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Global trade will play a critical role in driving economic recovery from Covid 19

Global trade has contributed to growth and poverty reduction in the past three decades, but gains from trade can be more inclusive, according to a new World Bank report, which provides new knowledge, data, and tools to make trade work better for more people.

Trade has been a significant driver of growth and poverty reduction throughout the developing world over the past decades. Countries are continuing to sign new trade agreements and deepen existing ones in the hope that trade and increased integration can lead to broad-based gains. But it is important to recognize that the distributional impacts of trade have been uneven and unequal. Gains and adjustment costs have been heavily concentrated in some sectors, types of jobs, and regions.

The World Bank has been examining the links between global trade and poverty reduction, how changing trade patterns affect the poor, and how policies can ensure that gains are shared more widely over the last two years. This report is a result of this work. It provides new knowledge, data, and tools to inform policy responses to spread the gains from trade more widely, to make trade work for everyone.

In WB report ‘The Distributional Impacts of Trade’, analysis shows that countries should continue seeing trade as a pathway to development. The evidence remains strong that trade leads to higher growth and better jobs. But the report also shows where previous analysis may have fallen short. In extending the latest economic thinking to developing countries through a series of newly developed models and databases as well as five country case studies, the report aims to help trade policy makers to better identify who will benefit and who may need support as the structure of the economy changes through trade.

Among the most critical lessons of the report is that maximising the gains from trade requires a comprehensive and economy-wide approach. This includes understanding how to facilitate labor mobility as well as the importance of complementary policies such as business environment reforms and supporting skills development. Developing countries can use the analysis, data, and tools in the report to better understand potential distributional impacts before policies are implemented, monitor the implementation, and coordinate responses across government.

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