|International trade can play powerful role in driving economic growth and job creation, but protectionist may do the opposite, according to a report released Wednesday at the Forum of the Organization for Economic Cooperation and Development (OECD) in Paris.
"Governments that foster open markets and resist protectionism have the best chance of stimulating inclusive economic growth and creating high-value jobs," the OECD said, citing a new study of the International Collaborative Initiative on Trade and Employment (ICITE) comprising of 10 international prestigious organisations.
The study report, named "Policy Priorities for International Trade and Jobs", was launched by OECD Secretary General Angel Gurria during the annual OECD Forum held on May 22-24.
It shows that protectionist and discriminatory trade measures do not protect or preserve jobs. On the contrary, closing markets is actually more likely to stifle growth and put additional pressure on labour markets.
"In today's challenging policy environment of a hesitant recovery and slow job creation, market openness can be a critical element to boost growth and employment," Gurria said.
The ICITE report highlights the significant role of trade in driving growth and improving employment after drawing on numerous studies covering different parts of the globe and countries at very different levels of development and analysing the complex interactions between globalisation, trade and labour markets.
The study shows that of the 14 main studies undertaken since 2000 reviewed in the report, all 14 have concluded that trade plays an independent and positive role in raising incomes.
Trade also raises average wages, given the fact that from 1970 to 2000, manufacturing workers in open economies benefitted from pay rates that were between 3 and 9 times greater than those in closed economies.
The report outlined that fears of the impact of offshoring may be exaggerated, citing studies for Britain, United States, Germany and Italy,which demonstrate that "off-shoring of intermediate goods has either no impact or, if any, a positive effect on both employment and wages."
The ICITE report debunks the principal argument against freeing up trade, the supposed impact of imports on jobs, saying there is no systematic link between imports and unemployment. "Instead, evidence shows that in country after country, both exports and imports push productivity growth upward while helping create better skilled and higher paying jobs."
The report indicated that offshoring and outsourcing by developed countries,two commonly-cited negative aspects of globalisation, often complement, rather than replace domestic jobs, while creating new, higher-wage opportunities in developing countries.
However, the report suggested that openness to trade should be complemented with other policies, "such as sound macroeconomic policies, a positive investment climate, flexible labour markets and adequate social safety nets," these are all needed to realise the full benefits of trade.
"Trade liberalisation has historically gone hand in hand with better economic performance when accompanied by sound institutions and effective employment and education policies, in both developed and developing economies alike. Opening up further will benefit workers, firms and consumers," the OECD director said.