Free and fair trade contribute to economic development - Survey

Tuesday 21st May, 2019
Trade Development
By Kodjo Adams/Josephine Dodoo, GNA

Accra, May 21, GNA - A survey on trade development for Small and Medium Enterprises (SMEs) in Ghana has revealed that free and fair trade contribute to economic development and poverty reduction in developing and emerging economies.

The survey showed that increased trade openness was associated with lower levels of absolute poverty and reduced wage discrimination by gender or race.

The study was conducted by the Institute of Statistical, Social and Economic Research (ISSER), University of Ghana in collaboration with the Kiel Centre for Globalization at the Institute for the World Economy, Germany, supported by Deutsche Gesellschaft fur Internationale Zusammernarbeit (GIZ).

The study was on the topic: “Can Trade Foster Development, Firm-Level Evidence for SMEs in Ghana”.

The study focused on firms export and import activities and estimated the effects of these on their productivity, employment, wages, skill structure, training and gender equality.

Dr Charles Ackah, the Senior Research Fellow, ISSER, presenting the report at a national dissemination and policy workshop in Accra, said the study was conducted in August and September 2016.

The sample of the survey consisted of manufacturing SMEs located in Accra, Tema, Kumasi and Sekondi-Takoradi.

He said the study provided new evidence on the benefits of exporting and importing among small and medium sized enterprises in the Ghanaian manufacturing sector.

Dr Ackah explained that SMEs were important players in the Ghanaian economy because they provide about 85 per cent of manufacturing employment and contribute about 70 per cent of the country’s Gross Domestic Product.

Touching on the results of the study, Dr Ackah said exporting was found to be contributing to development by increasing the average wage and creating more employment and more apprenticeship positions at the exporting firm.

The findings also showed that exporting did not increase the skill intensity of the firm, which suggested that, as exporters expand their workforce, they hire both skilled and non-skilled workers, but gave higher wage increases to skilled employees.

Dr Ackah said the findings found no direct development effect from the imports of material inputs, adding that starting to import or increasing import intensity, were not accompanied by rising productivity, wages, employment or demand for skilled workers among the firms.

The result showed that exporting activity in an industry-location cluster stimulated non-trading firms, which paid higher wages and move towards hiring more skilled workers.

The findings also revealed that trading firms were more productive than non-trading firms before they start to trade.

Professor Holger Gorg, Director, Kiel Centre for globalization at the Institute for the World Economy, Germany, touching on policy implications on the country, said exporting had clear benefits on both exporting firms and non-trading firms in their vicinity.

He recommended that, promoting exporting activity among manufacturing SMEs can be a route for fostering development through providing additional employment opportunities and increased wages.

Prof Gorg said further investigations were necessary to find out why Ghanaians SMEs cannot benefit from importing.

Mr Patrick Poku, Director of Trade Facilitation, Ministry of Trade and Industry, said the findings of the study would serve as a guide for policy decision on trade development in the country.

Nana Osei-Bonsu, the President of the Private Enterprise Federation, urged government to create favourable environment for SMEs to survive in the emerging markets because they contributed significantly in the country’s economic development.

GNA