Summary
Few development issues are as hotly debated as international trade. Economic growth through
trade has the potential to lift billions out of poverty. But rapid and insensitive liberalisation has
often forced poor people to compete in world markets at times when they are least prepared to
do so, undermining their livelihoods and increasing their vulnerability. Trade exerts a powerful
force on development and poverty reduction.
Given the importance of trade, one would expect the effects of different trade policies to be
thoroughly dissected and analysed in Poverty Reduction Strategy Papers (PRSPs) – the flagship
development framework of donors and national governments. But evidence suggests otherwise.
This briefing note draws on research commissioned by Christian Aid into the trade and poverty
content of PRSPs.1
This research finds that the current round of PRSPs say very little about
trade policy. More importantly, even where PRSPs do contain a discussion on trade, trade policy
choices are rarely underpinned by a holistic analysis of poverty in each country. PRSPs fail to
consider the impacts of trade on different groups of poor and vulnerable people. Effects are not
disaggregated between consumers, producers and employees, between urban and rural
populations, or by gender. Dimensions of poverty beyond income – risk and insecurity, access to
services, and empowerment – are almost completely ignored.
This suggests that, despite the rhetoric of PRSPs, trade policy is not determined in a
participatory way that draws on the perspectives and aspirations of different groups of people in
each country. In the absence of ex-ante impact studies, there is also no reason to believe that
trade policy has been designed to maximise its contribution to poverty reduction.
Christian Aid argues that the way that trade and trade policy is currently treated in PRSPs is
dangerous for a several reasons. Although trade-poverty linkages are complex and likely to vary
between countries, the limited discussion of trade policy in PRSPs tends to use the simplistic
language of wholesale and rapid liberalisation. The World Bank Sourcebook chapter on trade
appears to provide the blueprint. Donors and governments have therefore failed to encourage a
national debate on trade policy choices and trade-offs.
PRSPs should also, by their very nature, consider the impacts of different trade policies on
poverty. But this has not been happening. Only one Poverty and Social Impact Analysis (PSIA)
was conducted on trade policy for the 17 countries reviewed.2
Despite this disjuncture between trade and poverty analyses, the World Bank and IMF continue
to include ‘conditionality’ on trade policy reform in their loan agreements. Christian Aid argues
that this practice should be discontinued for two reasons. First, trade policy reforms to which
conditions are applied are not underpinned by a holistic understanding of poverty in each
country. So the analytic justification for this approach is weak. Second, the use of conditions
creates suspicion of undue influence and the misuse of lending programmes. Ultimately, it
precludes the transfer of ‘ownership’ of the development agenda and the role of trade policy
within it.
Christian Aid believes that the effects of trade are too powerful to omit trade policy from
national development strategies. But if PRSPs themselves are to include trade policy then this
needs to be underpinned by a comprehensive analysis of how changes in such policy will affect
different aspects of poverty for different groups of poor people. The briefing note concludes with
recommendations on the roles of national governments, civil society and donors. These include:
National governments being responsible for:
-
analyzing in depth the impacts of various trade policy options on different groups of people, drawing especially on the perspectives of those representing poor
people.
Civil society groups having a right to:
-
express their views on the purpose and design of trade policy, and also contribute,
including through locally owned PSIA, to ex-ante analyses of different trade policy
choices.
Donors being responsible for:
-
facilitating the shift in ‘ownership’ of the trade policy debate, through providing
space for national debate and supporting locally owned analysis such as PSIA if requested
by government and local groups
-
discontinuing the practice of trade policy ‘conditionality’.
Northern governments being responsible for:
-
providing aid to reduce national constraints to improved trade, such as weak
infrastructure, inadequate access to education and ill health
-
committing to cover the ‘costs of adjustment’ borne especially by poor and vulnerable groups through trade policy reform
-
abolishing uncompetitive practices such as production subsidies and dumping,
and removing market-access restrictions harmful to producers in poor countries.
-
making good on their promises to extend Special and Differential Treatment so
that poor countries can implement trade policies that put development needs first.
Footnotes:
- Hewitt, A. and Gillson, I. (2003), A Review of the Trade and Poverty Content in PRSPs and Loan-Related Documents, Overseas Development Institute [forthcoming]
- A limited PSIA on trade policy was conducted in Vietnam. This is referred to in the PRSP, and elaborated on in the supporting Poverty Reduction Strategy Credit.
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