The Economic Premise series summarizes good practices and key policy findings on topics related to economic policy. They are produced by the Poverty Reduction and Economic Management (PREM) Network Vice-Presidency of the World Bank.
(World Bank, Washington, DC, 2013-04)
Le Goff, Maëlan; Singh, Rajun Jan
While most economists accept that, in
the long run, open economies fare better in aggregate than
closed ones, many fears that trade could harm the poor.
African countries, for example, have realized significant
improvements in trade liberalization in recent decades, yet
Africa remains the poorest continent in the world. It seems
that the large gains expected from opening up to
international economic forces have been limited in Africa,
especially for poor people. Drawing on the findings of a
recently published working paper (Le Goff and Singh 2013),
this note argues that the benefits of trade are not
automatic, but rather depend on accompanying policies aimed
at developing the financial sector, promoting primary
education, and improving governance. This accompanying
policy agenda allows people to take advantage of the
opportunities offered by freer trade, by reallocating
resources away from less productive activities to more
promising ones. Trade liberalization therefore should not be
implemented on its own, but with the necessary complementing policies.