While trade liberalisation often leads to economic growth in a country, the impact it can have on the health of populations may not be so positive. The issues are discussed in the third paper of The Lancet Series on Trade and Health, written by Dr Chantal Blouin, Carleton University, Ottawa, Canada, and colleagues.
The authors focus on the links between trade liberalisaition and health outcomes by focusing on four key factors: income, inequality, economic insecurity, and unhealthy diets. For income and its distribution, it has often been argued that countries which lift their trade barriers reduce poverty and therefore improve health. But trade reforms create winners and losers: some sectors cannot complete in the new market while others gain access to new opportunities. Therefore, some losers from trade liberalisation might be poor households whose income will fall further. The authors refer to research from Ravallion and colleagues, which says: "Based on the data available from cross-country comparisons, it is hard to maintain the view that expanding external trade is, in general, a powerful force for poverty reduction in developing countries."*
Secondly, the authors look at inequality. An assumption behind trade liberalisation is that developing countries, which have an abundance of unskilled labourers, would gain from trade in products produced by unskilled labour. Further, the position of unskilled labour in the labour market would be enhanced vis-à-vis other factors of production, leading to a fall in the skills premium and hence reductions in inequality. However, contrary to what the theory predicted, trade liberalisation has actually led to widening wage differentials in many cases, with a substantial rise in relative rewards for skilled labour whereas unskilled workers remain engaged in informal activities rather than being in regular employment. Thus inequality increases; a high level of inequality is associated with less healthy populations.
Analysing economic insecurity, the authors say that during trade reforms, job creation is generally accompanied by employment losses because labour moves from one sector or industry to another. This process—known as churning—needs social safety nets and smooth employment transition mechanisms to lessen material and psychosocial stress to workers and their families. Intersectoral movement makes finding new employment difficult and costly for displaced workers, because moving into a different sector usually needs a change in skillset. In addition to rapid changes in labour markets, more open economies are more susceptible to economic instability in the form financial crises and currency devaluations; social protection can reduce the health risks associated to such insecurity.
Perhaps the most important effect of trade liberalisation, though, is on diet and nutrition. Reductions in prices of unhealthy foods—ie, calorie-rich, nutrient-poor, high in saturated fats and salt—compared with healthy foods, has increased the desirability and availability of unhealthy foods. This worsening asymmetry between consumers and suppliers of foodstuffs, and growing urbanisation and changes in lifestyle, are all possible means by which trade liberalisation could affect popular diets, especially those of poor populations. This effect has been clearly demonstrated in some Pacific Island populations, where rates of obesity and chronic disease are increasing with increasing levels of high-fat imported food . The authors note the alarming trend in processed food sales — 7% growth per year for rich countries, but 29% for developing nations. But they also call for more evidence of definitive links between these food trends and health outcomes.
The authors conclude: "Our understanding of causal pathways between trade and social determinants of health will continue to evolve as new research findings on the effects of trade reforms are presented... Nevertheless, existing evidence can already guide policymakers in adoption of policies, such as monitoring of trade reforms on the income of poor households and strengthening of social protection, to ensure that their trade policy contributes to enhanced health outcomes for all citizens."
Dr Chantal Blouin, Carleton University, Ottawa, Canada T) +1 613-520-2600 ext. 1401 E) chantal_blouin@carleton.ca
Professor Richard Smith, London School of Hygiene and Tropical Medicine T) +44 (0) 20 7927 2403 E) richard.smith@lshtm.ac.uk
LSHTM Press Office T) +44 (0) 20 7927 2073 E) lindsay.wright@lshtm.ac.uk / gemma.howe@lshtm.ac.uk
Notes to editors: * Ravallion M. Looking beyond averages in trade and poverty debate. World Dev 2006; 34: 1374.
For full third paper see: http://press.thelancet.com/tradeandhealth3.pdf
Journal
The Lancet