A new report from the World Trade Organization (WTO) underscores the transformative impact of international trade on global income growth, poverty reduction, and economic convergence. Over the past three decades, since the establishment of the WTO, the world has witnessed an unprecedented period of income growth, with global per capita income rising by 65% between 1995 and 2023. During this period, low- and middle-income economies experienced a nearly threefold increase in per capita income, significantly reducing poverty, malnutrition, and infant mortality.
However, the World Trade Report 2024 also highlights that while trade has played a crucial role in lifting millions out of poverty, its benefits have not been universally shared. A growing divide remains between economies that have successfully integrated into the global market and those that continue to struggle with high trade costs, limited diversification, and poor infrastructure.
The Promise and Perils of Global Trade
According to the report, the global economy has experienced notable convergence, with low- and middle-income countries increasing their share of global trade from 21% in 1995 to 38% in 2022. The participation of developing economies in trade has also grown, with trade between these nations quadrupling over the past three decades. These shifts have been vital in reducing global inequalities, especially as foreign direct investment (FDI) and trade reforms have accelerated the structural transformation of many economies.
However, the convergence process has slowed since the 2007-08 global financial crisis and reversed during the COVID-19 pandemic, which disproportionately affected poorer economies.
A third of low- and middle-income economies have grown at a slower pace than the average high-income country, leading to an expanding income gap in some regions, particularly in Africa, Latin America, and the Middle East.
Challenges to Inclusivity
While the economic benefits of trade are clear, the report emphasizes that trade alone is not enough to ensure inclusivity. It points out that trade barriers such as high tariffs, insufficient regional integration, and weak domestic policies have prevented many economies from reaping the full benefits of globalization.
Some countries, particularly Least Developed Countries (LDCs), remain highly dependent on commodity exports and face difficulties in diversifying their economies.
The report calls for complementary domestic policies to maximize the benefits of trade and ensure that its growth is more inclusive. These policies should focus on improving infrastructure, reducing administrative barriers, and investing in technology and innovation to facilitate economic diversification.
According to the WTO, this will enable countries to better integrate into global value chains (GVCs) and improve their competitiveness on the global stage.
The Way Forward: Trade and Cooperation
The main conclusion of the 2024 World Trade Report is clear: reducing trade would stifle growth and inclusivity, but relying solely on trade policies would not capture the full potential of economic opportunities. The report calls for stronger international cooperation and greater coherence between the WTO and other international organizations to promote sustainable growth that benefits all nations.
As the global economy continues to navigate challenges like income inequality and vulnerability to crises, the WTO’s latest findings provide a roadmap for how trade policies can be leveraged to create a more inclusive global economy. While the benefits of trade have been widespread, ensuring that the most marginalized regions and populations can fully participate remains a key challenge for global policymakers in the years to come.
