Trading up: the impact of trade liberalization on poverty

Does international trade liberalization reduce poverty? The question is an important and relevant one. It was high on the agenda in the late-1990s—think of the Seattle riots against the World Trade Organization (WTO) in 1999—and after a decade or so of quiescence it is starting to worry policymakers again. Fortunately, it permits a fairly definite answer, one that surprises many people. While there clearly are exceptions, the answer is “in the long run and on average, almost always, yes, trade liberalization reduces poverty.” The terms “long run” and “average” are not weasel words, but they do mask a lot of heterogeneity. The variance encompassed by those terms is the subject of this article.