OECD urges freer trade combined with structural adjustment to reap benefits from globalisation


11/10/2005 - 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.

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.

  • 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.
  • 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.
  • 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.

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.

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.

Trade and Structural Adjustment: Embracing Globalisation is available for journalists through the OECD's journalists password-protected website or from OECD's Media Relations Division  (tel. + 33 1 45 24 97 00).

Subscribers and readers at subscribing institutions can access the study via SourceOECD our online library. Non-subscribers will be able to purchase the study via our Online Bookshop.

For further information on the report


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