WTO Lessons from experience with adjustment policies experience Lessons from Making Globalization More Inclusive Making Globalization Making Globalization More Inclusive More Inclusive Lessons from experience Lessons from experience with adjustment policies with adjustment policies Recent research shows that although trade and The publication includes an extensive review of the technological advances yield important benefits literature on this topic and provides case studies on for economies overall, some workers and regions adjustment policies written by experts from seven can be negatively affected. Policies aimed at countries across four continents. The contributions helping workers adjust to the impact of trade cover a broad range of policy measures taken by or technological changes can provide a helping governments to help labour markets adjust to the hand to the workforce and increase the benefits of impact of globalization, including trade openness, open trade and new technologies. This publication using a variety of approaches. They provide valuable contributes to the discussion on how governments insights into those policies and useful information can help make international trade more inclusive for all those interested in the social dimensions of and ensure that the benefits of open trade are globalization and technological change. Edited by spread more widely. It responds to the growing demand from policy-makers for further research on Marc Bacchetta, adjustment policies, building on previous WTO work Emmanuel Milet and on the labour market effects of trade. José-Antonio Monteiro MAKING GLOBALIZATION MORE INCLUSIVE Lessons from experience with adjustment policies Edited by Marc Bacchetta, Emmanuel Milet and José-Antonio Monteiro Disclaimer The designations employed in WTO publications and the presentation of material therein do not imply the expression of any opinion whatsoever on the part of the World Trade Organization concerning the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers. The responsibility for opinions expressed in studies and other contributions rests solely with their authors, and publication does not constitute an endorsement by the World Trade Organization of the opinions expressed in them. Reference to names of firms and commercial products and processes does not imply their endorsement by the World Trade Organization, and any failure to mention a particular firm, commercial product or process is not a sign of disapproval. Copyright 2019 World Trade Organization Design by Book Now Ltd Cover image: murals on labour by Dean Cornwell (1955). Photo by Pierre-Yves Dhinaut, 2008. Copyright 2019 World Trade Organization. Reproduction of material contained in this document may be made only with the written permission of the WTO Publications Manager. ISBN: 978-92-870-5057-1 (print); 978-92-870-5058-8 (pdf) WTO publications can be obtained through major booksellers or from: WTO Publications World Trade Organization 154 rue de Lausanne CH-1211 Geneva 21 Switzerland Tel: + 41 22 739 52 08 Email: [email protected] Web site: www.wto.org Online WTO bookshop: http://onlinebookshop.wto.org Printed by WTO Secretariat, Switzerland, 2019. Contents Notes on editors vii Notes on contributors ix Acknowledgements xi Introduction 1 Marc Bacchetta and Emmanuel Milet Open questions 10 References 13 1 Literature Review 15 Emmanuel Milet Adjustment to international trade 15 Adjustment policies 19 Conclusion 41 References 44 2 Globalization, Flexicurity and Adult Vocational Training in Denmark 51 Anders Humlum and Jakob R. Munch Introduction 51 “Flexicurity” and the Danish labour market 52 Adult vocational training in Denmark 56 Training and globalization 61 Conclusion 67 References 68 iii iv MAKING GLOBALIZATION MORE INCLUSIVE 3 Enforcement of Labour Regulation and the Labour Market Effects of Trade: Evidence from Brazil 71 Vinicius Lima, Vladimir Ponczek and Gabriel Ulyssea Introduction 71 The trade liberalization episode in Brazil 71 Labour regulations and enforcement 73 Empirical analysis 75 Empirical strategy 78 Results 80 Discussion 82 References 84 Appendix 85 4 German Employment Legislation and its Impact on the Trade and Labour Market Nexus 87 Antonia Reinecke and Hans-Jörg Schmerer “The sick man of the euro” 87 Stylized facts on the pattern of imports from China 88 The German labour market reform 90 Theoretical considerations on the trade and employment protection nexus 93 Empirical analysis 94 Summary of results and policy recommendations 105 References 108 Appendix 110 5 The Republic of Korea’s Trade Adjustment Policies and their Effects on Labour Market Adjustment 113 Young-Han Kim and Sungmin Park Introduction 113 The structural features of Korea’s labour market 