Introduction

Economists have championed the merits of international trade since Adam Smith. Indeed, advocacy of free trade permeates the field to such an extent that 97 per cent of economists believe that tariffs and quotas diminish welfare. However, the poverty-alleviating potential of trade is not something that is necessarily realised; thus care must be taken to temper this advocacy with consideration of the transmission mechanisms between trade and the poorest members of society. Accordingly, the economic literature is replete with such considerations. The purpose of this chapter is to provide an overview of this literature in order to establish the theoretical background for the case studies that comprise this volume. One of the key outcomes is that the effects of trade on poverty are context specific. Consequently, no attempt is made here to derive a holistic or definitive description of the impact of trade liberalisation on the poor, as, in reality, there are a multiplicity of effects that vary across countries and across time. Instead, this study develops a set of factors that can potentially influence the nature and magnitude of the effects of trade on poverty alleviation. In each individual setting, a different set of factors will pertain, leading to different outcomes. Accordingly, policies should be tailored to the prevailing conditions within the country in question. Nevertheless, some generalised policy prescriptions can be derived and, as such, this chapter concludes with a discussion of how policy makers can influence the factors that mediate the effects of trade on poverty.