Why the gender gap in international trade needs to close faster

The data on gender and trade are clear – for individual businesses and for whole economies.

Economically, closing the gender gap in trade would create up to US$12 trillion in GDP by 2025, according to a study by the Washington DC-based Center for Strategic and International Studies.⁹ In the UK, an independent study commissioned by the government, the Alison Rose Review of Female Entrepreneurship, found that if women started small businesses at the same rate as men, they would add another US$307.7 billion to the British economy – a 9.8% bump to 2021’s GDP of US$3.13 trillion.¹⁰

The case for businesses is also clear. According to a 2021 study by Credit Suisse, companies with more than a 20% diversity threshold have enjoyed better EBITDA margins (higher by 1.6 percentage points) on average since 2010 compared with companies with a lower than 15% diversity threshold. Moreover, firms with higher levels of diversity, whether in management or the boardroom, have higher share price returns than companies with lower diversity levels. Comparing businesses with an above-average share of women on the board and in management to those with below-average shares (9.7% and 6.8%, respectively), the disparity in returns is roughly 300 basis points.¹¹

Diversity improves performance

A lack of diversity among venture-capital funders also helps explain why female entrepreneurs fall through the cracks. The Rose Review found that less than 1% of UK venture capital funding goes to all-female teams of entrepreneurs. This is similar to the global total, which has hovered between 2% and 3% in recent years.¹² In the US, women account for only 5.7% of VC partners.¹³ These gendered results for venture capital persist despite a growing body of evidence that women make great leaders of start-ups: venture-backed technology companies run by women deliver higher revenue and a greater return on equity, for example.¹⁴

These lessons are critical for global businesses looking to align with efforts to close the gender trade gap by ensuring they have inclusive representation in their own trade functions.

“Any kind of diversity improves your performance,” says Rocio Mejia, EY Global Trade and Indirect Tax Leader for Latin America North. “Having women in top roles provides different points of view. It’s always a combination of ideas that companies tend to follow, so it is better to have more ideas than fewer.” Companies that are inclusive are 1.7 times more likely to be leaders in innovation.

In May 2022, the United Kingdom and Mexico kicked off negotiations on a bilateral free-trade agreement. The signing ceremony was held in London’s Soho district, at the new headquarters of Diageo Plc. The largest distiller of Scotch whisky is also a major tequila producer, and recently announced a US$500 million investment in new production facilities in Jalisco, the Mexican state home to the blue agave plant used to make the drink.¹⁵

When the time came for the countries’ trade ministers to shake hands and smile for the cameras, there were two women in the frame: Tatiana Clouthier, Mexico’s then Secretary of Economy, and Anne-Marie Trevelyan, the UK’s then Secretary of State for International Trade.

That two women would interact in such a high-profile negotiation was unusual because few women hold leadership positions that oversee international trade. As of January 1, 2023, women represented only 22.8% of government Cabinet ministers,¹⁶ and they typically headed ministries other than the high-profile ones that oversee trade policy, such as a ministry of finance, trade and investment; economic development; or foreign affairs. The five most commonly held roles for female ministers focus on issues concerning family, children, youth, the elderly and the disabled.

“When there are more females in those powerful positions, there is a greater emphasis on women’s issues and a natural understanding of the challenges they face,” says Ian Craig, EY Latin America South Global Trade Leader.

Chile takes a leading role

When Michelle Bachelet won a second term as president of Chile in 2014, she made gender equality gaps a focus.¹⁷ FTAs had rarely mentioned gender as an issue, and when they did so it was typically in an aspirational introductory passage rather than in the binding language of the body of the document. But Bachelet’s trade negotiators had already teamed up with some like-minded peers to push against that boundary. In 2016, Chile and Uruguay introduced the first FTA with a chapter covering gender issues. It contained general passages declaring the importance of ending discrimination against women, calling for considering gender in trade policy, and flagging trade as a way to equalize opportunity.

The two parties also declared an intention to cooperate on programs to help women build skills and networks, and to create labor market conditions that encourage female participation in job markets. Moreover, they established a gender committee to facilitate those objectives. However, these pro-equality moves are voluntary. The text clarifies that the dispute-settlement mechanism does not apply to the gender chapter.

Chile’s next generation of FTAs went further, with two treaties effective as of 2019 with Canada and Argentina. Chilean and Canadian negotiators included reminders in their bilateral FTA of other international agreements the two countries had signed, including the 1979 Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW). The Argentina-Chile deal referenced CEDAW as well as several conventions of the International Labour Organization, which mandate equality in remuneration and opportunity, and address discrimination and other gender-based workplace issues.¹⁸

Canada sets the bar higher

A Canadian FTA with Israel announced in 2019 raised the bar even higher. Canada and Israel negotiated an update to their existing FTA and specified in the gender chapter that its content is subject to the FTA’s binding resolution method. Further, instead of confining gender issues to the gender chapter, they are also addressed in the preamble of the FTA and in its labor chapter.

