Showing posts with label economic recoverry. Show all posts
Showing posts with label economic recoverry. Show all posts

Wednesday, May 27, 2020

How can the ICT sector in Colombia was affected by COVID-19 and how can it be recovered?

Authors: Bryan Bohorquez (bbohorquez@eafit.edu.co ); Miguel Ceballos, Maria Jose Franco Mejia (mjfrancom1@eafit.edu.co ) & David Muñoz (Ethics and Social Responsibility undergraduate course at Universidad EAFIT).


1. Introduction


The relationship between this assessment and ethics and social responsibility is to be able to see how different companies of different sectors are being affected by this huge issue that is COVID-19. This will also help to see how the different sectors are working to overcome this issue and if they are helping to overcome this pandemic in Colombia or maybe if they are doing the opposite and not making ethical decisions in their organizations. 

Data collected from the daily reports of the Colombian Ministry of Health at its twitter account (by 16th May 2020)



Description of the sector:


The information, communication and technology sector are “made up of the manufacturing and service sectors whose main activity is linked to development, production, commercialization and intensive use of new technology” ("What is ICT Industry | IGI Global", n.d.)and the companies in this sector provide services related to broadcasting, computing and telecommunications, all of which capture and display information electronically. In Colombia, this sector is extremely important to the economy because of the different organizations in the sector that are round 5.400, and in 2015 the employment rate in the sector grew to 90.978, but more important on mobile telecommunications and internet access which has shown a penetration rate of more than 100%. In this assignment we will be describing the different companies that take part of this sector and how they have impacted the community during the pandemic. 

2. Impacts of COVID-19 in the ICT sector in Colombia 


Vulnerabilities of the sector: The ICT sector has been affected in both ways, good and bad. The weakest point they are presenting on this difficult time is the customer service because sometimes the internet and other sources of communication like phones or cellphones can suffer different issues because everybody is using them, so they can collapse. For the different industry companies is very difficult to attend and solve the problems of all the homes, companies, and people problems. Other vulnerability is the earning from advertisement and events, during the year the different companies sponsor events and make a lot of money from advertisement, but a lot of companies need to be very careful and they cannot invest in advertisement. to finish they are vulnerable in an economic way because some people will not pay the bills because they are not having earnings.

Short term: During the short term, the sector of ICT has had a lot of different impacts. The demand of customer service increase a lot, internet consumption in homes increase in an important number, internet consumption in most of the companies decreased, low internet speed, more users will demand the different services, create different plans to help people with economic problems, create campaigns and advertisements to prevent the virus.

Long term: Its evident that the sector has been benefited during this situation because the demand has increased in an important number but in the long term the impacts will be very bad and serious, a lot of companies and users will not be able to pay their bills because a lot of businesses are finishing, a lot of people is not having their regular wages so it will be very difficult to pay this services.

Pace of recovery: If the Pandemic continues for a long time the recovery of the sector will be very slow, the sector will recover when people start working in a regular way and all the industries recover and start paying the fair wages.


3. Responses to COVID-19 crisis


National government:

