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Trade and Employment in Asia

By Niny Khor & Devashish Mitra

While it is understood that trade leads to higher economic growth, the question of whether increased trade and openness to global markets benefits workers is still debated. Below, Niny Khor and Devashish Mitra argue that trade is beneficial for both employment and its quality, provided the right kind of complementary domestic policies are in place.

On April 24, 2013, an eight-storey building in Bangladesh collapsed, killing more than 1,100 workers, many of whom worked for export-oriented garment enterprises in the building. The disaster was one of the worst industrial accidents in recent years, and the outcry was immediate — igniting allegations that once again, globalisation is hurting workers in poor countries.

“Our studies suggest that withdrawing into protectionism would be a mistake: in general, increased openness has benefited the average worker in Asia. “

This is not the first time that foreign trade and foreign direct investment (FDI) have been blamed for the misery of workers. But is that a fair allegation? That trade leads to higher economic growth is one of the rarer facts that most economists agree upon. However, whether increased trade and openness to global markets benefits workers is still an open question.

 In our recent publication, the edited volume Trade and Employment in Asia,1 several experts from all over the world examine the trade-labor nexus in the context of Asia, which has been growing rapidly over the last three decades and at the same time has been undergoing significant structural changes in an increasingly globalising world (Figure 1). This period in Asia has seen job creation at a rapid and robust pace. At the same time, economic growth has led to substantial poverty reduction. Employment is transitioning from agriculture to industry and services.

However, the global financial and economic crisis that began in the second half of 2008 has led to a rise in unemployment together with underemployment across the world. This acts as a major disruption in Asia’s steady march towards universal productive employment. Especially because of the region’s reliance on exports for its growth in income and employment, the slowdown and the threat of a double dip recession in the Organisation of Economic Cooperation and Development (OECD) countries has posed a major challenge to Asian countries. As a result, within policy circles of many Asian countries, there have been discussions about rebalancing their respective economies towards domestic demand and away from exports.

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