For least developed countries like Nepal, international trade plays an important role in achieving sustainable development. But harnessing the potential benefits of trade requires a thought-through approach to policy, writes SAWTEE’s Posh Raj Pandey.

The Sustainable Development Goals (SDGs), a global development agenda for the period 2016-2030, take a holistic approach by pursuing economic, social and environmental development. The 17 Goals are closely intertwined; they address issues that are or should be central to holistic development in one form or another. These Global Goals are seen as a means to generate productive employment, promote women’s empowerment, ensure food security and reduce economic inequality. There is also a clear link between international trade policy and achievement of the SDGs.

Whether directly or indirectly, implementation of the Global Goals will influence international trade and its regime. Goal 17 specifically outlines a plan to promote an open, universal, rules-based, fair and multilateral trade system. It intends to double the share of developing countries in world trade by 2020, and to help least developed countries gain market access through quotas. More indirectly, world trade will also be influenced by other goals such as ending hunger and ensuring food security (Goal 2), guaranteeing healthy lives (Goal 3), achieving durable and sustainable economic growth (Goal 8), reducing inequality (Goal 10), conserving community resources (Goal 14) and protecting, reviving and promoting bio-diversity (Goal 15).

The problem of hunger and food insecurity has to be addressed by means of trade. To this end, the plan is to promote trade in farm products and to eliminate distortions in the international market caused by agricultural subsidies. To facilitate access to essential medicines, an appeal has been made for flexible implementation of the WTO’s proclamation on public health. There is emphasis on the need to raise the productive capacities of developing and least developed countries; the concept of ‘Aid for Trade’ has been advanced as a strategy to this end. Also mentioned is the plan to reduce intra- and inter-country inequality. In order to bring down inter-country inequality in particular, effective implementation of the Special and Differential Treatment provisions for least developed countries in multilateral trade systems is stressed. In order to ensure sustainable fisheries, the agenda refers to the need to cushion farmers from the impact of subsidies given to multinational fishing companies. It also reflects the need to protect endangered species and curb trade in them.

For least developed countries like Nepal, international trade plays an important role in achieving sustainable development. By concentrating economic activities in competitive sectors, international trade facilitates income generation and helps attract foreign investment and technology. An increase in income across the board expands government revenue, which in turn helps the government to mobilize financial resources for meeting targets on health, education, food security, environment conservation, and other priorities. Trade also offers non-financial benefits. Greater trade and access to markets raises workers’ income, which has a positive impact on health and nutrition. Trade in essential medications contributes directly to better health. Similarly, by facilitating access to technology, international trade addresses the problems of ecological imbalance and adverse climatic effects; technology has a major role in minimizing and adapting to climate change. The SDGs refer to technology transfers by means of trade.

Meeting the SDG target on international trade will also help meet other targets. The major conceptual question, then, is whether these targets can be achieved through current trade policies and systems. Adopting a completely market-oriented system without regulating trade risks increasing inequality. If we do not regulate the market, assuming there is a perfect market system, inequality would increase in terms of the distribution of expected outcomes and labor. Therefore, we need complementary policies if we want to exploit trade to achieve SDG targets. Such complimentary policies are required both at the global and national levels.

The SDGs have been embraced by all countries. Unbridled markets cannot deliver universal prosperity and peace. First, the global market is not a level playing field. Least developed countries lack export surplus and productive capability, and international assistance is imperative in order for them to improve on these two fronts. The Special and Differential Treatment provisions for these countries in international trade need to be strongly implemented.

Because of unequal resource distribution, the market alone cannot ensure fairness. There is also the possibility of market failure. Therefore, the market has to be regulated for it to function well. The goal of the overall economic and market policy should be pro-poor economic growth. The growth rate of the poor’s income should outstrip the growth rate of the wealthy’s income. In other words, growth in trade will be pro-poor if wages take up a relatively greater share of profits from trade than capital. Otherwise, growth in trade and in the economy will not automatically lead to the attainment of the SDGs.

More articles (Development Advocate 2019)