Assessing the distributional impact of trade policies in Africa

Global trade has been a vital driver of growth and poverty reduction over the past three decades. However, the World Bank maintains that the benefits of trade could be spread more inclusively across various sectors and regions. Jakob Engel, an economist at the World Bank's Global Trade and Regional Integration Unit, recently sat down with CNBC Africa to discuss the implications of the World Bank's report on the distributional impacts of trade policies. The report delves into the nuances of how trade has contributed to poverty alleviation and inclusive growth in developing countries, emphasizing the importance of ensuring that the gains from trade are more evenly distributed. The study draws on novel datasets, tools, and country-specific case studies in regions like Brazil, Mexico, Sri Lanka, Bangladesh, and South Africa to highlight the successes and shortcomings of trade policies. One of the critical revelations of the report is that while trade fosters overall economic growth, not all segments of society benefit equally. This underscores the necessity for policymakers to intervene and create policies that support those who may be left behind in the process of economic transformation. In the context of Africa, the report emphasizes the significance of enhancing worker mobility and reducing trade barriers to maximize the benefits of the African Continental Free Trade Agreement (AfCFTA). Policies that facilitate easy movement between industries and regions, along with lowering trade costs, are pivotal for ensuring a level playing field and fostering a conducive business environment. The report stresses that addressing disparities and promoting equitable distribution of trade benefits require proactive policy interventions and targeted reforms both at the national and regional levels. Furthermore, the ongoing COVID-19 pandemic has posed significant challenges to global trade dynamics, necessitating a reevaluation of trade policies. While the pandemic has disrupted supply chains and highlighted vulnerabilities in the trading system, it has also presented an opportunity to revamp trade mechanisms and promote more resilient and sustainable practices. By recognizing the importance of open and free trade, countries can leverage the crisis as a catalyst for positive change and collaboration, particularly in areas like vaccine distribution and economic recovery. Looking ahead, Engel acknowledges that achieving perfect equality in trade benefits among all stakeholders may be unrealistic given the inherent complexities of trade reforms. Nonetheless, he emphasizes that policymakers can mitigate disparities by proactively planning and implementing measures to support workers and industries that may face challenges during economic transitions. By empowering workers through skills training, facilitating mobility, and removing historical trade barriers, policymakers can strive to create a more equitable distribution of gains and ensure a fairer playing field for all participants in the global trade landscape.