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Trade Liberalisation and Child Wellbeing: Potential Impacts of the Peru-US Free Trade Agreement

Briefing/policy papers

Written by Nicola Jones, Paola Pereznieto

Following the lead of Latin American countries such as Mexico and Chile, Peru signed a Free Trade Agreement (FTA) with the United States in December 2005. While most economic analysis points towards overall benefits for Peru, there are concerns regarding potential adverse consequences. In order to derive maximum benefits with minimum losses, it is vital to identify appropriate mechanisms to support short-term losers – especially children from poor families – and to develop medium-term strategies to promote more equitable distribution of benefits.
Trade liberalisation’s potential to promote national economic growth is internationally acknowledged. It can help countries to exploit their comparative advantage in the production of regionally specific goods and take advantage of larger markets for products that have limited local demand. Liberalisation may also generate economies of scale, increase efficiency and lower production costs. Countries can remain competitive – against a background of proliferating multilateral and bilateral trade agreements – by gaining the same access to large trading partners as their regional competitors.
Bilateral trade agreements ensure countries’ special access to specific trade partners in exchange for greater liberalisation of tariff and non-tariff barriers and adherence to stricter regulations than those found in the international trade framework shaped by the World Trade Organisation (WTO). Bilateral negotiations are generally driven by the richer trading partner and pay little heed to concerns raised by the weaker partner about potential impacts on certain economic sectors and population groups.
Young Lives (YL) – a longitudinal childhood poverty project being implemented in Ethiopia, India, Peru and Vietnam – is researching the mechanisms by which trade affects children. This work aims to fill an important lacuna in trade impact analyses. Findings are being used to identify possible policies and programmes that can better mitigate the negative impacts of trade liberalisation on poor families with children.
There is an additional dimension that needs to be tackled in order to improve schooling indicators. While the general focus has been on supply of educational services, not much attention has been paid to out-of-school factors that influence the demand for schooling. This is a concern which the Young Lives Project – a 15-year longitudinal policy-research project in four countries (Ethiopia, India (Andhra Pradesh), Peru and Vietnam) which aims to reveal the links between international and national policies and children’s day-to-day lives, with the objective of influencing national policies to improve the wellbeing of children living in poverty – seeks to emphasise.
Achieving UPE will necessitate not only sustaining and improving current policies in the education sector but also identifying complementary policy interventions to address the range of external causes for insufficient school enrolment.

Eliana Villar and Paola Pereznieto with Nicola Jones