• Poverty impacts

Poverty impacts of trade liberalisation

This brief looks at the ways in which trade liberalisation can impact on children, and uses two case studies, Peru and Ethiopia, to verify how these impacts play out in practice. The paper argues that the effects that structural policies, like trade liberalisation, have on children, need to be traced from the changes they generate on macro economic variables, such as consumer prices, through to individual household livelihoods – and the complexity of differential intra-household effects.

The main findings are discussed by impacts of household wellbeing and intra-household dynamics and decision making. These include:

• household wellbeing:trade policy changes impact on domestic prices, and thus the consumption of goods and services
• liberalisation generally affects wages and employment opportunities which can shape both consumption and savings decisions, and household labour supply decisions. This may involve greater integration of women and children into the labour force, which may alter intra-household dynamics
• possible reductions in public revenue from loss of import tariffs and export taxes - in the case of children, the most serious outcome of such a change would be cuts in social sector expenditure
• changes in government expenditure may affect government transfers to households
• intra-household effects: changes in household consumption are likely to have an impact on resources allocated to children. In particular, the quantity and nutritional content of children’s food, and their access to medicine, schooling, educational materials and clothing may be affected
• children’s time allocation may be affected. They may be withdrawn from school and/or compelled to spend more time working in paid or unpaid activities.

Based on these findings, three broad areas for policy interventions are identified: child-focused policies, policies geared towards supporting sustainable household livelihoods and adjustments to broad economic policies.

These include:

• policies to improve the quality of schooling and promotion of post-school opportunities could encourage children to stay in school, in the hope of obtaining better paid jobs located in trade-related sectors
• specific attention should be paid to the potential rise in prices of basic medicines that may result from the introduction of stricter intellectual property rights. Governments should develop compensatory measures to subsidise medicines for low income families, as well as providing targeted free healthcare for the poor, particularly children
• The financing of children’s healthcare is also key
• to ensure that the benefits of trade liberalisation reach poor families, it is important to invest in infrastructural improvements
• a gradual transition towards liberalisation will help ensure that losses in tariff revenues are compensated by increased revenues from growth, thereby smoothing out any potential shocks on social expenditure allocations. This process should be accompanied by policies aimed at strengthening social safety nets, social protection measures and welfare programmes.

• Full text of document
• Publisher details
• Send to a friend