  • Identifying the vulnerable: government announced that people with low resources are most vulnerable to this situation so the older people, also said that ethnic groups and people with incapacities have more risks. 
  • Social distancing: according to Tikitakas. (2020, april 13). they said “1. Wash your hands frequently, 2. Don't say hello to people with kisses or handshakes, 3. If you cough, cover your mouth with your elbow bent or with a disposable handkerchief, 4. Avoid touching your eyes, nose and mouth, 5. If you have a fever or shortness of breath, seek medical attention, but call line 123, 6 first. Follow the instructions of the local authorities and nation”. 
  • Travel restrictions: El Tiempo. (2020, march 19). In the 19 of march of this year Colombian government said that from 23 of march the country closed all international fly’s to Colombia in order to contain the spread of the virus for 30 days, with the exception of international fly’s that brings resources like food and medicine and other supplies. Also, transportation of supplies and interstate transport is allowed, but only to adolescents and kids, older population have to stay at home. They still close until day 
  • Closing borders: Acording to Francesco Manetto, F., 2020. the government of Colombia closed all borders in 17 of march until the 30 of May to all neighbor countries in order to stop de coronavirus from speeding 
  • Lockdown: acording to Tikitakas. (2020, april 13). Colombian government declares lockdown t 24 March until the 13 of April, but the 13 of April they extended to the 26 of April with the possibility of more extensions, this due to the increase number of infected. 
  • Financing responses: acording to Semana. (2020, april 10). Created the “Fondo de Mitigación de Emergencias (Fome)” in order to help economie issues, 
  • Recovery plans: Non-Available. 
  • Business continuity measures: according to El Tiempo. (2020, march 19) the government announced thar from the 23 of March all business must be closed until 15 of April and the food commerce may work but only in a digital way and by delivery. Also establishment that produces and provides main necessity products don’t have restrictions to operate, to this day this restrictions still operates 
  • Donations- front-line medical services: according to Republic P. (2020, april 10). thanks to the campaign “Ayudar nos hace bien” the government could donate 3 million pesos for food to vulnerable people. Donations according to Tiempo, T. E. L. (2020, april 9). multiple companies made collaborations for covid 19 like Postobon who donated 9.000 to health and Argos 10 million pesos in materials and Exito group donated food packages for the one who needed most 
  • Social distancing: according to Tiempo, T. E. L. (2020, april 9 companies like amazon, Postobon and Argos they have very restricted rules and punishments for those employees who not take care of themselves and comply with the restrictions that government and the minister of health dictated. 

4. Comparison of impacts and business responses:

Other sectors in Colombia:

  • According to the International Air Transport Association (IATA), Latin American companies will lose revenues of $ 15 billion this year. 
  • It's estimated that this pandemic will take 314,000 million USD from the sector, thanks to the drop of the 90% of world passenger traffic. 
  • The captain Jaime Hernández, in representation of the Colombian Association of Civil Aviators (Acdac) they decided to offer their services for cargo and humanitarian flights, during the world emergency due to the coronavirus pandemic. 
  • The more than 750 pilots who are part of Acdac, from controls such as Avianca, Latam, and Copa Airlines, announced that they will make the collection of their payments more flexible to help a little in the financial health of their companies. (Leal, 2020) 
  • According to Anko van der Werff, CEO of Avianca Holdings the effects of the COVID-19 have confronted them in the most challenging crisis of their 100-year history as a company. ("Avianca pidió la quiebra en EEUU por el impacto del Covid-19", 2020) 
  • Avianca declares bankruptcy due to the impact of Covid 19 
  • Avianca has reported a drop of 80% of its income. 
  • They reported that 14,000 of the 20,000 employees were discharged without pay. 
  • Thanks to New York Chapter 11, Avianca will be able to try to restructure their debts in a better way. 
  • They did a committed saying that they will do everything possible to preserve all their jobs 

Same sector in Latin America: 

Brazil: 
  • Claro and Nextel informed that they will not reduce the data speeds of their clients although the plan is already finished. 
  • TIM gave free access to cloud work packages like Microsoft Office. 
  • Claro, Net TV, Sky, Oi, Vivo and Algar Telecom opened access to several television channels that previously required to cover additional fees. 
Chile: 
  • Claro, in alliance with Cisco Webex, Google and Microsoft, made collaborative tools available to SMEs and large companies in the country, with up to three months at no cost for the first two, and six for the last (Contreras, 2020) 
  • Movistar, Claro, Entel, WOM, VTR, and noGTD enabled access to official educational platforms in the form of zero-rating. 
Ecuador: 
  • The government and the sector expanded bandwidth to support growth in consumption. 
  • No company will suspend its services from any client.
Peru: 
  • Companies will not interrupt services, even if customers do not cover invoices. 
  • Claro, in alliance with Cisco Webex, Google and Microsoft, made collaborative tools available to SMEs and large companies in the country, with up to three months at no cost for the first two, and six for the last (Contreras, 2020) 
  • Claro and Movistar released premium pay television channels until March 31 
Argentina: 
  • Telecom activated zero-rating on government educational content and prepaid recharge gifts, as well as more data. 
  • Movistar offered more gigabytes at no additional cost, free SMS, free-roaming, extra video content and online games, and balance loans for postpaid customers.
Colombia 
  • Claro increased data for postpaid customers and converged landlines by 50 percent 
  • Some companies are still using their personal # to remember their clients to be home the most possible. 
  • Claro, Movistar, Tigo, DirecTV, ETB y EMCALI enabled zero rating for government applications on the pandemic. 

