Introduction

Trade liberalization and poverty have been and will be the main inter-related issues in international forums and international organizations. These issues have been daily issues for almost all international organization, central and local governments all over the world.

Trade liberalization, initiated with Havana Charter in 1940, has completed four rounds, namely, Dillon Round (1960-1962), Kennedy Round (1963-1967), Tokyo Round (1973-1979), Uruguay Round (1986-1993), and the on going process of Doha Round (2001-now). However, the goals of these daunting efforts to make trade, especially in agriculture, to be more efficient and fairer, have been not sufficiently realized. The high subsidies in developed countries, attaining to US$ 318 billion per year unfair distribution of the benefits of trade liberalization, and sluggish development of the Doha Round, are some evidences that indicates that the goals of trade liberalization have not been satisfactory realized.

The WTO Doha Round was expected to be signed on 1 January 2005. The progress of the round is very slow because of a deadlocked in some important agricultural issues, mainly market access, domestic support, and export subsidies. Moreover, a big gap between developed and developing countries' positions on special and differential treatment (SDT), trade-related aspects of intellectual poverty rights (TRIPS), and public health, is considered a major obstacle to reach agreement.

On the other side, many evidences indicate that poverty and its various facets and consequences are still a daunting task for most developing countries. Half the world or nearly three billion people live on less than two dollars a day and around 1.1 billion live on extreme poverty on less than one dollars a day (UNDP, 2003). This condition has caused over one billion children (more than half of those living in developing countries) suffer from severe effects of poverty and 674 million (over a third) are living in conditions of absolute poverty. In addition , as whole every 3.6 seconds someone dies of hunger that are 24,000 people every day and about 75 per cent of these deaths are children under 5. If this trend cannot be checked, this would cost developing countries future productivity at a present discounted value of US$500 billion or more (FAO, 2005).

Many studies have been done to assess the links between trade liberalization, and poverty. However, the results are varied, not only magnitudes of the relationship, but also the direction of the links/relationship. For some scholars, trade liberalization has been perceived as a mean to induce economic growth, leading to poverty reduction. On the other hand, some scholars stated that trade liberalization weakly links with poverty reduction. With this divergence results of the studies, however, we can classified into two main groups, namely, (i) those of supporting the of poverty alleviation effect of trade liberalization and (ii) those questioning the role of trade liberalization on poverty alleviation.

Supporting Poverty Alleviation effect of Trade Liberalization

Many studies found that trade liberalization have had a positive impact on growth, leading to poverty reduction effects. The general logic behind this findings is that trade liberalization will improve production and market efficiency, leading to positive net benefit/surplus in the world market. This net benefit will induce economic growth and to certain extent will reduce poverty.

Anderson (2004) shows the magnitudes and the distribution of the monetary impacts of trade liberalization on developed and developing countries. The total impacts were estimated at around US$ 254 billion with agriculture contributing US$ 164.7 billion. Developing countries will gain 42.7 per cent of the total impact. Full liberalization of OECD farm policies would boost the volume of global agricultural trade by more than 50 per cent, but would cause real international food prices to rise by only 5 per cent on average. Most developing countries and households will be better off in terms of some poverty indicators, such as, income and food security.

A study by the World Bank (2005) also stated that in 24 developing countries that increased their integration into the world economy achieved higher growth in incomes, longer life expectancy and better schooling. These countries, home to some 3 billion people, enjoyed an average 5 per cent growth rate in income per capita in the 1990s compared to 2 per cent in rich countries. Many of these countries -such as China , India , Hungary and Mexico- have adopted domestic policies and institutions that have enabled people to take advantage of global markets and have thus sharply increased the share of trade in their GDP. People in these integrating countries saw their wages rise, and the number of people in poverty decline.

