A survey of findings on the poverty impacts of agricultural trade liberalization
2006
T. W. Hertel
The purpose of this survey is to review the available empirical evidence on the impacts of agricultural trade liberalisation on poverty. While the focus is on agricultural trade policies, consideration is also given to other trade policies and external shocks that influence the relative prices of tradable and non-tradable goods.The author concludes that agricultural trade liberalisation can have an important impact on poverty and inequality. Since the bulk of the world’s poor live in rural areas where the dominant livelihood is farming, any trade reforms that boost agricultural prices tend to reduce poverty. However, the specific impacts depend on a number of factors including:poor infrastructure and high transactions costs serve to insulate rural consumers from world price rises, while penalising exporters. Any policies aimed at reducing domestic marketing costs will enhance rural welfare and improve the chances of rural producers benefiting from trade reformthe more responsive a household is to the price changes, the greater the chance that it will be able to gain from trade reformin the medium run, labour markets play an important role in determining the poverty impacts of trade reform. Net purchasers of agricultural commodities can gain from higher prices, provided these prices translate into higher wages, and they have access to employment at these higher wages. In fact, since the dominant endowment of the poor is unskilled labour, the impact of trade reforms on unskilled wages is central to the poverty storyin the long run poverty reductions from trade reform depend on economic growth
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