How the right trade policies can empower women

How the right trade policies can empower women

In Bangladesh, increased opportunities in the garment industry have resulted in better education for girls and fewer marriages for teenagers. Photo: ADB

By Cyn-Young Park, Fahad Khan

Trade can benefit women and girls in a variety of ways, but only if the right policies are put into place

Free and open trade plays an important role in economic growth and development, delivering better jobs, incomes, skills and many other benefits. With appropriate and efficient trade policies, these gains can contribute to other development outcomes and support the Sustainable Development Goals, particularly gender equality and women’s economic empowerment.

The nexus between trade and gender is, however, complex and multidimensional. It involves a range of social, economic and cultural issues, and is conditional on sectors, jurisdictions, and individual socioeconomic and education levels.

On a positive note, trade can impact women through multiple transmission channels, including better economic opportunities, technological upgrading, socioeconomic empowerment, and labor reforms. The key mechanism is through the expansion of comparative advantage sectors where women are more likely concentrated: as these sectors expand, the relative demand for female labor will increase, which can result in higher levels of employment and income. Greater trade openness in Asian countries has been associated with higher incidence of paid employment. In many Asian countries, women have also benefitted from this, particularly in export-oriented manufacturing and service industries.

For instance, in the People’s Republic of China (PRC), employment in export-oriented manufacturing increased by 2.3 million in a span of four years (from 15 million in 2004 to 17.3 million in 2008) after accession to the World Trade Organization. In Bangladesh, job creation in the export-oriented garment industry saw the addition of four million workers, more than 75% of which were women, mostly from poor families and entering the labor market for the first time. In the Philippines, the business process outsourcing industry counts mostly women among its 1.3 million employees. In Indonesia, reduced import tariffs on locally-relevant inputs led to greater participation in employment, increased work hours, and reduced domestic duties by women, especially those less educated.

Trade may also positively influence employment quality and labor conditions. Increased trade competition and trade policies (often driven by international agreements) encourage companies to formalize employment, and adopt better labor standards. The formalization of employment—and the conditions of employment formalization including labor laws, the right to unionize, and adherence to International Labor Organization standards, among others—can set the foundation for increased bargaining power among women.

  In Bangladesh, more garment jobs for women resulted in fewer teen marriages

This is a development that further welcomes broader attempts to empower women both economically and socially. Evidence also suggests that trade openness helps reduce egregious forms of employment, such as forced and child labor, for which women and girls are most vulnerable.

Besides improving employment levels and working conditions, trade and participation in global value chains can foster technology and skills transfer, which can consequently encourage the expansion and quality of skills development opportunities for women and enhance inclusiveness in education. In particular, as firms and producers become increasingly involved in global value chains, the demand for technological upgrading, meeting global standards of quality, and raising efficiency required of them increases. Studies also find that firm-level innovation is associated with increased employment, labor productivity and skills development, and that innovative firms tend to employ more female workers.

Further, the creation of export-oriented market jobs, especially those that are skill-intensive, can generate incentives for training and educational opportunities. For instance, in Indian villages where services outsourcing has increased employment opportunities for young women, girls are more likely to be in school than those living in villages where no such trade links exist.

Changes in economic incentives that favor women can help reduce other aspects of gender inequality. For instance, studying the impact of economic incentives on missing women in rural areas of the PRC shows that increasing returns for tea, which women have a comparative advantage in producing, not only increased women’s incomes but also the survival of girls in tea-producing regions in the early 1980s. In Bangladesh, the rise of the export-oriented garment industry, which employs a workforce of 80% women, has increased young girls’ (aged five to nine) education and reduced the number of teenaged girls (aged 12 to 18) getting married. These examples show that the impact of trade and trade policy on women’s lives goes far beyond economic benefits.

However, trade can also have negative effects which may disproportionately accrue to women given prevailing gender biases and structural constraints. Trade liberalization can disrupt economic sectors and markets and lead to contraction in comparative disadvantage sectors. Where women are active in these sectors, there are risks of job displacements and losses, and in some cases, relocation from the formal to the informal sector.

  Increased trade does not automatically empower women, but it can with the right policies

Moreover, while increased international competition from trade liberalization may bring opportunities for individuals and firms, this also implies a need to grow and upgrade technologically. This may be particularly challenging for female employees and female-owned firms with limited access to credit, technical knowledge, training, and information networks. Along the way, the resulting increased competition can pose some risks to women especially those with less training and in low-skilled jobs, as well as to small firms owned by women, leaving such firms with little room for growth as a result of industry consolidation and expansion of existing large companies.

Trade can also reinforce common forms of workplace gender discrimination and inequalities. Greater market competition may encourage exporting firms to take advantage of existing gender inequalities to lower costs of production and limit women’s access to economic and labor rights. Evidence suggests that demand for low-cost and flexible labor in export industries has led to low wages and poor conditions in jobs predominantly occupied by women.

While international trade has contributed to the region’s stellar growth and poverty reduction and shows strong potential to help empower many women along the way, the benefits of trade are not automatically shared evenly across different sectors and communities. Trade can have a far-reaching impact on women’s economic empowerment and policy design should be gender mainstreamed or even specifically tailored for promoting gender equality to allow women as well as men to benefit from trade and enjoy an equal share of the gains.

Economies with a strong track record, pursuing the right policies, can expect to see sustained growth and poverty reduction through open trade. And if strongly inclusive and pro-women trade policies are pursued, there is a better chance that trade will lead to more inclusive growth and promote women’s economic participation and empowerment.

Read more about gender and trade: Leveraging trade for women’s economic empowerment in the Pacific

This blog post relates to the 2019 ADB Annual Meeting institutional event Trading Up: Economic Empowerment and Gender Equality.
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