Trade Liberalisation and Poverty: What are the Links?
Author(s)
Winters, L. Alan
Abstract
Openness and trade liberalization have been a major component of conventional economic policy advice for the last fifteen years. There is widespread acceptance that in the long run open economies fare better in aggregate than do closed ones, and that relatively open polices contribute to long-run development. Many commentators fear, however, that in the shorter run trade liberalization puts great stress on certain actors in the economy and that even in the longer run successful open regimes may leave some behind in poverty. Others additionally argue that being open – rather than just the process of opening up – exposes an economy to shocks that generate uncertainty, cause it to operate with higher levels of poverty than would a less open economy and undermine policy measures designed to alleviate poverty and redistribute income. This paper attempts to take these concerns seriously; it asks how a developing country’s own trade liberalization could translate into increased poverty, and what information would be required to identify whether it will do so.
