1. Why might trade and investment affect the social and economic development of a country?

2. What actions should a developing country take in order to enhance the potential benefits from international trade and development?

International trade clearly plays an important role in influencing nations’ economic and social performance, especially for developing countries. Yet the mere expansion of trade does not guarantee benefits for a country and its people. Rather, countries need to view trade performance in the context of its effects on their employment levels, economic growth, development, and improvement in their people’s living standards. The United Nations Conference on Trade and Development (UNCTAD) compiled the Trade and Development Index (TDI) to capture interactions among a range of institutional, structural, financial, trade, and development factors underlying trade and development, with a goal of measuring a country’s trade and development performance and to identify strategies to help trade to produce improved development.

The 20 highest-ranked nations are all developed countries, while 9 of the bottom 10 nations are in sub-Saharan Africa. The best regional performance among developing nations was that of the countries of the East Asia and Pacific region, while South Asia and sub-Saharan Africa lagged behind. A critical factor contributing to high TDI scores is trade liberalization, and FDI was found to have a significant and positive impact on export performance. UNCTAD emphasized that merely improving trade factors, such as by liberalizing the trade environment, will yield only marginal benefits for a nation unless these efforts are made in conjunction with others aimed at social development and poverty reduction. There is a strong need for trade policy and other social, political, and economic undertakings to be integrated and consistent with each other.