Trade And Investment In Developing Countries Key To Making Progress Against Poverty

Photo By: Martha Hoflich

InterAction believes it is imperative for the Obama administration to push for an open, rule-based, predictable and non-discriminatory trading and financial system that takes into account the unique needs of the developing world.

Lesotho offers an example of the growth and opportunities that trade and investment can offer less-developed countries. In 2007, the Millennium Challenge Corporation agreed to a $362.6 million compact with Lesotho, aimed at reducing poverty and increasing economic growth. By removing barriers to foreign and local private sector investment, the private sector has created jobs and increased exports. The African Growth and Opportunity Act has also given Lesotho the opportunity to export more than $300 million every year in clothing to the U.S. and created jobs and opportunities.

The poorest 49 countries of the world currently represent 10% of the global population but only 0.4% of world trade. These less developed countries have been hit particularly hard by the global economic crisis. While many rich nations are already beginning to see signs of recovery, the less resilient economies of the world’s poorest countries are unable to pull themselves out of the crisis through policy reforms or massive bailouts because they lack access to funds and the flexibility to design and implement counter cyclical policies and social safety nets. Particularly in Sub-Saharan Africa, where many less developed countries were already struggling after food and fuel crises in 2008, the financial crisis has severely tested their already-limited resilience.

At the G-20 Summit in Pittsburgh late last month, world leaders enacted a Framework for Strong, Sustainable, and Balanced Growth, making specific commitments to provide support for the world’s most vulnerable people by increasing access to food, fuel, and finance. InterAction applauds these steps taken by world leaders, and urges them to follow through on their commitments and to focus on enterprise-led development, the removal of trade barriers, and increasing foreign direct investment in the economies of the developing world. It is essential that the global community recognizes that change is both a necessity and an opportunity.

While the US is one of the world's most open economies overall, more progress can be made toward the Millennium Development Goal of building a fairer global trading system. InterAction believes that U.S. trade policy and agreements should be development oriented, coordinated with poverty reduction efforts, respectful of human rights, democratic, transparent, and in line with existing international agreements and treaties. By creating fair policies that remove the disadvantages faced by less developed countries, and by enacting reforms that allow them to overcome historical and economic obstacles, we can give the poorest of the poor the opportunity to help themselves.

In fact, by creating a more open and resilient global economy that fully integrates the developing world, we can create jobs and wealth both domestically and internationally, and get one step closer to making poverty history.