Trading Up from Poverty

A long-held tenet of international-trade theory is that, in the long run, increased trade correlates with faster GDP growth. But the challenge is to ensure that the poor benefit from trade-driven growth.

WASHINGTON, DC – A long-held tenet of international-trade theory is that, in the long run, increased trade correlates with faster GDP growth. But the challenge – which my institution, the World Bank, is working to overcome – is to ensure that trade-driven growth benefits the poor. That is why the heads of seven multilateral institutions, including the World Bank, strongly supported the push for the trade-facilitation agreement that was reached earlier this month at the World Trade Organization’s ministerial conference in Bali.

To be sure, the incidence of poverty worldwide has reached an historic low, with the extreme-poverty rate (the share of the population living on less than $1.25 a day, in purchasing-power-parity terms) falling in 2010 by more than half since 1990. But that still leaves more than one billion people worldwide living in extreme poverty. Moreover, progress has been uneven, with poverty rates having declined far more in East Asia and Latin America than in Sub-Saharan Africa.

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