International trade and poverty have always been related. Trade and foreign investment (called Foreign Direct Investment, or FDI) make up a large part of a country’s economy, which affects poverty within that country. But as Alan Winters, the Director of the World Bank Research Group, has noted, “Tracing the links between trade and poverty is going to be a detailed and frustrating task, for much of what one wishes to know is just unknown. It will also become obvious that most of the links are very case specific.”

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Better trade practices have been shown to lift people out of poverty. Such has been the case especially in several East Asian countries – known as the Asian ‘Tigers’ – including China, Taiwan, and South Korea. Michael Moore, the World Trade Organization (WTO) Director-General, puts it well: “30 years ago, South Korea was as poor as Ghana. Today, thanks to trade-led growth, it is as rich as Portugal.”

The ‘Asian Tigers’ achieved their high economic growth because they agreed on much more open trade policies and started to welcome foreign investors. This allowed individuals and small businesses to reduce costs incurred from tariffs (or fees) and other trade-related expenses.

Frederick Erixon, a Swedish economist, believes that creating an open market for trade in developing countries is the only way to lift people out of poverty. He points out that at the same time that Eastern Asian countries were liberalizing, or opening up, their economies, many sub-Saharan African nations started to limit and shut down international trade. Not surprisingly, he argues, the East Asian countries did much better at alleviating poverty and growing economically than the African nations.

Studies by the WTO and World Bank, covering a combined total of 80 countries, also show that developing countries that engage in more open forms of trade are increasing their standard of living and economic performance.

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The most recent development in trade and poverty is the so-called ‘Doha Round’ of WTO trade talks, a series of negotiations to discuss many trade issues in developing nations, most recently held in Hong Kong (this meeting was also known as the 'Sixth WTO Ministerial Conference'). The Doha Round started with a meeting of WTO members in Doha, Qatar, in 2001, and then proceeded to locations in Mexico (2003), Switzerland (2004), France (2005), and Hong Kong (2005).

The Doha Round of trade negotiations held by the WTO started with talks in Doha, Qatar.

The talks and negotiations are referred to the ‘Doha Round’ because of the ratification of the Doha Development Agenda there, which opens up trade in developing countries, especially in the agricultural sector, and is seen as a good way to cut poverty by allowing developing countries to compete in the global economy and improve the lives of their people. While short-term effects on poverty are expected to be mixed, studies suggest that the Doha Development Agenda should cut poverty in developing nations by up to 7% by 2015.

Although the ‘Doha Round’ has not been completed yet, it has made substantial progress in creating agreements between both rich and poor countries on complex trade issues, and should benefit poorer countries tremendously by allowing developing nations increased access to markets in developed nations. Though some minor issues on industrial and agricultural goods remain to be resolved, the Doah Round had been regarded by some as a success - it has resulted in increased trade opporunities for developing nations The Doha Round is expected to end sometime during 2006 or 2007, after several more trade talks are held.

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BBC News: 'Q&A: WTO trade breakthrough'

BBC News: 'Q&A: World trade in crisis.'

BBC News: 'Why Aid Doesn't Work'

BBC News: WTO Trade Agreement at a Glance

Business Journal: 'Textile industry wants trade-specific talks'

Schifferes, Steve. BBC News: Final round for global trade deal. 21 December 2005

Wikipedia: Doha Round

Wikipedia: Tariff

Wikipedia: WTO MC6

World Bank: Evaluation of the Doha Development Agenda (PDF)

World Bank: Poverty and the WTO

WTO: 'Free trade helps reduce poverty, says new WTO secretariat study'

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