Healthy Trade: The Relationship Between Open Trade and Health

Abstract

A recurrent theme of the academic literature and wider public discourse is that free trade is bad for health as it promotes economic inequality and insecurity, polluting the environment and making processed foods more widely available. Such views are also widely promulgated by international policymaking organizations such as the World Health Organisation (WHO). However, there has been little empirical evidence to support these assertions, in particular the relationship between free trade and health. This is an important relationship, as it tells us more about the effect of economic policies on human welfare than bald statistics relating to GDP. This study aims to build on a nascent literature by examining the relationship between free trade and health, using a range of data relating to trade openness and human development. Our analysis finds that free trade does in fact appear to be associated with better health outcomes, with the relationship particularly pronounced for lower-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.