Trade raises productivity but may hurt some unless policies redistribute the benefits
As the global economy struggles with slow growth, political support for freer international trade has weakened, most notably in advanced economies and especially in the United States. While some resistance to freer trade is nothing new, it never stopped the postwar trade liberalization process, which delivered growth in advanced economies and promoted convergence of per capita incomes throughout a significant portion of the developing world.
Opposition to trade remains a minority view—most people gain from trade, but it seems to have many more vocal enemies these days.
Trade enables a country to use its resources more efficiently. But the gains from that greater efficiency may be divided unevenly among a country’s citizens, so that some of them lose out. The result can be greater income inequality and disrupted lives.
Over the past quarter century, the global economy has seen a seismic transformation thanks to increased trade and technological and political changes. While there is much progress to cheer at the global level, most governments have not ensured that gains from economic growth—including those due to trade—are broadly shared. In some places, tepid and declining overall income growth has brought frustrations to a boil.
Trade’s benefits have always been unequally shared, and maybe more so in recent years. But its gains are all the more important in today’s low-growth environment. Countries must protect and expand these gains through policies that redistribute them more equitably. That will also make economies more resilient to a range of market forces, beyond those connected with globalization.