Same sector in the rest of the world:

  • The main UK mobile networks suffered disruptions as millions of people started working simultaneously from home. 
  • Vodafone stated that its systems crashed 4 hours in some parts of Europe. 
  • WhatsApp was forced to increase coverage by 40%, incurring huge expenses. 
  • The UK regulatory agency OFCOM advised its residents on limiting downloads and the use of landlines rather than mobiles 
  • The UK was forced to invest much more in fiber optic technology. 
  • Several companies in Spain have increased the power of their services at no cost to their clients. 
  • Analysts from the consulting firm IDC Canada predict that several companies in this union will present losses. 
  • Safaricom has supported the government of kena in the establishment and operation of a 24-7 COVID-19 Information Centre. 
  • Safaricom has donated thermal cameras with a cost of 10 Million KES to the Ministry of Health (kena). 

5. Best practices in terms of social responsibility, recovery, and long-term sustainability:


  • The minister of the TIC´s Karen Abudinen announced that families with lower incomes will have the opportunity to apply to access subsidies that will allow them to have low cost internet in their homes. This project will help 500 families in Colombia. These families can access this help via a link or via phone call. (Hernández, 2020) 
  • Organizations in this sector have developed different initiatives to maintain connectivity during the pandemic ("Empresas del sector TIC proponen soluciones para garantizar la adecuada conectividad", 2020): 
  • Increasing internet capacity to nearly 400,000 homes with no additional cost 
  • Virtualization of services so people do not have to go out to pay their bills 
  • CoronApp for free with educational content to complement education sessions 
  • This sector became the perfect tool in Colombia for virtual education, working from home, commerce and even helping the congress sessions to take place virtually. The sector has provided tools for all these things to take place virtually an allowing interaction between people without having to meet up in person. This sector is also helping to re-open organizations and economic activities helping to accelerate the economy. ("“El papel de las TIC durante la pandemia ha mostrado su potencial”", 2020) 
  • The ICT sector are helping to keep the economy going, but it is also benefitting medical professionals who are taking lessons in the global community to inform themselves more of COVID-19. (GHOURALAL, 2020) 


6. Recommendation for restoring economic activity, employment, and social well being: 


Recommendations for policy makers (government):

  • The government that it’s in charge of the work and companies’ sector should create better policies that help companies to sustain during the pandemic. 
  • Government should work in better ways to create consciousness to the citizens that still thinks that this situation it is not serious. 
  • Companies and the government should work together to create a system that can work during this pandemic so the citizens would be affected by its consequences. 

Recommendations for business (managers, entrepreneurs and employees): 

Start creating coupons that customers can use after the pandemic comes to an end. Start using social media and technology to increase their earnings during quarantine. Freeze debts until the industry recovers. Train employees to start using technology in a more efficient way to work from home. Managers should give free programs to monitor people to prevent the virus like in Korea, start creating tele medicine where people from far places to be diagnosticated.

Recommendations for civil society (business organizations, customers, NGOs, media):


People should follow the orders of staying at home to flatten the curve, business should provide information to their clients about the pandemic and enforce this stay at home rule if they can on their employees. The media should inform of how this pandemic is affecting the community not only the economy and provide information on how people can prevent it from spreading. 

7. Conclusions:


This study analyses the risk management and social responsibility responses associated with the pandemic outbreak of COVID-19 by ICT sector in Colombia from the moment the pandemic was announced by the Colombian Government, until it was declared controlled. The findings of this study show that in places where institutional measures are most drastic and adopted earlier, there were many different ways government tried to lower the contagion rate by encouraging and donating technology to the people, so they can work and study from distance avoiding physical contact and the spread of the virus, they are going hand to hand with technology and for a long term since we don't know how long the Covid-19 will last. The ICT sector has benefited because the demand of their services has increased a lot since the mandatory quarantine has been applied. On the other hand, the customer service sometimes collapses because a lot of users are complaining. The environment is the most benefited during this issue because people are staying at home so, pollution has decreased and the air quality is almost perfect because a lot of companies stop production and there are no people using cars, bikes or trucks.

