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Boosting Manpower Skills Increases Trade Performance


A recent joint research publication by the ILO (International Labour Organisation) and the WTO (World Trade Organisation) argues that the ever-growing challenges of a global economy confronting countries and businesses can be met by devising programmes that focus on boosting core work, technical and management skills. The publication entitled “Investing in Skills for Inclusive Trade”, which follows up on three previous collaborations between the two institutions, puts a spotlight on the linkages between trade and skills, and between trade and skills development policies. The report throws light on how trade affects the demand for skills and how appropriate skills development policies can help firms get the workers they need and help workers find good jobs. It lays emphasis on the importance of responsive skills development systems in making trade more inclusive. It also features the results from the ILO’s practical work on Skills for Trade and Economic Diversification (STED) programme, a strategic analytical and implementation tool that provides guidance for the integration of skills development policies in various economic sectors.


This ILO-WTO study contends that trade increases the demand for certain skills in both developed and developing economies. Besides forming an importing complement to infrastructure, skills contribute to trade growth and lead to economic diversification. The report stresses that skills development is vital to trade considering the role of skills in export performance, absorbing FDI and assisting firms to move up the value chain.

Highlighting the concepts of ever-changing technologies, market demands and trading relations in the context of globalization, the report states that the responsiveness of skills supply to current and prospective changes in demand is of crucial importance. According to the study, it enables firms and businesses to participate effectively in international trade in goods and services. The adequate response of skills supply to changes in the demand also help in facilitating adjustment to trade shocks by ensuring the smooth transition of workers from low-skill jobs to higher-skill and higher-productivity jobs. The report, conversely, expresses that skill mismatches can amplify the impact of trade on the skill premium, lead to higher unemployment for certain skill groups and constrain expansion of successful firms through shortages of certain skills.

The study suggests that continuing education and training, both at universities and in the form of technical and vocational education and training (TVET), and on-the-job training, can help workers “cope with the big changes in demand for skills which are in varying degrees triggered by globalization.”

There are experiences from ILO STED programme which show that lack of responsiveness in skills development systems is a key barrier to meeting the current and emerging skills needs of exporting and export value-chain industries in developing countries. Underlying this lack of responsiveness are shortcomings in resourcing and capacity among skills development providers, and within the skills systems themselves, as well as weak mechanisms for system governance in terms of industry engagement, identification and anticipation of skills needs, and quality assurance.

The econometric literature on trade and skills demonstrates that a country’s endowment of skills has an impact on its trade patterns and export performance. However, the indicators of skills on which this literature is based are pitched at a high level of aggregation.

With developing economies becoming more exposed to global markets, there is an increased pressure to catch up on skills development. Modern HRM (Human Resource Management) generally favours organizational strategies that entail significant investment in skills development for workers. The report holds forth on the weaknesses in HRM and strategies in businesses, particularly in MSMEs. It states that MSMEs are less likely to be able to afford to invest in strong HRM capabilities than their larger counterparts, which go on to affect their capacity “to benefit from learning as well as their capacity to recruit effectively.” Lessons from STED programme suggest that largest firms are better resourced and have managers educated and trained to international standards. However, for MSMEs, this remains a common and substantial constraint.

In fine, the ILO-WTO study highlights some specific areas where attention should be given. This includes “development of core skills in initial education; quality, relevance and consistency of formal education and training provision; Strategies for lifelong learning, with a particular focus on low-skilled workers, industrial workers and workers in sectors under adjustment; Acknowledgement of the importance of skills within the response to trade-connected employment dislocation; Work-based learning; Skills development at and for MSMEs; Collection and dissemination of LMI; Planning and acting at sector level, among other levels; Imbalances of career opportunity and career risk between women and men.”

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