Trade policies, household welfare, and poverty alleviation:
Case studies from the UNCTAD Virtual Institute Academic Network
Summary
For some time now, a debate has been brewing about the relationship between international trade and poverty. This is because, on the one hand, factors such as trade liberalization through the reduction of existing barriers, the fragmentation of production, and the increase in demand for goods have contributed to, for example, the increase in exports from middle- and low-income countries from 251% to 551% of their Gross Domestic Product (GDP) between 1994 and 2008, respectively. On the other hand, global poverty has decreased, as the number of people living on less than a dollar a day fell from 521% in 1981 to 221% in 2008.
Thus, the question arises: to what extent can the decline in global poverty be linked to the growth of international trade? Therefore, the case studies addressed in this text attempt to address the issue from two perspectives. The first is to examine the consequences of global increases in food prices on societal well-being, and the second is to examine the effects of changes in trade policies and exchange rates on societal well-being.
For this reason, and to provide a more representative overview, the text includes case studies in selected countries classified as lower-middle and middle-income, with GDP per capita ranging from USD 2,388 in Nigeria to USD 12,000 in Argentina (according to 2010 purchasing power parity). Furthermore, these countries vary in their poverty levels, with the number of people living on less than a dollar a day ranging from 11% in the former Yugoslav Republic of Macedonia and Argentina, to 16% in China, the Philippines, and Vietnam, and 6% in Nigeria. At the same time, they differ in their exposure to the global agricultural market in terms of production and employment.
Hence, these studies not only offer insight into the relationship between trade policy, commodity price fluctuations, and poverty; they also support Aksoy & Hoekman's (2010) conclusion that generalizations about how rising food prices affect the poor are not possible. This is because the effects depend on the impact of trade policy changes on domestic prices, the exposure of poor households to price fluctuations from both the producers and consumers of goods, and with respect to their wage income and the magnitude of price changes.
Reference
United Nations Conference on Trade and Development UNCTAD. (2014). Trade Policies, Household Welfare and Poverty Alleviation: Case Studies from the Virtual Institute Academic Network. Recovered from: http://unctad.org/en/PublicationsLibrary/gds2014d3_en.pdf
Note: summary made by CATRADE Grupo Consultor en Comercio Exterior.