Skills Development is Key to Inclusive Trade

A WTO and ILO study shows that no matter what type of economy a country has it must prioritise evolving skills that drive inclusive trade as doing so allows countries to lift millions out of poverty, retain or grow their competitive edge or respond to trade-connected shocks.

Increased trade integration is helping drive growth across all economies and lifting millions out of poverty. But despite this progress, new technology is creating a digital divide that the World Trade Organisation (WTO) believe is causing many to be left behind.

Skills have an important role in enabling firms to adapt to market demand and to competition, allowing improved productivity, the ability to participate effectively in international trade and to adjust to import competition.

According to joint research by the International Labour Office (ILO) and WTO, skill levels are one of the principal enablers of trade growth and economic diversification. Indeed, such is the importance of ensuring a workforce has relevant skills that The 2030 Agenda for Sustainable Development calls for countries to substantially enhance their relevant vocational and technical skills as a means for fostering employment, decent jobs and entrepreneurship.

While the fourth industrial revolution (4IR) delivers a multitude of ways to facilitate inclusive trade, improve efficiency, reduce costs and deliver significant growth potential to countries all over the world, to keep up with the pace of change, workers require rapidly changing skills.

Research shows a direct correlation between a country’s skill level and skill composition, and its participation in trade. For example, work by the ILO, under the Skills for Trade and Economic Diversification (STED) programme, found that organisations in less developed countries are often constrained from participating effectively in international trade by ‘the capabilities of workers’. Contrastingly, countries with responsive skills development systems are more successful in putting these skills to use, facilitating a positive impact on trade and developing a country or region’s overall comparative advantage.

Therefore, to keep up with technology and in order to reduce the emerging digital divide - skill development must be prioritised by both government and industry. For instance, the ILO, believe that country-wide skill improvement targets should focus on widening and strengthening work skills, technical skills and management skills in order to facilitate the quality, responsiveness and product differentiation that provide a country with a competitive advantage and deliver the benefits of inclusive trade.

Indeed, the ILO study shows that economies – whether developed or developing - must continually evolve skill levels within their workforce as whilst t Che need for less developed countries to adjust their skill levels is greater, inclusive trade requires even developed countries to regulate their policies in order to strengthen skill levels and retain their competitive edge or respond to trade-connected shocks. Consequently, no matter what type of economy a country has it must prioritise evolving skills that drive inclusive trade.

To do this, the WTO and ILO suggest governments ensure the following principles are in place to support skill evolution; 

1. Policy coherence - connecting trade and skills policies in a coherent and consistent way to support the workforce in gaining the skills they need
2. Access to education for all – ensuring the whole economy is able to gain the skills they need to contribute to the economy is a vital component in developing a workforce ready for the 4IR era.
3. Nurturing a culture of continuous skills development and lifelong learning. This allows the economy to remain flexible and adaptable. Workers who lack transferable skills benefit less from trade and are vulnerable to technological change or to a trade-connected employment shock whereas those equipped to deal with the digital revolution are more adaptable.
4. Targeted training for displaced workers. Although reskilling may be required to allow workers to move occupation, role or jurisdiction, the global economy stands to benefit from allowing displaced people to work, rebuild their lives and contribute to their host economy.
5. Continued focus on core skill development ensures that skills evolve alongside technology. However equally important is ensuring that the workforce possesses strong core work skills, such as team working and problem-solving, as these are vital for achieving employability, business performance, and economic competitive advantage. They also contribute to inclusiveness and offset the tendency of trade to widen income inequality.

Given the role of skills in productivity and in trade performance as well as in access to employment and in wage distribution, a strong emphasis on skills development is should be a central mechanism with the strategies of governments, firms and workers. As ILO Director-General Guy Ryder explains; “Providing the right skills is essential to reap the benefits of trade in increased productivity and better jobs, and to ensure that trade contributes to inclusive development. In a fast-changing world of work it is more important than ever that skills development responds to current and emerging skills needs, enhancing outcomes for workers and firms both now and in the future.”