Trade and Development - Overview

Overview

The current consensus is that trade, development, and poverty reduction are intimately linked. Sustained strong growth over longer periods is strongly associated with poverty reduction, while trade and growth are strongly linked. Countries that develop invariably increase their integration with the global economy, while export-led growth has been a key part of many countries’ successful development strategies.

Continents, countries and sectors that have not developed and remain largely poor have comparative advantage in three main areas:

• natural resource exploitation, i.e. running down of natural capital such as rain forest timber;
• low-education labor-intensive manufacturing, due to high population densities and little suitable land per person;
• agriculture, due to low population densities and relatively large areas of suitable land per person.

Crucially for poverty reduction, the latter two at least are labor-intensive, helping to ensure that growth in these sectors will be poverty-reducing. However, low value-added, price instability and unsustainability in these commodity sectors means they should be used only temporarily as stepping stones in the path to economic development.