Foreign trade and sustainability is high on the political agenda, with increasing efforts to use trade policy more effectively for sustainable development purposes. But scientific evidence on how trading activities impact on firms’ sustainable behaviour is limited.
A recent study ‘Foreign Trade and Sustainable Development in Ghana’ by researchers from the Kiel Institute for the World Economy and the University of Ghana, including ISSER’s Prof Charles Ackah, sought to address this question. Using a survey database for more than 400 Ghanaian firms spanning 2013-2015, plus four case studies based on interviews, the study provides new empirical evidence on the link between business sustainability and firms’ engagement in international trade.
The study explored sustainability both in its social and environmental aspects, and the question of how foreign trade makes companies willing to operate more sustainably.
It outlines five key findings, including the following: foreign trading is positively linked to sustainable business practices; exporters pay higher wages, especially for the skilled; it makes a difference who you trade with; and the gender of the business owner matters, but only for wages.
Based on the findings, four key recommendations are derived:
- To increase exports, governments should assist firms in learning to meet export-related sustainability requirements.
- Governments should stimulate sustainable business practices also more widely on the domestic market.
- There is a role for policy to provide incentives for firms to train workers, in particular unskilled ones, in order to enable them to work with more sophisticated technology and ultimately benefit from wage gains.
- Policy-makers should tackle the root causes of trade-related gender imbalance.
Read the policy paper for more on this study.