Transcript Trade, Openness and Poverty: The Missing Link

By
Miriam W O Omolo
Institute of Economic Affairs
Monday 22 June 2009,
Country Inn, Jaipur, India
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Definition of terms: trade openness, poverty
Linking trade openness and poverty
African country experiences
The Missing link(s)
Conclusion and Way Forward
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Moving from inward looking trade strategies to policies
that facilitate integration to global economy
◦ Tariffication of quantitative restrictions
◦ Removal of trade barriers such as tariff and non-tariff barriers to
trade
◦ Export promotion initiatives i.e. export processing zones
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Free Market Access for foreign goods and services
◦ Doha negotiations
◦ Economic partnership Agreement (ACP-EU)
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The Key Objective is to increase overall and individual
welfare of those involved in trade.
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Inability to meet one’s daily food consumption
requirement-food poverty
Inability to meet both food and non-food requirementsAbsolute Poverty
In expenditure terms-spending less than 1USD per day
Poverty Indicators:
◦ Welfare-Income, expenditures
◦ Basic Needs-Clothing, education, nutrition , health etc
◦ Capability: perception, dignity, civil liberty and security
Source: UNCTAD 2004 LDC Report
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Trade liberalization is expected to raise the level of
income since resources are reallocated as explained by
the theory of comparative advantage.
Trade liberalization affects the direct determinants of
poverty i.e. income/wages, prices, government
expenditure etc
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TDP project: Kenya, South Africa, Tanzania, Uganda and
Zambia
Phases of Trade Liberalization:
◦ Import Substitution Industrialization
◦ Structural adjustment Programmes-unilateral liberalization (IMF
and World Bank)
◦ Reciprocal Liberalization (WTO, regional and bilateral
agreements)
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Trade Liberalization has resulted in different gainers and
losers,
◦ e.g. Kenya, the cotton sub-sector vs. telecommunication
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There is strong debate whether trade liberation has led to
sustained economic growth
Most countries have not achieved international
competitiveness –especially with agricultural products
being the main exports-Kenya, Uganda, Tanzania,
Zambia
There is no sufficient evidence to conclude that trade
liberalization has resulted in poverty reduction
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Wrong presumption
◦ Trade liberalization does not guarantee equitable distribution of
gains/losses to individuals, sectors, countries or regions.
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Trade liberalization as a panacea for development-Trade
is a component of development
Export Diversification and intensification
◦ Continued trade in primary products with little progress in high
value addition and movement into the global value chain
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Concentration on export promotion with little focus on
productivity growth through learning, knowledge
accumulation and innovation through trade
Innovation –strong missing link?
The TDP Project – Empirical research establishing the
impact of trade liberalization on poverty.
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Examine trade liberalization as a component of
development
There is a lot of ongoing debate on trade liberalization
and poverty…..There is need for a ‘big push’
◦ Productivity growth through innovations
◦ Institutions and regulations to facilitate innovations