Are the poverty effects of trade policies invisible?

Abstract

With the advent of the WTO‘s Doha Development Agenda, as well as the Millennium Development Goals aiming to reduce poverty by 50 percent by 2015, poverty impacts of trade reforms have attracted increasing attention. This has been particularly true of agricultural trade reform due to the importance of food in the diets of the poor, relatively higher protection in agriculture, as well as the heavy concentration of global poverty in rural areas where agriculture is the main source of income. Yet some in this debate have argued that, given the extreme volatility in agricultural commodity markets, the additional price and poverty impacts due to trade liberalization might well be undetectable. This paper formally tests this ―invisibility hypothesis via stochastic simulation of a computable general equilibrium framework. The hypothesis test is based on the comparison of two sets of price and poverty distributions. The first originates solely from the inherent variability in global staple grains markets, while the second combines the effects of this inherent variability and trade reform. Results indicate that the short-run impacts of trade liberalization on poverty are not distinguishable from market volatility in majority of the fifteen focus countries – suggesting that the poverty impacts of agricultural trade liberalization may indeed be invisible.