ABSTRACT
The recent miracle of economic growth and development in the 1980s and 1990s in some Asian countries, such as China, Hong Kong, Singapore, South Korea, and Taiwan, supports the significant role of trade liberalisation in economic growth. After transforming a centrally planned economy into a market economy in 1986, Vietnam attained remarkable achievements in economic growth and reduction in poverty. Although several other open economies also attained high economic growth and reduced poverty considerably, the empirical literature on the relationship between trade liberalisation, economic growth, and poverty is not devoid of concerns, particularly with respect to the strength of empirical evidence (see Rodriguez and Rodrik, 2001; Wacziarg and Welch, 2008; PachecoLopez and Thirlwall, 2009; Singh, 2010). The persistence of poverty amongst a considerable proportion of the population in transitional or liberalised developing economies also casts a dubious light on the impacts of trade liberalisation on poverty. The literature on trade and poverty acknowledges the difficulties in establishing the relationship between these two, primarily because both the concepts, trade and poverty, are multidimensional and therefore hard to measure (Winters et al., 2004). Many pathways through which trade affects households and poverty have been identified in the literature on the trade-poverty nexus. As noted, a strand of studies suggests that the trade-poverty relationship is largely case and country specific (McCulloch et al., 2001; Berg and Krueger, 2003; Pacheco-Lopez and Thirlwall, 2009). The impacts of trade liberalisation could be enormous and pervasive, but are to a large extent difficult to verify empirically. Some studies have shown that trade development can generate positive externalities that are pro-poor; for instance, trade development spurs knowledge exchange and thereby benefits the poor. Trade policy reforms also accompany institutional reforms (Rodrik, 2002) that reduce social costs associated with institutional discrimination and thus help the poor (World Bank, 2001). Bannister and Thugge (2001) point out that trade liberalisation can impinge on the vulnerability to negative external shocks that could affect the poor. Abrupt changes in terms of trade can directly affect agricultural production or informal production, the main activities of the poor. McCulloch et al. (2001, however, contend that, although
trade liberalisation is believed to have an enormous potential impact on welfare and poverty, the direct effects on poverty are negligible for many dimensions of trade liberalisation.
