International Trade and Trade Reform Essay

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Words: 3680
Pages: 15
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Module Code: EO314
Module Title: ISSUES IN INTERNATIONAL ECONOMICS
Module Convenor: Stephen Smith
ID: 03004367

Topic: INTERNATIONAL TRADE

This project will attempt to research and gain an understating of whether there is linkage between trade liberalisation and poverty in (SSA) sub Saharan Africa. The project will contain a balance of key analytical approaches and empirical evidence on trade liberalisation and economic growth.

In the world of economics and politics, trade and poverty is one of the major issues which has been debated over last decade. On the international stage, there is a growing concern among super powers, African leaders, and other observers that the independence and credibility of the state continues to be endangered due to the negative balance of trade, heavy dependence on international aid and the high levels of indebtedness in Sub Saharan Africa. The debt relief has come to be viewed not only as a basic condition for arresting Africa’s socio-economic decline but also for stimulating and sustaining development. Consequently, debt has had an adverse impact on the majority of the population, poverty, unemployment and socio-economic, inequalities has increased, physical infrastructures has deteriorated, political and civil conflicts have worsened and corruption has become more persistent. The concern with how to tackle the debt crisis has led to a number of developments, however the main one is for the G-8 countries to have adopted debt reduction policy measures in aiding Africa and especially sub Saharan Africa.

There has been a colossal of social scientists, political scientists and economists who have come across and done similar research on debt as well as debt becoming a social problem. Corresponding to the increase in problem of debt has been researched with various writers such as sociologists (e.g. Ford, 1988), lawyers (e.g. Sullivan, 1989) and political scientists (e.g. Berthoud and Kempson, 1992) and many more. Research on debt can also be traced by Katona (1975), (Livingstone and Lunt, 1992; Lea et al.. 1993; Tokunaga, 1993). However the focus of the project is on the link between trade and poverty in SSA, which is a new area of study. Although recent research on poverty has come from writers such as, (e.g. Winters 2000, Ben- David, 2000 and Conway 2003). This is still mostly theoretical and empirical research which has been done.

If trade liberalisation and poverty were both easily measured, and if there were many historical instances in which liberalisation could be identified as the main economic shock, it might be simple to derive simple empirical regularities linking the two. Unfortunately, these conditions do not hold, so there is relatively little direct empirical evidence on this question.[i]

There are many different kinds of liberalisation, the following are trade, capital account, foreign exchange, credit and domestic competition. Although others are clearly significant and they are obviously inter-related, the main focus is on trade liberalisation.

Trade liberalization
The economic argument for more free trade is based on the assumption that the international liberalization of markets will enhance growth and the economic welfare of countries. Trade liberalization enhances the free movement of goods, increases specialization in the production of those goods in which a country has a ‘comparative advantage’, boosts output and incomes with benefits to all consumers within the country. Economic analysis of poverty at an aggregate level is based mainly on aggregate market measures of consumption and income. Poverty lines are used to make comparisons across countries and over time, and measure the proportion of the population in poverty. Economic models linking trade, growth and poverty have been developed to show the advantages of trade liberalization for potential poverty reduction. Economic models focus primarily on market measures of trade
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