Quality Infrastructure, trade and Economic Growth

It is generally recognized that enhanced trade should lead to economic growth, which could ultimately lead to poverty reduction. Trade helps an economy grow in several ways:

  • It encourages economies to specialize and produce in areas where they have a relative cost advantage over other economies. Over time, this helps economies to employ more of their human, physical and capital resources in sectors where they get the highest returns, boosting productivity and the returns to workers and investors.
  • Trade expands the markets local producers can access, allowing them to produce at a more efficient scale to keep down costs. Even in populous developing economies, low incomes often mean that producers’ potential local market is small, so trading with the world is vital.
  • Trade diffuses new technologies and ideas, increasing local workers’ and managers’ productivity. Technology transfers through trade and investment are particularly valuable for developing economies, which employ less advanced technologies and typically have less capacity to develop new technologies themselves.
  • Removing tariffs on imports gives consumers access to cheaper products, increasing their purchasing power and living standards, and gives producers access to cheaper inputs, boosting their competitiveness by reducing their production costs.