SEATTLE — The results of the Brexit vote and the election of Donald Trump show that economic nationalism is spreading rapidly through two prominent western countries. President Trump removed the United States from the Trans-Pacific Partnership as one of his first acts after inauguration and has threatened to apply tariffs to the countries with which the U.S. has trade deficits. These talks about globalization and getting “tough” on trade beg the question: How will this affect global poverty?
In 2015, the World Bank estimated that 700 million people were living in poverty. In conjunction with the World Trade Organization, the World Bank released a report titled “The Role of Trade in Ending Poverty,” which shows trade and global poverty as interconnected and key for developing growth.
One of the three main messages of the report was that lowering tariffs was an essential piece of the global poverty-reduction puzzle. The report notes that lower trade barriers need to be met with equal efforts at maximizing gains for the poor to ensure that the effects reach the most vulnerable. When poorer countries can sell wealthy countries their products at low costs, it increases growth and development in those countries via jobs and government services.
Even if the United States and other western countries can help with the development of nations with high poverty levels, there may be risks. What if doing so is detrimental to their own citizens? Evidence does suggest that globalization has hurt employment among America’s working class over the years. But, studies show that this is outweighed by the fact that freer trade provides better choices for the consumer. This results in larger gains in the long run.
Not only would protectionism have a negative effect on the world’s poor, it would also hurt the poor in the United States. The National Foundation for American Policy found that, if implemented, the tariffs proposed by the Trump Administration would cost U.S. households with the lowest 10 percent of income an average of 18 percent of their after-tax income.
It is important not to overlook the connectivity between trade and global poverty. On the surface, the two may not seem relative to each other. Opponents of freer trade in the United States claim that it is bad for the average American worker. However, there is little debate that globalized trade has had a positive effect on the world’s poorest and most vulnerable.
– Dustin Jayroe