The 2024 edition of the WTO’s World Trade Report presents strong evidence that trade has played a crucial role in narrowing the income gap between economies since the WTO was established 30 years ago.
The flagship publication also analyses trends in the distribution of the gains of trade among people within economies, and emphasizes the need for a comprehensive strategy that integrates open trade with supportive domestic policies.
“Perhaps the biggest takeaway from the report is its reaffirmation of trade's transformative role in reducing poverty and creating shared prosperity — contrary to the currently fashionable notion that trade, and institutions like the WTO, have not been good for poverty or for poor countries, and are creating a more unequal world,” WTO Director-General Ngozi Okonjo-Iweala says in her foreword to the report.
“But the second biggest takeaway is that there is much more we can do to make trade and the WTO work better for economies and people left behind during the past 30 years of globalization,” DG Okonjo-Iweala says.
Examining how international trade has contributed to making the global economy more inclusive, the report showcases data establishing a strong link between trade participation and the narrowing of income disparities among economies.
From 1996 to 2021, a high trade share in GDP is significantly correlated to faster growth in low- and middle-income economies, converging to the level of GDP per capita in high-income economies.
Moreover, membership in the WTO and its predecessor the General Agreement on Tariffs and Trade (GATT) has boosted trade between members by an average of 140 per cent, while economies that undergo rigorous WTO accession negotiations are shown to grow 1.5 percentage points faster during their accession period.
Analysis further suggests that trade cost reductions between 1995 and 2020 led to a 20 to 35 per cent faster income convergence of low- and middle-income economies with high-income economies.
Contrary to common belief, the report found weak correlation between trade openness and within-country income inequality, based on a comparison of the 2021 Gini inequality index and trade openness index of 157 economies. While income inequality remains high it is not systematically linked to trade and import competition.
