What is 'inclusive trade', and how can trade policies improve workers' lives?

Globalization and trade liberalization have done much to raise living standards and set more people on a path to prosperity. However, these benefits have not been evenly distributed, exacerbating existing labour challenges.

The ongoing green transition, digitalization and geopolitical shifts are likely to lead to further disruption and more people could be left behind, a new white paper from the World Economic Forum and the Geneva Graduate Institute cautions. The paper, Trade and Labour: Rethinking Policy Tools for Better Labour Outcomes, explores the persistent labour challenges hampering inclusive trade and the approaches that can improve workers’ rights and wellbeing, and build more sustainable and resilient supply chains.

While driving economic growth, trade liberalization has also been linked to rising wage inequality, particularly in developing economies, downward pressure on working conditions and higher levels of informal employment.

A fifth of employees today live in poverty due to receiving inadequate wages for their work (21%), and informal employment affects close to two-thirds (61%) or two billion of the global workforce. Four billion have no social protection whatsoever and more than 28 million people are subject to forced labour. Workers in developing economies are particularly exposed to precarious employment, leaving them vulnerable to economic shocks and instability.

These conditions persist despite policymakers' and organisations’ increased focus on improving labour standards throughout supply chains, for example through the adoption of due diligence frameworks and the inclusion of labour provisions in regional trade agreements.

The white paper cautions that the ongoing digital and green transitions should not come at the expense of labour rights.

Already disadvantaged groups such as women, older workers, people with disabilities, migrant workers and indigenous groups, could be disproportionately affected. These groups often lack the resources and opportunities to adapt, such as upskilling or reskilling, and could face greater economic hardships and job insecurity.

Inclusion and equity are, therefore, vital to the success of global trade, and the white paper stresses the need for a socially just evolution that does not jeopardize labour standards.

The report advocates for the implementation and enforcement of robust labour standards to protect workers from exploitation and improve working conditions, focusing on three areas:

First, more coherent, harmonized rules are needed, strengthening the link between trade and labour policy tools on the one hand and supply chain initiatives on the other. International collaboration on establishing harmonized policy frameworks and standards will be vital to avoiding fragmentation. Multilateral organizations such as the ILO, WTO, ITC, UNCTAD and UNICEF should be as much part of this process as regional organizations and policymakers.

Second, the paper recommends applying a supply chain lens to better understand the dynamics that impact working conditions and address resulting imbalances. It advocates deeper cooperation between all parties to create fairer conditions for workers.

Third, implementing and enforcing existing and new labour standards and policies at a national level must happen in dialogue with all stakeholders. This will ensure an inclusive approach to reforming areas such as wages, working conditions and labour rights, as well as creating upskilling opportunities and rooting out informal employment.

While there are significant challenges to realizing more inclusive trade benefits, they are not insurmountable.

The white paper calls for renewed attention to trade and labour linkages, more coherent policymaking and enforcement, and enhanced collaboration between trade and labour communities at the international, regional and domestic level. It also highlights that if the promise of globalization is to be realized for all, policymakers, businesses, international organizations and civil society must work more closely together than ever before to navigate the transitions effectively and contribute to strengthening labour rights.