The best practices in this sector provided by the sector in Colombia to mitigate the impacts of the Covid-19 pandemic were:
  • Facilitating employees with tools to work from home 
  • Giving their users incentives such as faster internet, premium tv channels, all for free. 
  • Providing tools to understand the pandemic for free 
  • Providing subsidies to help families in need access the internet 
Measures that could have helped during the pandemic. These measures were implemented by other places in the world that could be set as an example in Colombia:
  • The most significant thing that we found very useful was the donation of thermal cameras by Vodafone in Kena. 
  • Some companies should increase the time giving to inform more about how we can prevent in a better way this illness. 
  • Some companies should give more free access to cloud work packages like Microsoft Office.
In order to provide a successful response, and having an early recovery, managers should have ethics based on making decisions that will not only affect in a positive manner their own employees, but the community around them, and they should count with the following personal values: 
  • Integrity 
  • Honesty 
  • Compassion 
  • Determination 
  • Responsibility
This to work in an ethical manner and provide tools to help the people around them overcome this pandemic. 

Based on the evidence, the social responsibility of business in the ICT sector in Colombia are:
  • Giving the opportunity of less fortunate families access to internet services at a low price 
  • Giving families educational tools to learn about the pandemic for free 
This study concludes that to be a sustainable business in the ICT sector companies must:
  • Companies must provide tools for their costumer to pay easily through internet services 
  • Make ethical decisions to protect their employees and the community where they are located and preventing the disease from spreading 
  • They must improve their customer service  

References:










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Thursday, October 23, 2014

Economic growth towards development

Artículo de opinión por: Catalina Tamayo Posada (catalinatamayop1@gmail.com)
Estudiante de Economía. Universidad EAFIT, Medellin, Colombia.

Since the most recent financial crisis, the world has been trying to reach the pre-crisis levels of growth, unemployment rates –which increased with the crisis-, investment, trade, domestic demand, among other economic variables.

As for growth, there have been lower levels since the 2008 crisis, which was caused by the developed countries. Nevertheless, in 2014 the modest improvements have been fostered by the developed economies, specially, the European Union (EU). While growth in some countries of the EU is explained by the increase in the domestic demand and the recovery of consumer and mortgage credits, some other countries still face weakness in the banking sector. In developing and transition economies from Asia, growth is mainly because of the rise of domestic and public demand. In contrast, sub-Saharan economies are doing well because of high commodity prices, improvements in agriculture and the recovery from civil conflicts. Some Latin American economies have lost momentum due to a decrease in the domestic demand. However, hydrocarbons and mineral exporters are reporting high rates of growth (UNCTAD, 2014)

These slow but considerable improvements in economic growth have to be seen from a new perspective since the world is changing towards a new paradigm in which development plays a key role. According to the Trade and Development Report (2014), progresses in growth must be supported by policies taken by governments to direct the economy to achieve better life standards and to reduce the growing levels of inequality. In order to do it, it is necessary that countries make their best efforts to incentive investment and to raise their levels of human capital and technological know-how. Additionally, increasing per capita incomes is a priority for which it stimulates consumption and therefore the economy as whole, this increase should be the consequence of government’s efforts to improve industries’ productivity. Moreover, developing economies should enhance policies focused on diversifying their economies, strengthening income policies and creating measures to help mitigate the consequences of financial internationalization.

In pursuance of achieving the goals mentioned above, some developing countries and the least developed countries face, among many, a huge problem in terms of financial resources. The poor access they have to these services makes it difficult for the economy to grow. In addition to this, the transfer of technological know-how is urgent in order to develop countries’ own production capabilities (UNCTAD, 2014). The international community faces the challenge of ensuring that these countries –developing and least developed- manage to get the infrastructure required to effectively access to financial services and to implement any new technologies acquired, which in the end is what makes the economy more productive and –with good policies- more inclusive. If done so, economic recovery would be faster, more “global” and guided to development.

