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A framework to analyse linkages between trade policy, poverty reduction and sustainable development

Research report

Written by Kate Bird

Research report

This paper presents a framework of analysis for examining the impact of changes in trade regimes on poverty. Underpinning this framework is the belief that policy matters, that trade policy affects trade, and that trade then has effects on both economic growth and poverty. Positive and negative, direct and indirect effects will result from a country opening its markets to a greater volume and range of traded goods and services and in easing restrictions on exports. Impacts will affect segments of the population and sectors of the economy differentially over the short, medium and long term, and these effects may intensify the poverty of one group of people over the short term, while decreasing the poverty of another over the longer term.  The paper highlights the importance of having a differentiated and dynamic understanding of poverty. It emphasises the necessity for examining the difference between stated trade policy and the policy as implemented.   It suggests that while linkages between trade and poverty are complex, making systematic empirical investigations difficult, they may be traced through an examination of: economic growth and changes in production patterns, including an examination of impacts on overall prices; changes in the structure of firms and opportunities for labour mobility markets, including an examination of the extent to which poor have access to markets for the goods and services they buy and sell; the linkages between such local markets and international markets.

Kate Bird