As an aside, it’s interesting to note that Canada’s Minister of Finance, Minister of International Trade and Minister of Foreign Affairs are currently all women.

It's still too early to measure the progress we’re seeing

As of December 2020, an updated thorough assessment of 577 RTAs found that 83 of them had at least one provision directly referencing gender or women. This includes 305 agreements that are now in force and have been disclosed to the WTO. When provisions referring to implicit gender issues, such as human rights, the social dimension of sustainable development, and vulnerable groups are included, the total number of agreements rises to 257.

While this may be seen as progress, it’s too soon to expect measurable benefits, says Hong Kong-based Kareena Teh, Partner at LC Lawyers LLP (a member of the global EY network), who deals in disputes. “The dispute settle mechanism of the Canada-Israel FTA has yet to be tested with a gender-issues case. And FTA dispute mechanisms are just one path to narrowing the gender gap,” Teh says.

“If we take a carrot-and-stick approach, dispute settlement mechanisms are the stick,” Teh explains. “But FTAs could also include incentives to meet certain gender targets, which could be an easier way of achieving the same end.” Dispute settlement mechanisms could be difficult to apply because they are often oriented toward financial payments as settlements, and it is difficult to quantify damages payable for gender-based complaints.

Trade negotiators could also further improve FTAs through a process called gender mainstreaming. In public policy, this is a whole-of-government approach in which the responsibility to consider, analyze and address gender issues falls to more than just gender specialists. All activities must be screened for gender impacts before proceeding, including laws, regulations, government programs and research. For FTAs, gender mainstreaming would mean abandoning the approach of collecting gender-based issues and stipulations in a gender chapter, and instead ensuring that gender considerations are addressed in every chapter. This approach would leave room for both carrots and sticks, Teh says.

FTAs are an understandable focus for governments aiming to close the gender gap in trade. But trade policy isn’t the only path to progress. Practical responses to the problem can come from domestic laws and regulations, as well as from international organizations, the private sector and civil society. They include approaches such as establishing minimum standards, gender mainstreaming, training and oversight programs and incentive programs.

Many of the programs women can access are designed to tackle three main challenges they face as entrepreneurs: access to finance, mobility and information.

For the WTO, the international body most relevant to the challenge, a push for change coalesced into action at the 11th Ministerial Conference in Buenos Aires in 2017. Talks there led to 127 countries signing on to the Buenos Aires Declaration on Trade and Women’s Economic Empowerment, which aims to boost involvement in trade for women and to ensure they benefit from the activity.¹⁹ This led to an informal WTO working group that meets regularly (there are five meetings in 2023), as well as a Gender Research Hub, which has been collecting data on gender-related trade matters ever since and hosts the World Trade Congress on Gender every two years in Geneva. Their latest report, issued in 2022, focused on cross-border trade in the pre- and post-pandemic environment.

The United Nations Conference on Trade and Development (UNCTAD), meanwhile, offers the Trade and Gender Toolbox, which national policymakers can use to forecast how new trade policy proposals would impact women.

The UN and WTO also collaborate through the International Trade Center. Its SheTrades program offers a platform for women in business to network and support each other, and for buyers to find products and services offered by women. The Organisation for Economic Co-Operation and Development’s Global Trade and Gender Arrangement (GTAGA) commits signatory countries to promote trade policies that empower women and remove the barriers they face. At the World Bank, programming includes the Women, Business, and the Law initiative, which evaluates countries’ laws and regulations in hopes of triggering policy discussions that lead to the removal of legal restrictions on women aiming to export and import.

The World Bank and other multilateral or bilateral development banks and aid providers can play a dual role. In addition to providing programming to promote minimum standards or providing research, they can help close trade’s gender gap through their own decision-making processes on the loans and grants they offer. Most already require environmental and social impact assessments and environmental and social management plans for projects they finance. UNCTAD recommends 12 main ingredients for a management plan, one of which addresses gender concerns in labor.²⁰

Governments should seize opportunities to improve women’s access to finance, mobility and information

Outside of trade agreements, there are several opportunities governments can take advantage of to improve women’s access to finance, mobility and information.

