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Can more inclusive trade promote gender equality?

December 20, 2017

Arjan de Haan

Director, Inclusive Economies, IDRC

Trade is an important part of a country’s development processes and a crucial aspect of the global integration that marked the second half of the 20th century. But it has also been associated with growing inequalities — including gender — and has recently been considered the culprit of many social ills, as manifested in Brexit and the U.S. presidential election.

The increase in trade and cross-border production in global value chains over the last few decades has had a significant impact on disparities, both between and within countries, and the well-being of citizens — though this is easily misrepresented. Increasing trade can enhance overall production, and allow countries to benefit from their comparative advantages, but to trade successfully countries need to remain competitive, with strong institutions to facilitate trade.

Optimistic economists hope that increased competition may reduce barriers for disadvantaged groups, including women’s access to economic opportunities. For example, even though working conditions remain hazardous, the growth of exports in textile and garments creates opportunities for relatively poor women in many countries.

Although trade may provide advantages for some segments of the population, it can also threaten others by enhancing disparities between groups, including men and women. While some economic theories expected trade to help reduce gender gaps, discussions at IDRC suggest there is little evidence that this has actually occurred. A growing body of evidence on the impact of trade on gender gaps highlights that impact is very dependent on context (and definitions of empowerment and equality), and there are no simple conclusions.

At the Growth and Economic Opportunities for Women (GrOW) webinar at IDRC earlier this month, Janneke Pieters highlighted the potential to reduce gender gaps by concentrating on industries that primarily employ women. In Indonesia, trade liberalization has tended to reduce gender gaps: it helped enhance women’s work participation and hours of work. But in Brazil, trade liberalization reduced both men’s and women’s labour force participation rates, particularly among low-skilled groups, and more for men than for women. Pieters and co-authors emphasize that labour markets are and remain strongly segregated, although liberalization in Indonesia led to a decline in segregation. This is a critical determinant of the impact of trade and trade policies.

Evidence presented by Stephanie Seguino at the GrOW seminar on December 8 also emphasizes the complex links between trade and gender gaps, as her earlier research with Evelyn Wamboye demonstrated for Africa. While women have obtained a larger share of paid jobs in middle income countries, the discriminatory portion of gender wage gaps has widened in exporting powerhouses like China and Vietnam. Nor have gender gaps narrowed substantially in countries known for export-led growth such as South Korea and Vietnam. Moreover, the trend observed in Brazil appears to be a common one: in many cases where women’s employment rates rose relative to men’s, this was in the context of men’s declining employment rates.

While women often bear the brunt of increased competition and cost-cutting measures, this is happening in a context where all workers are under pressure. Seguino showed, for example, that both U.S. and Mexican workers lost out from NAFTA in terms of hourly compensation and workers’ share of national income. Wage shares are falling globally, in both developed and developing countries. Seguino concludes that it is not so much trade that causes these dynamics, but the ways that global production networks operate in the global economy, and the role investment agreements play.

What can we conclude? The evidence on trade and gender equality points to several policy priorities. First, it is important to understand the links in their specific context, and the important role of research in providing empirical evidence. Second, social policies have a key function, including social protection mechanisms that are needed for the frequent labour market adjustments that follow more open economies. Further, it is important to explore opportunities to impact the distributive effects of trade such as social tariffs, labour standards, and gender clauses (as is done in the Canadian progressive trade agenda). Equally important are measures that are not gender-specific, but have large distributive effects such as investment clauses, agreements on intellectual property that can increase corporate monopoly power, and dispute resolution mechanisms. And it is critical that these debates are global, so that voices of countries and groups in the Global South have an equal influence on the shaping of policy measures for more inclusive trade.

Arjan de Haan is the Program Leader, Employment and Growth at IDRC.

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