Investing in skills for inclusive trade

Over recent decades, the global economy has experienced a profound transformation, mostly as a result of the joint forces of trade integration and technological progress, accompanied by important political changes. Increased trade integration has helped to drive economic growth in both high- and low-income economies, lifting millions out of poverty in emerging and developing countries. Since the global financial crisis of 2007–08, however, trade, productivity and income growth have decelerated. At the same time, trade is increasingly perceived as leaving too many individuals and communities behind. Reaping the benefits from global trade and effective integration into global markets goes hand in hand with the adoption of new technologies, improved forms of work organization and productivity increases. Given the role of skills in trade, it is vital to put a strong emphasis on skills development. Human capital is one of the principal enablers of trade growth and economic diversification and is also an important “buffer” facilitating the adjustment to more open trade. Appropriate skills development policies are key to helping firms expand their export activities; they are also key to helping workers who lose their jobs make a smooth and rapid transition to new jobs with equal or higher wages. These two effects reinforce each other. For trade to grow, it needs to be more inclusive; and more exports offer more employment opportunities. Skills development policies constitute one among many policy instruments available to governments to make trade inclusive by enabling firms and workers to participate in trade, by lowering adjustment costs and by distributing more evenly the benefits of trade and technological progress. Other active labour market policies (ALMPs), such as job-search assistance or activation strategies, passive labour market policies such as unemployment insurance, and social policies, as well as complementary policies such as housing or credit market policies, can also be used to lower adjustment costs, while various instruments are available to redistribute the gains from trade or technology to those whose skills are less in demand because of those changes.