Rules of Thumb for Trade Policy for Poverty Reduction

The effect of trade reform on growth will depend on a variety of complementary policies and institutions. In low income countries, the key complementary policies/institutions that need to be analyzed fall into the following major areas: (a) macro-economic, and especially exchange rate policy; (b) the operation of the market for labor, since the poor are often concentrated in the informal sector; (c) the operation of the markets for agriculture—which is both a major source of income and accounts for a large portion of the household expenditures of the poor; (d) access of the poor to trade related services—for example, credit, marketing, transportation; and (e) access to safety nets. There are of course other issues, such as governance, which are important here as well as in other reform efforts. What follows provides a “checklist” of questions and issues that can be considered in the design and pursuit of trade reform…