Trade Liberalization and the Poor : A Framework for Poverty Reduction Policies with Special Reference to Some Asian Countries Including India

The paper examines the impact of trade liberalization on the poor through its impact on prices and incomes. A simple framework is developed which traces the impact of trade liberalization on the poor. Some guidelines are given for making trade work for the poor after identifying how the trade regime works. The paper also discusses necessary complementary policies that can make trade policy reform effective. These complementary policies include among others: macroeconomic and microeconomic stability, a competitive exchange rate, flexible labor markets and competent product markets. Also, there is large outstanding agenda that can and should be undertaken by high-income countries that will generate significant benefits for ordinary people in developing countries. These include trade distorting policies in agriculture, disciplining non-tariff measures that restrict trade and removing restrictions on the temporary movement of natural persons supplying services (Stern, 2002). The success of trade reform lies in focusing the reform agenda on agricultural and services sector. It is imminent from the study that these two sectors are key sectors in poverty reduction. The paper provides the basic elements of a good trade policy regime. These provide a benchmark against which to judge the prevailing trade regime and provide guidance for the direction of reforms for the poor in future