A new report from the International Chamber of Commerce (ICC) highlights how trade plays a pivotal role in ending poverty, driving economic growth, and mitigating climate change.
In 2015, the United Nations (UN) decided it would change the world by 2030.
The intergovernmental organisation laid out 17 interlinked sustainable development goals (SDGs) designed to be “a shared blueprint for peace and prosperity for people and the planet, now and into the future.”
By now, nearly halfway between the SDG launch and its intended goalpost, most of us are familiar with the colourful squares and crisp icons that have served as a map for changing the world.
Indeed, many industries and organisations worldwide point to how their efforts are enacting positive change within the context of a subset of these SDGs.
With a new report, the ICC is doing the same with international trade, emphasising the critical impact that cross-border commerce has on SDG goals; 1 (no poverty), 8 (decent work and economic growth), and 13 (climate action).
Trade helps provide decent work and promotes economic growth
According to the ICC report, trade helps promote economic development by providing access to new markets needed for economies to grow at an accelerated rate.
On average, a trade liberalisation policy leads nations to experience an average annual growth rate of 1.5% higher than before.
China, Brazil, and India all serve as excellent examples of this, as these countries have all experienced high and sustained growth since further integrating into global value chains over the last two decades.
Trade can also increase employment in the long term.
While it is true that increased trade does lead to unemployment in the short term, as newly introduced foreign competition makes workers in specific sectors redundant, in the long run, the reallocation of resources to more productive sectors leads to an employment boost.
ICC report reads, “Using data from 20 OECD countries, Felbermayr et al. (2009) find that a 10% increase in trade openness reduces unemployment by nearly 1%.”
Increased trade helps citizens in that increased market efficiencies––from domestic and international firms––drive down prices for end consumers.
As such, the ICC claims that trade is an essential facilitator of SDG 8.
Trade helps reduce poverty
As an added benefit of economic growth and increased opportunities for decent work, trade also has the power to dispel poverty.
This is because job creation and increased economic output are likely to improve employment prospects and, thus, earnings for low-income citizens.
However, the ICC highlights that this is not a guaranteed outcome.
Participation in global trade markets exposes nations to global economic shocks, mainly when economies are not well diversified.
There is also the risk that any country-level economic growth will be hoarded by those already in powerful positions.
Therefore nations need strong domestic policies in place to ensure that benefits reach the economically disadvantaged. They must ensure sufficient economic diversification or appropriate preparation to contend with potential shocks.
With these safeguards in place, trade does serve as a pivotal progress driver toward SDG 1.
Trade helps in the fight against climate change
The claim that trade helps in the fight against climate change may seem counterintuitive, given that one-quarter of the total annual global carbon dioxide emissions are associated with producing goods and services and delivering them across borders.
However, there is a green case to be made for trade.
One facet in support of that case is the difficulty and expert knowledge required for developing green technologies.
Countries that have the skills and experience in designing and producing innovative green technologies can leverage their comparative advantage to export more of these goods around the world.
This allows countries without that level of expertise to still acquire and use the best green tools in existence––something advantageous for the globe.
The adoption of trade digitalisation, which many experts expect to accelerate rapidly in the coming years, will also help drastically reduce carbon emissions as a result of using paper documents.
As an example of these benefits, the report cites that Timor-Leste has lowered its carbon emissions by 14,492 kg since implementing an automated system for customs data.
With these benefits becoming increasingly widespread and trade helping to bring green technology to all corners of the globe, international trade will continue to be a fundamental driver for SGD 13.
The ICC standards for sustainable trade and sustainable trade finance
While the ICC believes that trade is a vital driver of the SDGs, the organisation recognises that the work is incomplete.
In their constant quest to transform trade into a more efficient engine for sustainable development, they have released the ICC standards for sustainable trade and sustainable trade finance.
This initiative helps to define and set the standards for sustainable trade through a comprehensive framework to measure and assess the sustainability of a given trade transaction.
In turn, this will help businesses evaluate the efficacy of their environment, social, and governance (ESG) measures, support the UN to achieve the SDGs, and hopefully help humankind enjoy a cleaner and better world.