TOPICS: Linking human development with trade

Nepal acceded to World Trade Organisation (WTO) in the belief that global integration of the economy is essential for expanding trade opportunities, facilitating competition and absorbing knowledge and thereby creating opportunities for growth and pursuing overall development goals. International trade based on production specialisation according to each nation’s advantage leads to a more efficient allocation of resources in the world economy and consequently to higher levels of output and growth in all countries. Accelerated growth, in turn, will promote national development and reduce poverty. However, the link between trade and human development is complex. Therefore, expanding global trade is not always beneficial.

The UNDP’s Human Development Report 2005 (HDR 2005) was launched in Nepal on September 13 with the theme: ‘International cooperation at crossroads: Aid, trade and security in unequal world.’ The report is about the challenges facing the world at the start of the 10-year countdown to 2015, the year set up by UN to achieve the Millennium Development Goals (MDGs).

The report focuses on responsibilities of rich and developing countries in global partnership bargains. The report warns that in the absence of renewed commitments to cooperation backed by practical actions, the MDGs will not be achieved. The report focuses on three pillars of global partnership, viz. development assistance, trade and security. The second pillar (international trade) of global partnership can no doubt be a powerful catalyst for human development, however, right conditions are needed. The Doha Development Round 2001 of WTO enabled rich nations to create those conditions.

The HDR 2005 argues that trade has greater potential than aid to increase the share of the world’s poorest countries and people in global prosperity. However, unfair trade policies are limiting the potential of trade to increase welfare of poor people. Improved multilateral cooperation on trade is vital if the international community is to achieve the MDGs. International trade rules and national trade policies need to be aligned with a commitment to poverty reduction. The starting point should be a recognition that greater openness to trade, like economic growth, is not an end in itself: it is a means to expand human capabilities. Indicators for increased openness such as export growth and rising trade to GDP ratios are important but they are not proxies for human development.

Trade liberalisation may fail to expand human choices and contribute to increasing inequalities in Nepal. The level of human development in Nepal is quite low and has very low levels of attainment in individual indicators of human development such as income, life expectancy, literacy, and gender equity. It is imperative to actively participate in WTO negotiations and implement policy interventions rather than passively wait for the markets to deliver automatic benefits if the opportunities of WTO are to be translated into tangible benefits.