Making trade work for all – the Danish case

International trade is important to Denmark. Danish firms export goods and services worth DKK 1,100 billion annually, supporting half of the employment in the private sector in Denmark. In addition, imports of goods and services are crucial for Danish firms to produce and operate in Denmark. For example, half of the world’s insulin is produced in Denmark by Novo Nordisk but less than 1 per cent of Novo Nordisk’s revenue comes from sales in Denmark. Further, imports generate a broader selection of goods and at lower prices. The total effects of international trade on the Danish economy are positive. However, while some firms and sectors prosper, others struggle. Therefore, there are people who have experienced lower growth in wage income – and even income reductions – as a consequence of increased international trade.

In light of these challenges, Copenhagen Economics has been asked by the Danish Business Authority to analyse the benefits and costs associated with international trade, and to assess the role of the Danish policies and labour market design in reducing the transition costs for individuals that are challenged by international trade.

The main conclusions from our study are that

• More than one third of the growth in Danish GDP since 1992 is due to increased international trade.
• The design of the Danish labour market has helped lower the individual transition costs, e.g. through the use and provision of active labour market policies, training and education.
• In the future, the main challenge is the risk of increasing protectionism and possible restrictions to trade, which can be harmful to the Danish economy.

The study is commissioned by the Danish Business Authority (Erhvervsstyrelsen)