ABSTRACT
International trade is important for development. It helps increase and sustain growth-a precondition for reducing poverty-by giving firms and households access to world markets for goods, services and knowledge, lowering prices and increasing the quality and variety of consumption goods, and fostering the specialisation of economic activity into areas where countries have a comparative advantage (Bhagwati 1988; Irwin 2001). The primary determinant of the benefits from trade is a country’s own policies. Establishing the appropriate trade and complementary domestic policies is consequently a critical dimension of national development and poverty-reduction strategies. National policies may also be affected by or conditioned on what other countries do. Thus, measures that restrict market access may lower (raise) the prices of exports (imports) and may have direct negative effects on the terms of trade and indirect effects on investment incentives and the growth potential of developing countries. High rates of subsidisation and trade barriers for agricultural products in developed countries increase world price volatility, lock developing countries out of major markets and can lead to import surges that have a detrimental impact on farmers and rural communities.
