Trade and Poverty in South Asia: An interpretive Survey

Abstract

The link between trade liberalisation and poverty has become one of the most debated topics in international trade and development in recent years. Among policy analysts and policy makers there is widespread concern that trade liberalisation has an adverse impact on poverty in developing countries. The purpose of this paper is to inform this debate through an interpretive survey of the literature on the nexus of trade liberalisation and poverty with emphasis on the South Asian experience. The key inference is that there is no unique answer to the question whether trade liberalisation reduces poverty in the South Asian region. Different empirical studies provide contradictory results (or mixed results), with some studies demonstrating that trade liberalisation reduces poverty and others showing that trade liberalisation increases poverty. There are some winners in countries in the region: some segments of the population and some regions have experienced reduction in poverty following liberalisation reforms. All in all, trade liberalisation is not a "magic bullet" in reducing poverty; indeed, it may well be one determinant of poverty. As advocated by many, it is important to have complementary policies to reduce poverty while implementing trade policy reforms.