Does Trade Lead to Poverty Reduction: Voices From the Grassroots

Hong Kong, December 15, 2005

Contrary to the populist belief and perception that trade leads to poverty reduction, this meeting organised by CUTS Centre for Trade, Economics & Environment (CUTS-CITEE) set the record the straight. Eminent panellists drew similar conclusions that the linkages between trade and poverty reduction are not yet clear or evident. There may be a few examples to prove that this link exists but these cases are stray and do not constitute a decent sample size in order for any substantial generalisation.

Kamal Malhotra, Senior Adviser, United Nations Development Programme (UNDP) said that trade liberalisation does not always lead to poverty reduction and trade can only be one of the means to reducing poverty. To look at trade as an end in itself to poverty reduction would be a very micro approach to issues surrounding poverty. He quoted the example of Vietnam, which is not member of the World Trade Organisation (WTO) and yet has been growing steadily over the past few years. Countries ought to dismantle trade barriers as they grow instead of reducing trade barriers as a pre-request to growth.

Dr. Venkatesh Sheshamani reiterated the fact that the links between trade and poverty reduction are tenuous and empirical evidence also proves this. Poverty reduction is closely linked with human development and a far more holistic approach is needed. To assume that trade leads to poverty reduction needs to be examined in the light of various other cyclical factors of poverty, such as literacy, access to resources, health care etc., which are very complex issues.

Jean Pierre Lehman was of the opinion that relaxing domestic regulations play a very important role in reaping the benefits of trade. He quoted the example of India, which has not taken adequate benefits accruing from trade due to its inflexible domestic regulations, which were in place in the past.

Anil K Singh of Network of Entrepreneurship and Economic Development (NEED), an entrepreneur from India stated that the need of the hour was a bottom-up approach, one where community members mobilise themselves in the form of self-help groups (SHG). Though there were benefits from the trickle down effect of trade, assistance in the form of trade facilitation would be welcome.

Otto Genee, Policy Coherence Unit, Ministry of Foreign Affairs, The Netherlands, a member from the Dutch Government who came in place of Agnes Van Ardenne, Minister for Development Cooperation, The Netherlands, placed the onus of poverty reduction on the local governments of countries. He stressed on the importance of domestic policies in promoting better wages, working conditions and standard of living, as these were internal issues that needed to be worked out between the people and the local government. Though international trade plays a role in so far as exports are concerned, the tentacles of the WTO are expanding its influence into domestic issues as well. Therefore, it is imperative for governments to keep in mind the linkages and strive towards domestic policies that are pro-poor and in favour of the marginalised.

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