Mainstreaming Trade in Poverty Reduction Strategies

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Mainstreaming Trade in Poverty Reduction
Strategies

• Presentation to the EIF Focal Points Global
  Workshop
• Held at WTO, Geneva, 8-9 July 2009
• Charles Gore
• Special Coordinator for Cross-sectoral issues
• Division for Africa, LDCs and Special Programmes

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Some Basic Questions   1. What is your basic
objective ?   Freer trade (trade liberalization)
  More trade (increased quantity of
trade)   Better trade (increased quality of
trade)  2. Freer trade more trade better
trade ? 3. What is meant by better trade ? 4.
What should be the focus of efforts to integrate
trade into development and poverty reduction
strategies ? ? Exports of Goods and Services
? Imports of Goods and Services ? Both 
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Two Approaches to Analyzing theRelationship
between Trade and Poverty   1. Focus on
short-term impacts of trade liberalization   EXAM
PLE McCulloch, N., Winter LA Cirera, X, (2001)
Trade Liberalization Poverty A Handbook,
Centre for Economic Policy Research, London.  2.
Focus on long-term relationship between trade,
development and poverty.   EXAMPLE UNCTAD, The
Least Developed Countries Report 2004 Linking
International Trade and Poverty Reduction
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Second Approach Broad Range of Issues
Source The Least Developed Countries Report 2004
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Second Approach Range of Mechanisms
Source The Least Developed Countries Report 2004
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Common assumptions in the macro-economic trade
forecasts

• It is expected that GDP growth will be higher
  than in the recent past.
• It is expected that export growth will be higher
  than the recent past.
• A major part of the increase in GDP is expected
  to come from export expansion
• It is expected that import growth will be lower
  than the recent past.
• It is sometimes expected that import growth will
  be slower than GDP growth.

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Implications of the Global Financial Crisis and
Recession

• Is there a need to re-think development
  strategies in the light of the crisis?
• What is the apporpriate balance between external
  and domestic demand as sources of economic
  growth?
• Increasing relevance of regional economic
  integration as an approach to increasing
  reslience.

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• Step 2 Identify and assess particular trade
  policy options
• Focus on the balance of payments
• Estimate the external trade requirements for
  achieving poverty reduction goals (also applies
  to MDGs)
• Basic Steps in the Methodology (chart 43)
• Set a poverty reduction target (e.g. reduce the
  incidence of extreme poverty by half by between
  1990 and 2015) and estimate the growth rate
  required to achieve the target (this depends on
  elasticity of poverty reduction with respect to
  economic growth)
• Make future projections of trade balance - future
  import growth on the basis of price and income
  elasticities of demand for imports future export
  growth on the basis of trends in export volume
  and export unit values.
• Identify alternative trade policy options for
  increasing the income elasticity of demand for
  exports and decreasing the income elasticity of
  demand for imports.
• Evaluate trade policy options according to their
  growth and poverty reduction effects, and the way
  in which they fit into the overall development
  strategy.

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• Mainstreaming Possible Questions to Askin
  Identifying Trade Policy Options
•  Exports
•  What are a country's major traditional exports?
  (major products in the recent past)
• What are the demand growth prospects of a
  country's major traditional exports?
• To what extent is it possible to increase the
  income elasticity of demand for exports through
  improved competitiveness of traditional exports
  (increase in global market share)?
• What new products and sectors can be promoted to
  increase the income elasticity of demand of
  exports (change export composition towards more
  dynamic products)?
• What new markets can be accessed in order to
  increase the income elasticity of demand for
  exports (change geographical destinations of
  exports)?
• Are there untapped opportunities for South-South
  trade?
• How can the instability of export growth be
  decreased?
•  Imports
• Are there opportunities for efficient import
  substitution, including backward linkages from
  export activities?
• Are there opportunities to reduce import costs
  through better import procurement practices?
• How is it possible to make the best use of the
  untying of aid?
• Can cost savings be achieved through regional
  import substitution?

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• MainstreamingPossible Questions to Ask in
  Assessing theGrowth and Poverty Reduction
  Effects ofDifferent Trade Policy Options
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• In what products and sectors does the country
  have a comparative advantage?
• What are the demand growth prospects of different
  products and sectors in world markets?
• What is the magnitude of local value-added,
  externalities and potential for learning
  associated with these products and sectors?
• What is the employment intensity of specific
  export activities and their linkages with the
  rest of the economy?
•   But the overarching issue is
• How do the different trade policy options relate
  to the overall development strategy?

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Thank you

• For more information on this approach, see
  www.unctad.org/ldcr
• Especially UNCTADs Least Developed Countries
  Report 2004, 2006, 2007
• and 2009 (forthcoming July 16)