The positive link between trade liberalization, especially in agricultural trade liberalization, and poverty alleviation is also found in India case. Trade liberalization in agriculture has a potential benefit for poverty alleviation in India . In agriculture, barriers such as tariff peaks, tariff escalation, domestic support and export subsidies continue to restrict the effective market access of Indian agricultural products to developed country markets. India 's own tariffs have few peaks and are applied to only 1.3 per cent of the tariff lines in India , against 20 per cent in developed countries. If there is full trade liberalization in agriculture, India , as a net food exporting country, is likely to see significant welfare gains. India 's exports are likely to increase by 13 per cent if trade distorting domestic support in developed countries is reduced. Approximately 100 million people could be lifted out of poverty by liberalizing developed countries agriculture. The poverty alleviating effects of multilateral liberalization would be increased if adequate reforms were made at the domestic level. Cororaton and Cockburn (2005) show the positive impact of trade liberalization on poverty in the Philippines . Tariff cuts implemented between 1994 and 2000 were generally poverty reducing, primarily through the substantial reduction in consumer prices they engendered.

Questioning the Role of Trade Liberalization on Poverty Alleviation

In the contrary with the optimistic role of trade liberalization on poverty alleviation, many studies also found that the role is unclear and even increase poverty. Although World Bank (2005) found that in some countries trade liberalization has poverty alleviation impacts, but the opposite results are found in other counties. In other words, not all countries have integrated successfully into the global economy since some 2 billion people – particularly in sub-Saharan Africa, the Middle East, and the former Soviet Union – live in countries that are being left behind. On average, these economies have contracted, poverty has risen, and education levels have risen less rapidly than in the more globalized countries.

The evidence on the impacts of trade liberalization on poverty reduction is mixed at best. Open markets are neither inherently good nor inherently bad for poverty reduction. The impacts of trade liberalization on poverty levels depend on many factors, such as, the initial distribution of income and assets, what people in poverty produce, buy and sell, and how internationally competitive the national producers are. Some of the countries ( Haiti , Peru , Mali , Nepal ) that opened their markets most rapidly and deeply have poor records in poverty reduction. Meanwhile, some countries that are clearly among the most successful globalizers ( China , Viet Nam , Uganda ) have aggressively promoted exports while carefully managing imports, and have achieved impressive results in poverty reduction.

The role of trade liberalization on poverty was also questioned by Medely (2004). There is now less confidence that the mainstream trading system can help the poor. The benefits of liberalization to low-income agricultural producers are likely to be very limited. Yet at the start of the 21st century trade does not seem to be helping some of the world's poorest communities to escape from poverty. Trade liberalization and the rules of international trade are having a detrimental impact on many of the world's poor and the environment. For more substantial gains (towards food security) countries will have to encourage the expansion of their domestic food production sectors.

Abbots (2002) also stated that the global trading system is still very much biased against the poor. An average poor person faces twice the level of trade tariff than an average rich person does. Political interests underlying various policies of developed countries cause some imbalances between developing countries and developed countries.

That Trade liberalization or economic openness that is weakly linked to poverty reduction is also indicated by study of Ravallion (2004). The empirical approaches used cast doubt on any presumption that greater openness to external trade is the key to rapid poverty reduction. Equally, doubt was cast on any presumption that trade openness hurts more poor people than it helps. Pooled data matched with measures of the extent of trade openness, does not reveal any correlation between rates of poverty reduction and expanding trade volume. Based on the data available from cross-country comparisons, it is hard to defend the view that trade openness is, in general, a powerful force for poverty reduction in developing countries.

From those all studies, we may infer that the impact of trade liberalization on poverty alleviation is still very much debatable. As (Twyford, 2003) stated the evidence on the impacts of trade liberalization on poverty reduction is mixed at best. Open markets are neither inherently good nor inherently bad for poverty reduction.

(The writer is a professional staff in Centre for Alleviation of Poverty through Secondary Crops' Development in Asia and the Pacific, Bogor , and a senior researcher in Indonesian Research Institute for Estate Crops, Bogor ).