Are The Poverty Effects of Trade Policies Invisible?

With the advent of the WTO’s Doha Development Agenda, as well as the MillenniumDevelopment Goals aiming to reduce poverty by 50 percent by 2015, poverty impacts oftrade reforms have attracted increasing attention. This has been particularly true ofagricultural trade reform due to the importance of food in the diets of the poor, relativelyhigher protection in agriculture, as well as the heavy concentration of global poverty inrural areas where agriculture is the main source of income. Yet some in this debate haveargued that, given the extreme volatility in agricultural commodity markets, theadditional price and poverty impacts due to trade liberalization might well beundetectable. This paper formally tests this “invisibility hypothesis” via stochasticsimulation of a computable general equilibrium framework. The hypothesis test is basedon the comparison of two sets of price and poverty distributions. The first originatessolely from the inherent variability in global staple grains markets, while the secondcombines the effects of this inherent variability and trade reform. Results indicate that theshort-run impacts of trade liberalization on poverty are not distinguishable from marketvolatility in majority of the fifteen focus countries – suggesting that the poverty impactsof agricultural trade liberalization may indeed be invisible.