2. Trade, Development and Poverty Reduction in 13 Developing Countries from Asia and Sub-Saharan Africa: An Overview
Presentation by: Dr Mohammad A. Razzaque Commonwealth Secretariat London, UK Hanoi, 6 March 2008 Nairobi, 13 March 2008

3. Background
Development strategy for growth, employment and poverty reduction
‘self-sufficiency’
foreign aid and campaign for ‘trade not aid’
Shift from inward-looking policy
actively engaged in MTNs
Unilateral liberalisation and MTNs promised a new era for growth and poverty reduction.

4. Background (contd.)
However, trade and development experiences are far from being similar
…so diverse that the general relationship is a subject of regular empirical scrutiny.
Main objective of TDP Project –
to study country cases and understand the nature and dynamics involving TDP linkages.

5. Background (contd.)
CUTS-TDP project – overall country and sectoral experiences.
Volume – I brings together general country case studies
A forthcoming volume will contain sectoral studies.

6. The 13 countries in CUTS-TDP
8 from Asia (Bangladesh, Cambodia, China, India, Nepal, Pakistan, Sri Lanka and Vietnam)
5 from sub-Saharan Africa (Kenya, South Africa, Tanzania, Uganda, and Zambia)
Set of diverse countries
Large and Small
High growth and erratic growth performance
Large and low export response
Commodity producing and manufacturing
Diversity offers invaluable insights into TDP linkages

7. Countries
GDP ($ bill)
PC GNI ($)
PPP PC GDP
POP (mill)
BGD 60
470 -
142
CAM 6
430
2,727 14
CHN
2234
1740
6,757
1,304
IND
805
730
3,452
1,095
NEP 7
270
1,550 27
PAK
111
690
2,370
156
SRL 24
1160
4,594 20
VNM 52
620
3,071 83
KEN 18
540
1,239 34
SAFR
239
4770
11,110 47
TAN 12
340
744 38
UGA 9
280
1,433 29
ZAM
500
1,022

8. X ($b)
X/GDP(%)
Mfg/Mer X (%)
Agr/GDP (%)
Poverty ratio (%)
BGD 10 16 91 20
44.2
CAM 4 65 97 34 35
CHN
837 38 92 13
7.9
IND
166 21 70 18
26.1
NEP 1 74
30.8
PAK 17 15 82 22
32.1
SRL 8
22.7
VNM 37 55
18.1
KEN 5 27
52.3
SAFR 57 3
TAN 2 14 45
35.7
UGA 33
37.7
ZAM 9 19 68

9. TDP Links – Theoretical Insights
TDP Linkages:
(1) trade-growth
(2) trade-income distribution
But the issue of trade liberalisation and growth draws most attention
Inconclusive theoretical arguments
Static gains from trade arguments
Dynamic gains leading to higher growth
New growth theories - ambiguous

10. TDP – Empirical Evidence
Empirical evidence is inconclusive
Powerful evidence found to be not credible
identifying countries as open and closed is difficult and often flawed

11. TDP – Empirical Evidence
Export-led growth and liberalisation
UNCTAD – ‘export-led growth’ is misleading
Countries that grow fast tend to experience rising export-GDP ratios
Trade-poverty direct relationship is complex

12. TDP: Empirical Evidence
Striking econometric evidence from China
 China’s trade-GDP ratio increased from 15% to 45%.
 poverty incidence fell from 52% to 7%.
Statistical analysis finds no evidence of the relationship between the two indicators (Ravallion 2006).

13. Experiences of TDP Project Countries
Strong trade controls in the immediate post independence period
Started opening up with BWI support
Vietnam and China – liberalisation initiative mainly domestically-led
Liberalisation led to:
a decline in QRs,
rationalisation and diminution of import tariffs
relaxation of foreign exchange controls
privatisation of SOEs
generous promotional measures for exports.

14. Countries
Pre-reform avg tariffs
Most recent avg tariff
trade-wt avg tariffs
% of lines > 15%
BGD
94 (1989) 15
n.a. 40
CAM
35 (1996) 14 11 19
CHN
40.3 (1990)
9.9
4.7 16
IND
81.8 (1990) 22
NEP
23 (1988) 17
PAK
64.8 (1990) 13
SRL
28.3 (1990)
7.4 21
VNM
30 (1989) 41
KEN
43.7 (1990)
6.2
SAfR
12.7 (1988) 8
6.1
TAN
29.7 (1990)
9.7
UGA
19.9 (1987) 12
ZAM
29.9 (1987) 33

15. TDP Countries -stylised Facts
Rising significance of trade (X-GDP ratios)
Growth of exports
Growth of exports and GDP
Liberalisation and Growth
GDP growth and poverty reduction
Exports and poverty reduction

17. Export-GDP Ratio in Asian TDP Countries

22. Tariffs and Growth: TDP and Developing Countries

23. Growth and Poverty in TDP Countries

24. Growth and Poverty in TDP Countries

25. Growth Elasticity of Poverty

26. Growth of Exports and Poverty Reduction

27. TDP Country Cases: Lessons
Ownership of the Policy Regime
Home grown initiative – implications for PRSP
Export Response to Liberalisation
Removing anti-export bias enough?
Initial Distribution of Endowments
Can experiences of Vietnam and China be replicated elsewhere
Easy Reforms versus Critical Reforms
Institutional reforms and capacity

28. Lessons (contd.) The Role of Agriculture Priority for Future Reforms
Despite the need for diversification a dynamic agri sector is crucial
Priority for Future Reforms
May not be mere tariff cuts but more fundamental in nature
Supply Capacity and Trade Barriers
Trade reforms do not generate SS-side capacity automatically
Policy Space and Making Use of It
Policy space should be used carefully

29. Lessons (contd.)
Growth and poverty reduction and Pro-active Policy Initiative
Development of Domestic Productive Capacity
Taking Advantage of Liberalised Trade Regime

30. Lessons (contd.) Managing A Pro-Development Regional Trade Regime
Trade diversion costs could be high
Monitoring and Facilitating Adjustment Processes
To provide safety-net to vulnerable groups
Governance and Political and Social Stability

31. Concluding Remarks
Trade policy – a fundamental component of development strategies
Wide deviations from the general liberalisation and economic prosperity
Same set of policies produces dramatically different results
Country cases exhibit that ‘the same size fits all’ philosophy has failed to deliver

32. Concluding Remarks (contd.)
CUTS-TDP country cases show the need for learning from others’ experiences.
But blind replication may not work
The orthodox route to dealing with developmental problems needs to be replaced with heterodox approaches.
requires analytical policy regimes capable of identifying structural weaknesses

33. Concluding Remarks (contd.)
In the absence pro-active initiatives growth could bypass the poor.
social and political instabilities and bad governance
a development-friendly international trade regime is important in promoting trade-development and poverty linkages in poor countries.

34. Thank you very much.