114 The effects of market liberalization via bilateral trade agreements on the labour market in Korea 118 Trade adjustment policies adopted after bilateral FTAs 124 The effectiveness of the Korean TAA programme 126 Concluding remarks and policy implications 131 References 135 Appendix 137 CONTENTS v 6 Higher Education Response to India’s IT Boom: Did State Governments Play a Role? 139 Devaki Ghose Introduction 139 The IT boom 141 The Indian labour market 144 The role of the Government 147 Conclusion 156 References 159 7 Labour Market Policy Responses Amid Globalization: The Case of South Africa 163 Haroon Bhorat, Kezia Lilenstein and Francois Steenkamp Introduction 163 Globalization, growth and the South African labour market 163 Labour market responses 167 The cost of ALMPs in South Africa: A brief comparison 175 Conclusion 178 References 181 8 The Policy to Mitigate the Effects of the 2008 Global Crisis on Textile, Clothing, Leather and Footwear Jobs in Morocco 183 Saad Belghazi and Kawthar Berbich Introduction 183 The labour market and competitiveness of the TCLF sector 185 Impact of the 2008 crisis on the TCLF sector 190 Government policies prior to 2009 and measures adopted by the Strategic Watch Committee (SWC) 196 Effectiveness of the measures undertaken by the SWC 199 Conclusion 208 References 212 Appendix 213 Notes on editors Marc Bacchetta Chief, Economic Modelling and Quantitative Analysis Section, Economic Research and Statistics Division of the World Trade Organization, Geneva (Switzerland) Emmanuel Milet Post-doctoral fellow, University of Geneva (Switzerland), independent consultant José-Antonio Monteiro Economist in the Economic Research and Statistics Division, World Trade Organization, Geneva (Switzerland) vii Notes on contributors Saad Belghazi Economist, independent consultant (Morocco) Kawthar Berbich Economic and financial analyst, independent consultant (Morocco) Haroon Bhorat Professor of Economics, School of Economics, University of Cape Town; Director, Development Policy Research Unit, University of Cape Town (South Africa) Devaki Ghose PhD candidate, Department of Economics, University of Virginia (United States) Anders Humlum PhD student in Economics at Princeton University (United States) Young-Han Kim Professor of Economics, Sungkyunkwan University, Seoul (Republic of Korea) Kezia Lilenstein Researcher, Development Policy Research Unit, University of Cape Town (South Africa) Vinicius Lima PhD candidate, São Paulo School of Economics, São Paulo (Brazil) Emmanuel Milet Post-doctoral fellow, University of Geneva (Switzerland), independent consultant Jakob R. Munch Professor of Economics, Department of Economics, University of Copenhagen (Denmark) ix x MAKING GLOBALIZATION MORE INCLUSIVE Sungmin Park Economist, Economic Research Institute, Bank of Korea (Republic of Korea) Vladimir Ponczek Associate Professor, São Paulo School of Economics, São Paulo (Brazil) Antonia Reinecke PhD candidate, FernUniversität in Hagen (Germany) Hans-Jörg Schmerer Professor of Economics, FernUniversität in Hagen; CESifo, Institute for Employment Research (IAB) (Germany) Francois Steenkamp Senior Researcher, Development Policy Research Unit, University of Cape Town (South Africa) Gabriel Ulyssea Associate Professor, University of Oxford, Oxford (United Kingdom) Acknowledgements This report was made possible thanks to the funding of the Swedish Government. The editors would like to thank all the contributors without whom this volume would not exist. Thanks also go to Henning Envall, Counsellor, Permanent Mission of Sweden to the WTO, for his support; Eléonore D’Achon, David Cheong, Cornelius Gregg, Michael Mwasikakata, Lee Sangbok, Olga Strietska-Ilina and Bolormaa Tumurchudur-Klok from the International Labour Organization for their help in the early stages of the project; Jennifer Rouse, who copy-edited the report; Anthony Martin, Head of WTO Publications, and Edmundo Murray, WTO Publications Officer, who were responsible for the production of the report; and Anusha Goyal, WTO, who provided editorial assistance. The preparation of the publication was carried out under the guidance of Robert Koopman, Director of the Economic Research and Statistics Division, WTO. xi Introduction Marc Bacchetta and Emmanuel Milet Over the last 50 years, the remarkable opening and integration of the world economy, in combination with the rapid pace of technological change, has contributed to raise the living standards of billions of people around the world, including some of the poorest. But this process of globalization has necessarily been accompanied by economic change, churn and displacement as labour, together with other factors of production shifted from declining industries to expanding