Trade and health

In their paper ‘Is Trade Good for your Health’ (2004), Owen and Wu examine the relationship between a country’s openness to international trade (one of the EFW components) and several health outcomes. In general, the paper finds, “Increased openness is associated with lower rates of infant mortality and higher life expectancies, especially in developing countries”. Owen and Wu present preliminary evidence suggesting that part of the explanation for the positive relationship between trade and health emanates from the knowledge spill-overs facilitated by increased trade. Intuitively this makes sense; technologies developed by more prosperous and technically advanced economies can only be transferred to developing economies that are open to trade. 

Openness provides developing economies the opportunity to ‘piggy-back’ on technologies and ‘leapfrog’ up the developmental ladder. For example, developing countries may benefit from vaccines produced and manufactured in developed countries or from pharmaceutical drugs and devices, provided they allow them to enter the country without being delayed by bureaucratic procedures and other obstacles. 


Moreover, Owen and Wu note with regard to health outcomes, the poorest countries have the most to gain from trading with those that are more technically advanced, whereas developed countries gain little or nothing from trading with other advanced nations. The authors state, “Increased trade is associated with improved health outcomes but these gains vary by country. In particular, these benefits are enjoyed primarily by poorer countries, while the benefits to more developed nations are much smaller, or even nonexistent”. 


In addition to the technological spill-overs that occur from having more open trade environments, Owen and Wu suggest that openness is associated with sound economic policies, which may increase health outcomes. The authors state, “One of the reasons that trade and health are positively correlated is simply because “good” government provides policies that are conducive to both trade and better health outcomes”. 


The data presented above clearly demonstrates that countries which embark on trade and economic reforms that increase their levels of economic freedom, stand to gain substantially. The basic message is that freer countries tend to be wealthier and healthier and this is not true for just the richest members of society, but for all citizens. 


AUTHOR Jasson Urbach is a director of the Health Policy Unit (a division of the Free Market Foundation). This article is an extract from the book Paying for intervention! How statutory intervention harms South African health care published by the Free Market Foundation, and may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.


FMF Policy Bulletin / 04 September 2012

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