#6 - Trade makes poor countries richer
Between 1996 and 2016, gross domestic product (GDP) per capita tripled – from $280 to over $960 in Least-Developed Countries (in current U.S. Dollar, based on World Bank data, which is publicly available for example here). Much of this can be attributed to an increase in trade and foreign investment. Trade can help boost development and reduce poverty by generating growth through increased commercial opportunities and investment, as well as broadening the productive base through private sector development. Bangladesh is an impressive example: In the 46 years since its independence, Bangladesh’s poverty rate has dropped from 80% to 30% and it intends to graduate from least developed country status to a middle-income country by the year 2021. Economic growth is not everything: Consumers demand information on the labour and environmental conditions at the locations where the goods are produced.
The EU rewards environmental and social standards in its GSP/GSP+ programme
The European Union facilitates trade with Least-Developed and Developing Countries through the Generalised System of Preferences (GSP), granting tariff reductions or tariff free access to the EU market to Least Developed and Developing countries. The programme has three objectives: contribute to the eradication of poverty by expanding exports from countries in need, promote sustainable development while at the same time defending the EU's financial and economic interests. The programme is successful: Imports from beneficiary countries are rising. The main product sections imported under the GSP are textiles, footwear and machinery and mechanical appliances. Between 2014 and 2016, textile imports grew by 24.5 per cent, compared to 6.5 per cent between 2011 and 2013 - according to a review, conducted for the European Commission.
What about sustainability? The GSP report finds evidence for the positive impact on economic development and labour standards, the effect on environmental standards is less clear, due to a lack of available data on environmental indicators as well as long-time lags in their availability.
The branded clothing industry works actively with suppliers and policy makers in production countries as well as in the EU towards improving supply chain standards and the development of a policy framework to facilitate such improvement.
This is the sixth of ten messages on international trade, which we will publish over the coming weeks. If you like this please give us a star below. If you wish to respond, please send us a message via our contact form.