Open markets play a pivotal role in supporting growth and job creation, says a new joint report by the Organisation for Economic Cooperation and Development, the International Labor Organisation, the World Bank and the World Trade Organisation. But, it adds, trade opening must be complemented by properly designed domestic policies, including employment and social protection policies to ensure that benefits from trade are widely shared.
"Seizing the Benefits of Trade for Employment and Growth," presented to Leaders at the G20 Summit in Seoul on 11-12 November 2010, argues that more open trade for goods and services can provide a stimulus for the world economy, at a time when many of the temporary stimulus measures taken by many governments during the crisis are being unwound.
Trade is contributing to the economic recovery. But with high unemployment persisting in many countries, governments must resist protectionism, the organisations say. They underscored that a successful conclusion to the Doha Development Agenda would send a positive signal that governments continue to oppose protectionism and seek new opportunities for growth, development and job creation through trade.
The economic crisis showed how open economies are exposed to external shocks, the report adds. But openness to trade also helps economies recover more quickly as they are more adaptable and less dependent on limited domestic demand.
For open trade to boost growth and jobs on a sustained basis, complementary policies to address adjustment problems and distributional concerns are needed to help workers who may lose their jobs as a result of increased international competition. Relevant measures include stable macroeconomic policies, effective labor market and social protection policies, investment in education and enhancing export sectors in developing countries.
An open market frees countries from the constraints of their local economies, promotes greater efficiency and helps to develop and spread technological progress, the report says. These are key sources of longer-term gains in productivity and living standards.