Trade Liberalisation and the Reduction of Poverty—A Revisit

Abstract

The objective of this article is to revive the ongoing debate of whether trade liberalisation contributes to poverty reduction. This article considers case studies from East Asia and Latin America to demonstrate the varied effects of trade. Whilst structural instability and the Dutch disease phenomenon hindered trade liberalisation gains in Latin America, on the other hand, diversified economic structure and greater macro-economic stability allowed East Asia to reap the benefits of open trade, to its advantage. In effect, liberalisation does not have an overwhelming reduction in poverty. Although the long-term effects are positive and significant, there are many costs and factors that may hinder the success of liberalisation. A set of guidelines and the country’s readiness are required.