It is a well-established fact by now that trade liberalisation, and more generally globalisation, can have both positive and negative effects. On the positive side, it is generally agreed that more open economies have better long-run growth prospects and provide producers and consumers access to new markets. On the negative side, not everyone gains equally from trade liberalisation, some people will inevitably lose in the short run. Even in the long run there may be losers however, for example, if markets are destroyed. The people losing from liberalisation may include the poor. A problem in establishing the link between trade and poverty is that so far there has been little empirical evidence.

To study the impact of trade liberalisation on poverty, one has to look at the ways in which trade policy affects poor people. The speaker presented a conceptual framework that identifies three channels through which such effects might operate:

1. Enterprises: trade liberalisation will affect profits and thereby wages and employment.
    
2. Distribution: the competitive structure of the distribution sector is an important determinant of price transmission, i.e. the process by which border prices are translated into changes in prices faced by consumers.
    
3. Government: trade liberalisation will affect government revenues, taxation and spending, which in turn may affect poverty and poverty alleviation.

The effect of trade liberalisation on poverty will depend on specific country circumstances and the situation of the poor. Therefore, when governments want to assess the impact of trade policy changes on poverty, they have to look at the effects that will take place through the above mentioned channels. Governments also need to know where the poor live, how they obtain their income, what they consume and how they cushion shocks.

When looking at the effects of trade liberalisation on poverty it is not only important to see how the poor can be protected, but also how trade policy can be used to promote the poor. On the one hand, openness to trade is an effective way of promoting competition to ensure efficiency. In the discussion, reference was made to the example of increased access for the poor to telecommunications as a result of increased competition. In addition to the gains brought about by increased competition however, governments need to facilitate adjustment through the provision of public goods, reducing transaction and co-ordination costs, and improving access to knowledge, information and credit. If serious harm for the poor is to be expected from trade liberalisation, one has to think about appropriate safety nets.

In the discussion, the need for complementary policies was stressed if the poor are to benefit from trade liberalisation. It was noted that more attention should be paid to the issue of vulnerability and risks that face the poor. Poor people can often not be employed in a different sector of the economy, and new activities will not automatically emerge in a structurally non-diversified economy. An example of the problems arising from switching to new activities may be provided by the agricultural sector. Switching from staple foods to cash crops, which often happens after liberalisation, may leave farmers worse off in the end. This can happen for example if farmers end up losing seed technology and production knowledge for staple food from one generation to the next. For countries whose export earnings are dependent on volatile international commodity prices it is important to think through the implications for food security of a shift towards cash crops are for food security. Governments have an important role to play to address these vulnerability problems. One discussant noted that in addition to complementary domestic policies, donor organisations should be prepared to provide technical assistance in the field of policy reform, notably through capacity building, and to provide financial aid and incentives to stimulate private foreign investment.

Because there is little empirical evidence on the link between trade and poverty, little is known about the relative importance of the various effects. Various analytical tools are available to further study the impact of trade liberalisation on poverty. One discussant noted that the problem for developing countries is that they often lack the capacity to identify the links between trade and poverty or even to make use of existing studies. There are often problems to disseminate analytical results in a comprehensible and user-friendly way. Again, capacity building is essential to overcome these problems.

Other points that were touched upon during the discussion include the question as to what extent attention should be paid to the losers from trade if they are the "not so poor", and the uncertainty about the gains of trade when dynamics