References


UNCTAD. (2014). Trade and Development Report 2014. New York and Geneva: United Nations.
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Monday, October 20, 2014

La Necesidad de Reconsiderar las Políticas Económicas

Por: Laura Jaramillo Echeverri
Estudiante de Derecho, Universidad EAFIT, Colombia

Afirman algunos analistas, que la economía mundial se esta recuperando tras la devastadora crisis financiera del 2009, pues sostienen que a través de las políticas económicas de recorte en el presupuesto estatal y recorte salarial que han implementado países de la Euro zona y Estados Unidos se puede estimar que la economía mundial va a crecer de 2.5 a 3% en el 2014, dato que resulta positivo tras varios años de crisis. Pero no todo es color de rosa, pues estas políticas implementadas, también pueden llegar a resultar nocivas para la economía interna de los países, tanto desarrollados como en vía de desarrollo. 

Las políticas económicas que se están implementando actualmente en varios países, son claramente el resultado del mal manejo de las instituciones financieras, lo que derivaron en la crisis financiera. Como consecuencia la reducción en el gasto de los gobiernos es una de las políticas implementadas, como es el caso de Europa, donde la austeridad fiscal es más notoria, por que los gobiernos tuvieron que asumir los costos de la crisis por la “indisciplina económica” de las instituciones financieras, llevando esto a reducir gastos gubernamentales y recorte en el presupuesto publico, tales como los casos de Grecia, Italia, Portugal y España entre otros. 

Asimismo la implementación de políticas estructurales para incrementar la competitividad comercial, como la reducción del pago de la mano de obra para aumentar las exportaciones. Pero estas políticas resultan claramente problemáticas para un país pues se debe cuestionar, cual es el limite del recorte de salarios para amentar la competitividad, sin afectar la estabilidad social y la productividad. Además el salario de los individuos afecta a corto plazo las exportaciones del país, pues es por medio del salario y la percepción que se tenga de este, por medio del cual se estimula al gasto, al consumo y a la demanda, lo que eventualmente afecta las importaciones del propio país y las exportaciones de un diverso grupo de países. UNCTAD en muchas ocasiones ha insistido en la necesidad de los países con superávit de incrementar la demanda interna y aumentar sus importaciones a un ritmo mucho mayor que las exportaciones, en vez de forzar a los países con déficit, a ajustarse o a apoyarse en la reducción de costos laborales con la esperanza que esto lleve a una recuperación de sus exportaciones. Pues el verdadero aumento en el PIB se logra a través de la demanda interna no mediante exportaciones. (TDR 2004. Pg.24) 

De las políticas que se están implementando actualmente, UNCTAD ha analizado que a raíz de esta combinación es posible resaltar los errores estructurales que pueden desatarse eventualmente en una crisis, pero no es posible determinar por adelantado el tiempo de una crisis por su naturaleza, las medias concretas de las implicaciones a nivel marco y global, y el período de recuperación que le sigue. Esto debido, a que una crisis normalmente es detonada por un cambio repentino en la confianza que se tiene en el mercado, como resultado de una notica, o un rumor proveniente de los cambios en el sistema financiero o las perdidas de una institución importante. De este modo la recuperación de una crisis, es el resultado de una combinación compleja de estrategias para mejorar el estado de confianza de nuevo en el mercado. (TDR 2014. Pg. 30) 

Por lo tanto el TRD 2014 (30-31) en sus primeros tres capítulos señala como se puede ver que la economía efectivamente se esta recuperando, pero cuestiona las políticas que se implementan pues considera que son políticas muy parecidas a las que encaminaron la crisis financiera del 2009. De este modo propone 5 políticas para un crecimiento balanceado de la económica: 
  1. Políticas de ingresos para soportar el crecimiento de la demanda en bases sostenibles. 
  2. Crecimiento intensificado de las políticas fiscales. 
  3. Políticas industriales para promover la inversión privada y la transformación estructural. 
  4. Regulación de controles financieros y de capitales para estabilizar los mercados financieros a nivel mundial. 
  5. Tratados comerciales orientados al desarrollo. 

Referencias


UNCTAD (2014) Trade and Developing Report. Global Governance and Policy Space for Development Publicación de las Naciones Unidas, Nº de venta: E.14.II.D.4, Ginebra y Nueva York.
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Monday, February 17, 2014

Agriculture; the "new economic relief" for developing countries

Opinion article by: Nathalia Rios Ballesteros*(nriosba@eafit.edu.co) 
*Economics and International Business student at Universidad EAFIT, Colombia.

