INTERAMERICAN DEVELOPMENT BANK INTERAMERICAN DEVELOPMENT BANK Integration and Trade Sector Integration and Trade Sector The trade and poverty nexus in The trade and poverty nexus in Latin America Latin America LATN Plenary Meeting Buenos Aires - November 17, 2008 PAOLO GIORDANO
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INTERAMERICAN DEVELOPMENT BANK Integration and Trade Sector The trade and poverty nexus in Latin America LATN Plenary Meeting Buenos Aires - November 17,
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INTERAMERICAN DEVELOPMENT BANKINTERAMERICAN DEVELOPMENT BANK Integration and Trade SectorIntegration and Trade Sector
The trade and poverty nexus in Latin AmericaThe trade and poverty nexus in Latin America
LATN Plenary MeetingBuenos Aires - November 17, 2008
PAOLO GIORDANO
In Latin America anxiety is eroding the consensus for trade integration...
Source: Latinobarometro (different years)
60%
65%
70%
75%
80%
85%
90%
95%
100%
1996 1997 1998 2001 2002 2005
LAC: ATTITUDES TOWARD TRADE INTEGRATION (% Population in Favor)
... and in the developed economies there is a perception that free trade should be more pro-poor
Source: The German Marshall Fund (2006)
0% 20% 40% 60% 80% 100%
Believe that poor countries benefit from free trade
Agree to promote free trade with poor countries
Agree to provide assistance to poor countries
EuropeUSA
75%
72%
77%
75%
70%
56%
Outline
1. Trade and Poverty: an elusive question ?
2. Transmission Channels
3. Empirical Evidence in LAC
4. Toward a Policy Agenda
5. The LATN proposal
The trade and poverty debate:
a dialogue of the deaf when terms are not well defined
Trade: Free trade vs. globalization Technological change, FDI, capital flows, migrations, etc. Trade policy measures vs. trade outcomes
Poverty: Poverty vs. inequality Relative vs. absolute measures (national and global)
Monetary measures vs. basic needsMeasurement issues
Necessary to clearly define the variables under analysis
Outline
1. Trade and Poverty: an elusive question ?
2. Transmission Channels
3. Empirical Evidence in LAC
4. Toward a Policy Agenda
5. The LATN proposal
Prices
Employment
Government/ Fiscal Policy
Wages/ Salaries
Consumption
Consumption/ Income
Consumer or producer?Weight in consumption basketMarket structure (comp, olig, mono)Are markets integrated?
Labor mobility?Skills of householdsFull employment or unemployment?Levels of informalityPrivate sector competitiveness
Fiscal dependence on trade tariffs Is tax reform progressive or regressive?Are social safety nets in place?
Transmission channels of standard trade theory do not work as expected in LAC
Overall, standard theory does not tell the whole story
Initial conditions: Labor-intensive sectors enjoyed past protection> adjustment costs are significant