• Enforce standards. Governments can enforce standards through their procurement processes. Laws and rules can establish that winners of government contracts must commit to specific conditions, such as providing opportunities to qualified women-led subcontractors. Currently, impact assessments and procurement rules are often treated as “box-ticking exercises” in which investors do the bare minimum required to win approval, according to a World Bank report.
• Tailor training and facilitation resources to women. Training and facilitation programs often focus on the main challenges women face as entrepreneurs. They are available from in-country export-promotion agencies, from development banks, government agencies, or civil society groups. Tailoring these resources to women specifically and offering them in a women-only setting can help eliminate the possibility of discrimination, as in many cases the people running these programs are men.
• Consider culture and local norms when devising mobility solutions. The mobility problem is often rooted in local conditions and cultures, says Taramani Agarwal, a Dehli-based Public Policy Development Manager at EY Global Delivery Services India LLP. In many parts of the world women cannot simply pack up their goods and travel to another country to sell or arrange for shipping. People in remote settings may lack affordable transportation. Husbands might prefer their wives stay close to home to look after children. Women could face discrimination or unwanted sexual advances at any point in any business trip: to a market, supplier, bank or shipping point. Joining digital platforms may be a solution in the future because work can be done from home, but research thus far on their gender impacts is unclear. A local solution in Northeast India involved small, stall-based markets near India’s international borders, Agarwal says. This marketplace model of “boarder haats” [sic] is not exclusive to women. However, given the suitable conditions to trade products at the border markets, local women are able to make money for their sustainable livelihood. “We found that customs officers and trade officials needed to be gender-sensitive for this to work,” says Agarwal, who was then employed by a non-governmental organization working to facilitate trade. Her team recommended gender training for customs officials, freight forwarders and others involved in the process, as well as addressing the setting. The border-haat concept comes with a bonus for tax authorities – it reduces informal trade and offers an opportunity to connect with entrepreneurs and encourage them to register their businesses and pay taxes. Offer gender-exclusive opportunities to access information. Jesmina Zeliang, who is from India’s remote Nagaland state, and is the founder of a home décor and textiles business that sells goods to global retailers such as Crate & Barrel and Christian Louboutin, realized she needed help when growth had slowed and buyers had stopped calling. Zeliang started with programs for developing-country entrepreneurs offered by the Delhi-based Export Promotion Council for Handicrafts and the Dutch Entrepreneurial Development Bank. She evaluated her business’s strengths, weaknesses, opportunities and threats, and studied export marketing. She learned to target markets by understanding common color choices for home decoration in different countries and developing a pitch more sophisticated than carrying samples and knocking on doors. She added international contacts to her professional network and soon built relationships into contracts. She’s now on the board of the Export Promotion Council as its sole female member. Zeliang took advantage of many of the same types of support that men also find valuable: training, networking and joining trade associations or local chambers of commerce. The groups and programs Zeliang used weren’t tailored to women specifically. But there may be value in gender-exclusive versions.
• Develop models that speak to women. Vicki Saunders runs a non-profit crowdfunding platform called Coralus International. She raises funds for women entrepreneurs using a values-driven approach. Those donors are then entitled to vote on proposals from female entrepreneurs, and the winners receive a five-year loan worth US$100,000 in the local currency at zero interest. Coralus operates in Canada, the US, New Zealand, Australia and the UK. She has thus far raised about US$14 million and funded 146 ventures. “Our model has little to do with women specifically beyond that you have to be one to participate,” Saunders says. Saunders’ platform also addresses the ways in which women network and interact in professional communities, as well as the gap in finance. The entrepreneurs she backs participate in regular sessions, typically over video platforms. “People take turns talking about their products and services,” Saunders says. “Often, they hadn’t been thinking of exporting, but suddenly they’re able to tap international markets because someone else on the call knows a local distributor. It’s tough to build a business on your own, but it becomes so much easier when you get people together in the same room. We’re focused on relationships and not transactions.”

Where trade was once considered a gender-neutral activity, it is now understood to have gendered impacts. The 2017 Buenos Aires Declaration identifies improved data collection as a way to fix that.

“We need data disaggregated by sex so we know how different policies impact men differently than women,” Teh says.