In recent decades, the emergence of global phenomena including globalization, integrated value chains, technological and institutional innovations, environmental restrictions and the growing demand of agricultural goods -which has raised the price of commodities and has expanded the agricultural global market- have positioned agriculture, once again, as a main topic on the global agenda, while providing it with a renewed role in the development process of countries worldwide.

This new role recognizes agriculture’s ability to exert multiple functions towards reaching integral development by stimulating economic growth, environmental sustainability, reduction of poverty and hunger, and achieving higher levels of equity and food security within societies. Likewise, this sector does not only contribute to the food and raw materials production process, but also seeks for the nutrition and healthcare of people. Finally, it is important to mention that different factors such as the new agribusiness trends along with the strengthening of this activity have stimulated interest in the sector as the basic engine for sustainable development and poverty reduction in emerging economies.

For this reason, agriculture has acquired a new perspective in which this activity is considered as a set of linkages and relationships through which societies can foster and raise its standards of living while offering better and wider opportunities to its citizens, thus generating public recognition of this activity as a ‘profitable getaway’ for developing nations.

In this context, it is necessary for emerging economies to define and structure strategic, modern, and comprehensive policies that recognize the multiplicity of social, economic and natural phenomena surrounding agriculture; to promote and strengthen the development of this sector and the rural areas, so that a full and sustainable use of natural resources is achieved, while a dynamic growth of agriculture along with equal social development is ensured. All of the above supported and guided by the promotion of institutional innovation, which allows the development of a variety of organizational arrangements for better mechanisms of public private cooperation, which facilitates agricultural production and growth.

Moreover, present circumstances and future expectations about the course of agricultural production have generated the revaluation of natural resources with agricultural potential which has a positive impact and a special significance for a country like Colombia, which has, along with a small number of nations, abundance in endowment of agricultural resources, not yet fully exploited. This is why, considering the growth prospects of the global food demand by 2050 (FAO, 2012) and the role of agriculture today and for the future, it is estimated that in the exporting countries of agricultural goods, agriculture could become a central pillar of economic growth and development (Fedesarrollo, 2013)

References:

FAO. Food and Agriculture Organization of the United Nations. (Junio de 2012). World agriculture towards 2030/2050: the 2012 revision. Recuperado el 07 de 02 de 2014, de http://www.fao.org/fileadmin/templates/esa/Global_persepctives/world_ag_2030_50_2012_rev.pdf

Fedesarrollo. Fundación para la Educación Superior y el Desarrollo (Fedesarrollo). (2013). Políticas para el desarrollo de la agricultura en Colombia. Recuperado el 7 de 02 de 2014, de http://www.fedesarrollo.org.co/wp-content/uploads/2013/07/Libro-SAC_Web.pdf

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Wednesday, January 22, 2014

Global solidarity for sustainable and inclusive development

Por: Carolina Herrera Cano (caroherca@gmail.com )
Estudiante de Negocios Internacionales, Universidad EAFIT, Colombia

The beginning of a new year comes with different analysis about a variety of perspectives that will, to a certain degree, define the way in which decisions will be made during the year. The optimistic perspective about how global economy will be during 2014 has been discussed since last year, as economic indexes get better. The different symptoms that prove this recovery are very good news for the international economy, but there are some risks that must be faced if a sustainable, and inclusive growth is to be achieved.

The Managing Director of the IMF, Christine Lagarde, presented an overview of the way in which international economy will function through 2014. In her speech, Chistine Lagarde talks about the possible end of the “seven miserable years”, which came after the financial and economic crisis of 2008. Perspectives for most of the economies are better: the United States is showing an increase in its economic growth due to the private demand, the Euro Area is getting back from the recession, and the emerging markets will keep on presenting positive economic indicators.

Even if the emergence of a new positive scenario cannot be denied, it is important to note that it is also creating some risks that arise from the imbalances in social, and economic development. The IMF highlights some that jeopardize the global stability: the first one is related with the disparity between economic growth, and an actual job, the second one is the deceleration that emerging markets are facing, and the third one is the volatility of the capital flows; growth is still “low, fragile, and uneven”.

In this sense, despite the good perspective, international economy should remain vigilant; the shift from the “seven miserable years” to the “strong years” can only be reached through the acceleration of reforms that boost the labor market participation, and enhance competitiveness around the world: the . The recommendation that Christine Lagarde presents is that international institutions serve not only as a discussion forum, but as a support for a collective response to crisis. Although, this can only be possible with the effective coordination, and cooperation between countries: global solidarity for sustainable and inclusive development.


