By Miriam W O Omolo Institute of Economic Affairs Monday 22 June 2009, Country Inn, Jaipur, India

 Definition of terms: trade openness, poverty  Linking trade openness and poverty  African country experiences  The Missing link(s)  Conclusion and Way Forward

 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  Free Market Access for foreign goods and services ◦ Doha negotiations ◦ Economic partnership Agreement (ACP-EU)  The Key Objective is to increase overall and individual welfare of those involved in trade.

 Inability to meet one’s daily food consumption requirement-food poverty  Inability to meet both food and non-food requirements- Absolute 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

 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

 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)  Trade Liberalization has resulted in different gainers and losers, ◦ e.g. Kenya, the cotton sub-sector vs. telecommunication

 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

 Wrong presumption ◦ Trade liberalization does not guarantee equitable distribution of gains/losses to individuals, sectors, countries or regions.  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

 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.

 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