According to the OECD, policymakers should collect data for indicators such as the ratio of women’s to men’s income in comparable trade-based economic sectors or value chains, the percentage of women in higher-paid positions across sectors or value-chain segments, the ratio of women and men enrolled in trade-specific capacity-building training programs, and the number of procurement contracts awarded as a result of the increased certification of women-owned businesses.²²

A data-centric approach has worked to measure and close other kinds of gender gaps, according to the WEF. Since 2006, for example, the report has measured the ratio of males to females enrolled in secondary education. Disseminating that data led to 184 countries adopting a monitoring framework to ensure inclusion, and education became one of the two main gender gaps the WEF considers almost completely closed.²³

Conclusions across countries about how trade policy impacts women can be difficult, however, because countries collect that data in different ways, according to UNCTAD. One way to address this would be greater harmonization in the ways governments conduct surveys and other data-gathering exercises, to make data easier to compare across countries.²⁴

Disaggregating data by gender has also improved the private sector’s understanding of how women experience their goods and services. For the automotive industry, gender-specific data on vehicle crashes has helped to reveal that women are 47% more likely to suffer injury and 17% more likely to die because the crash-test dummies used in safety assessments mimic the bodies of men only instead of both genders. In financial services, data have shown that women are more likely to seek a new investment advisor when their spouse dies because advisors have worked in the past to develop a relationship with the husband only.²⁵

Although governments are the logical starting point for improving the data available to policymakers, they can’t do it alone – particularly in bigger countries, where relevant agencies may not have the resources to collect statistically significant data samples, especially in remote regions.

International organizations also play a role in data gathering and analysis. In recent years, several organizations have studied digital-commerce platforms and how their impact differs on male and female entrepreneurs, with mixed results. In Indonesia, a United Nations study found that 54% of women-owned microbusinesses use the internet to sell their products, compared with 39% of those that are men-owned. Using survey data from the Indonesian government, the study found that about 40% of micro and small businesses led by women used digital platforms to expand their businesses, compared with about 10% less for those led by men.²⁶ However, in the Philippines, the Asian Development Bank found that women are more likely to use platforms, but that men who use digital platforms in similar ways are more likely to earn more.²⁷

Another solution to address the data gap, while showing where the structural barriers to trade for women persist, is the SheTrades Outlook developed by the International Trade Center. This evidenced-based policy tool helps to identify policies, laws or programs that contribute or prevent women's participation in the economy and trade. The SheTrades Outlook covers 55 indicators grouped under six interlinked pillars. It also has a repository of over 100 good practices on women’s economic empowerment around the world.

It's early in the quest to understand the lasting impacts of digital platforms, just as it’s too soon to gauge the effectiveness of gender provisions in FTAs. The hunt for data will continue. “If you want gender-sensitive data, you need to ask gender-sensitive questions,” Teh warns.

This makes statistics collection similar to FTAs, representation in senior government roles and barriers to access. To improve gender-neutral outcomes, all stakeholders involved need to create opportunities for women to participate, lead and influence the process.

Gender parity is central to conversations among businesses that are increasingly focused on social and environmental issues. However, businesses need to translate rhetoric about progress into meaningful action that has a lasting impact.

For organizations that are serious about gender-parity in global trade, here are three ways they can help close the gender gap.

1. Lobby governments to forge stronger ties among domestic policy, trade and strategic goals. Organizations can lobby governments to not only acknowledge the importance of incorporating a gender perspective into strategic goals around inclusive economic growth, but also to develop and enact meaningful policies that mandate action – using carrot, stick, or both.
2. Lead by example by placing more women in key decision-making roles. As we’ve noted, the data is clear that governments develop better policies toward closing the gender gap when women are in senior decision-making roles. And businesses are more profitable. Organizations that prioritize diversity in their boards and senior leadership positions – and especially positions that have an impact on international trade – can do more than boost their bottom line. In leading by example, they can demonstrate to governments and policymakers that more women in roles that can accelerate the closure of the gender gap in trade becomes a win-win for everyone.
3. Create a trade function within your organization that recognizes the value women-led businesses can bring to global markets. In a more disrupted international trade environment, organizations would benefit from setting up a trade function. In addition to exploring new markets, finding suitable partners and developing a framework for trade compliance in the jurisdictions in which you operate, this trade function can establish policies that prioritize partnerships and alliances with women-led businesses. Such policies would strengthen your ecosystem and help women-led businesses maximize their potential in global markets.

Closing the gender gap in international trade shouldn’t take 131 years. With governments, policymakers, non-governmental organizations, and corporations working together to break down the barriers that women-led businesses face, gender-parity in international trade could be a reality within the next decade. That’s a goal worth realizing.

Summary

Women-led businesses account for just 15% of international trade, a major contributor to a global gender gap that the World Economic Forum says will take more than a century to close at the current rate of policy reforms. Shrinking that trade gap is projected to improve prosperity for all. Some jurisdictions, particularly those in South America, are taking the lead, and gender provisions are becoming more common in free-trade agreements. While progress is uneven, the trend is clear and trade functions will want to be sure their businesses capture the value and opportunities that progress offers.