References:


IMF's Lagarde on The Global Economy in 2014, January 15, 2014. Available in: http://www.imf.org/external/mmedia/view.aspx?vid=3059557762001
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Monday, September 30, 2013

Global Trade as a lever for growth and employment

Opinion article by: Nathalia Rios Ballesteros* (nriosba@eafit.edu.co)
Economics student at Universidad EAFIT, Colombia
According to the European Commission (2010) in the past few years, global trade has expanded rapidly. From the late 1990s until now, the value of world merchandise trade grew by 73%. This growth has been mainly driven by growth in incomes and demand, falling in transport and communication costs, significant increases in foreign direct investment (FDI) in emerging market economies, improvements in efficient economic policies along with the implementation of trade policies and reductions in tariff and non-tariff barriers without ignoring the increasing competitive pressures that drive the search and pace of innovation and the implementation of costcutting, outsourcing and economies of scale in many industries.
In this context, although it is difficult to make general statements about the impact of trade opening and its growth per se; trade should not be considered in isolation from national, international and global realities. In this sense, one can establish that “trade growth is not pursued for its own sake”[1]; it brings along a triple major benefit for the ongoing country: more economic growth; greater consumer welfare translated into higher incomes and lower prices of goods and increased in employment conditions – greater and better-paid jobs-.
As a matter of fact, U.S is the world's largest economy and the largest exporter and importer of goods and services nowadays, which implies an active and relevant role of trade as an important engine for its economic growth and employment market -considering that more than 30 percent of U.S. GDP is tied to international trade and investment, and more than one in five U.S. jobs are supported by trade according to the Trade Benefits America Coalition (2013)-. This is the reason why U.S. engagement in the international marketplace today, is more important to this nation’s economy than ever before, exhibiting and showing the key role that trade plays in the economic current situation of countries worldwide.
Moreover, trade openness stands as an important lever that lift developing countries out of poverty allowing them to reap and reproduce the benefits of globalization into their own economies, taking into account the strong increase in the share of this economies in the international trade flow . This rapid economic rise and increasing involvement in global trade of these emerging market economies -especially major performers such as the BRIC members- has made enormous contributions to growth, development and prosperity within these economies. As part of a comprehensive set of policies and internal circumstances, it has helped to lift millions out of poverty and spread the benefits of higher living standards through lower living costs. It has brought nations closer together, fostering mutual understanding and promoting world peace while equipping the involved countries with the necessary tools to meet the challenges carried along with the hazard of this economic activity; challenges towards jobless growth management, high unemployment, poverty, unequal distribution and allocation of resources, environment and sustainable development, and the role of trade routes as well as investment decisions in this context.
For all the above, and considering today’s climate of “weak economic recovery, high unemployment and pressure on public finances”[2], one of the effective solutions that governments might adopt to boost growth and employment could be to foster global trade thus keeping global markets open; which provides two important implications; a result and a challenge for the involved country. The result: better economic performance -trade and market openness becomes a more prevailing tool for generating better quality jobs and boosting the much-needed growth-; the challenge: to construct coherent national and international policy frameworks that seek and drive towards inclusive growth of trade among countries because “it is their design, not their absence, that makes the difference”[3].

References


European Commission. (2010). Trade as a driver of prosperity. Recuperado el 20 de 09 de 2013, de http://trade.ec.europa.eu/doclib/docs/2010/november/tradoc_146940.pdf

OECD Trade and Agriculture Directorate (TAD). (Mayo de 2012). Better policies for better lives. Recuperado el 17 de Septiembre de 2013, de http://www.oecd.org/tad/tradedev/50447052.pdf

Trade benefits America Coalition. (2013). Trade benefits America|. Recuperado el 20 de 09 de 2013, de http://tradebenefitsamerica.org/contact

World Trade Organization (WTO). (2013). The Future of Trade: The Challenges of Convergence. Report of the Panel on Defining the Future of Trade.



[1] European Commission (2010)
[2] (OECD Trade and Agriculture Directorate (TAD), 2012)
[3] (World Trade Organization (WTO), 2013)
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