Free trade: promoting economic growth & public health

By Phillip Stevens, Executive Director of the Emerging Markets Health Network

We often hear from NGOs and public health academics that free trade harms the poor by allegedly promoting economic inequality and insecurity, polluting the environment and making processed foods more widely available.  All of these factors are deemed to be deleterious to health.

However, there has been little empirical evidence to support these assertions, in particular the relationship between free trade and health. The relationship between trade and health is under the spotlight as the US and ten Asian and Latin American countries reach the final stages of negotiating the Trans Pacific Partnership (TPP), the largest potential trade deal since the collapse of World Trade Organization talks in Geneva in 2008.

There has been plenty of noisy opposition from health and development NGOs to this free trade agreement -- but almost none of it backed up by empirical research.

In order to bring some evidence to this debate about free trade and health, Emerging Markets Health Network undertook an econometric study analysing the relationship between trade openness and health indicators such as infant mortality rates and life expectancy.  If trade liberalisation is indeed bad for health, as is often claimed, then we would expect to see a decline in health indicators as countries open their borders to international trade.

In order to answer this question, we analysed panel data derived from the World Bank Development Indicators, which contains historical data going back to the 1960s; and Penn World Table version 7.0, which provides comparative PPP and national income accounts for a range of countries from 1950 to 2009.

Contrary to much of the literature and NGO rhetoric, our analysis shows a clear relationship between trade openness and improved life expectancy and infant mortality rates, a relationship that is particularly marked for low-income countries.

There are two mechanisms that might be responsible for this relationship. On the one hand, trade promotes economic growth, which in turn provides greater sums for individuals to improve their living conditions and for authorities to spend on public health measures such as sanitation and universal vaccination. 

Another mechanism is ‘knowledge spillover’, wherein international trade increases the global diffusion of both knowledge and products that improve health -- ranging from the basics of germ theory to modern pharmaceuticals and medical devices.

The implications of our study are clear: policymakers – particularly those from low-income countries – should continue to pursue trade liberalisation in order to improve the welfare of their citizens. This should also continue to be a goal for middle-income countries.

To improve the health of the world’s people, more free trade is needed – not less.

Philip Stevens is executive director of the Emerging Markets Health Network at the Institute for Democracy and Economic Affairs, Kuala Lumpur.