposed to international competition, there is likely to be a strengthening of the trend whereby the transfer of resources is less from manufacturing to services than from one service activity to another." |
This is because gains from multilateral freeing of trade will more than offset the losses that may arise from erosion of the preferences granted to many developing countries, the publication argues. Its analysis is built around detailed country case studies, from both developed and developing economies, in eight sectors: agriculture, fisheries, textiles and clothing, steel, motor vehicles, shipbuilding, health services and internationally sourced business process services.
Arguing that globalisation should be embraced, rather than resisted, the study addresses some of the widespread fears about globalisation, challenging some misperceptions.
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Globalisation does not involve an accelerating shift of employment out of manufacturing and agriculture into services. Over the past two decades, the transfer of employment into services has slowed and the pace of structural change between agriculture, manufacturing and services in OECD economies has eased. Employment shifts, where they occur, are now mostly taking place between different parts of the service economy.
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Movement of white-collar jobs offshore is still modest. Consultancy reports of the transfer of as many as 60,000 service jobs out of the United States every quarter need to be seen in the context of the vastly greater destruction and creation of jobs that is part of the normal functioning of the US labour market. Other OECD countries such as France, Germany and Italy are experiencing even more moderate movement of service jobs abroad.
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Most developing countries -- and not just a handful of the largest such as China, India and Brazil -- stand to gain from trade liberalisation. Global market openness is a key to successful adjustment because of the contribution of trade to growth, innovation and competitiveness. Particular benefits arise from the removal of barriers to trade in services given their critical role as inputs to economic activity
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| OECD Report: "The experience of the United States and India indicates that trade in IT and business process services has the potential to be beneficial for both OECD and non-OECD" |
But trade cannot do it all, the OECD study acknowledges. Trade liberalisation needs to be accompanied by flexible labour markets, efficient but not over-burdensome regulation and macroeconomic policies that promote stability and growth. The benefits of trade liberalisation will only be fully realised in an economy that facilitates the entry and exit of firms, allowing labour and capital to move from declining to expanding areas of activity.
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| OECD Report: "Textiles and clothing are a significant industry in world trade: in 2003, global exports" |
And there will be declining areas of activity. The OECD report acknowledges that globalisation brings losers as well as winners - for both people and countries. For this reason, it argues, the pursuit of efficiency needs to be matched by considerations of equity. In particular, it recommends active labour market policies that seek to match assistance - for example in job-search or training - to the actual needs of the people concerned.
As for those countries that are the poorest and most vulnerable, unable yet to benefit fully from the gains from trade, action is needed to build up their export capacity, to strengthen their institutions and governance, to improve their implementation of internationally-agreed core labour standards and to reduce their own often high barriers to trade, the OECD report says. Allowing the poorest countries to stand apart from the process of market opening is not doing them a favour, it argues. They too, with help, stand to gain from the flows of trade and investment that are at the heart of globalisation.
