AGB 452 -IMPACT OF TRADE POLICIES ON RURAL DEVELOPMENT AND POVERTY REDUCTION

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IMPACT OF TRADE POLICIES ON RURAL DEVELOPMENT AND POVERTY

REDUCTION

1. FUNDAMENTALS OF TRADE POLICY AND RURAL DEVELOPMENT

Trade policies and reforms seeking to liberalize trade through the dismantling of measures such

as tariffs and quotas can therefore be extensively influential in shaping the performance of rural

economies and development. The selected countries are developing nations where most of the

rural areas are dominated by agricultural and land-related activities. Changes in the trends and

provisions of the trading regime that affect market entry and the conditions of trade in

agricultural commodities can hence have significant impacts on incomes and opportunities in the

countryside. For example, opening up the markets for agricultural food imports have effects that

exert competitive pressures on domestic farmers and declining prices and profitability for home

grown crops particularly to smallholder farmers in rural areas with low levels of productivity or

capacity to adapt. In the same way, trade liberalization for export and overseas market may have

better impacts with bigger exporting farms than the small-scale food producing farms. The effect

of trade liberalization across different types of producers, and the effects of liberalization on

different income brackets in the household all affect the realization of development in the rural

areas in terms of income growth, poverty eradication, and food security. It is stated that there are

usually some transitional impacts which require additional corresponding measures, they

elaborate such things as producer safety nets, credit access, and public infrastructure, innovation,

and all forms of extension. They assist in ensuring that the smaller farmers and rural enterprises

are in a position to exploit fresh business opportunities in the liberalized markets as well as

compete for market share with more force when trade is liberalized more. It can also finance the

compensation for segments of the rural population that experience dislocation due to the process.

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Some of the ways through which trade policy changes were said to affect vulnerable groups

include the following and therefore monitoring the effects of such changes is important

especially for the vulnerable rural people. Analysis should provide for the desirable and feasible

complementary policies that would facilitate and enhance the rural development path with

inclusion. All in all, it can be concluded that trade liberalization, on the one hand, provides new

markets for rural economies to exploit their comparative advantage but, on the other hand,

involves inherent threats stemming from higher competitive pressure and transitional costs.

Trade reforms should therefore be linked to the appropriate measures that will support

agriculture productivity growth, mechanism to allow factor mobility from agriculture to other

sectors, and skills to enable producers and workers to harness on new opportunities brought

about by trade liberalization. The features of supporting policies and ability to target outcomes

for disadvantaged segments defines the nature of ‘getting the benefits and costs’ of changing the

trade architecture for rural populations, and consequent impacts on incomes, livelihoods and

poverty rise or decline.

1.1. Overview of international trade theories

Trade theories are those theories that try to explain how trade works and what happens with it,

trade theories that are relevant to trade policy and its effect on rural advancement includes

classical and neo-classical trade theory, Heckscher-Ohlin trade theory, Singer-Prebisch

hypothesis, dependence theory and the Porter Hypothesis among others. The classical trade

theories proposed by Adam Smith and David Ricardo are clear on the standpoint that free trade

based on comparative advantage is most efficient for the global economy is beneficial to all the

trading parties. These theories, however, do not specifically examine consequences on Rural

Industries. Neoclassical theories expanded the classical theories with the help of mathematical

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structures and methods of analysis. They involve real life features such as tariffs, the cost of

transportation and economies of scale but like the basic model of gains from trade due to

differential technology , resources etc between two countries. However, the critics argue that

these theories do disregard the unfavorable distributional consequences and that the national

policies can alter the comparative advantages in the long term by intervening in the skills,

technology, etc. Heckscher-Ohlin theory holds that domestic interests will find furthest from

home those products which intensively use resources scarce at home but are lavish with the

resources abundant at home. This means that, in the context of changes in trade liberalisation,

sectors benefiting from liberalisation may move production from using land and labour that

might dominate rural areas. The Singer-Prebisch thesis called for import substitution strategies in

developing countries to protect food sectors and employment. Depending on the dependency

theory, it is claimed that under globalization development country rural sectors may be used by

the developed countries. Another theory that outlines the ways for rural sectors and small

business to preserve and enhance their technological, innovative and skill advantages over the

foreign competitors is the Porter competitive advantage theory. Consequently, despite the fact

that classical and neoclassical theories advocate efficiency gains from trade, other heterodox

theories offer an opposing view that casts doubt on the positive aspects of trade liberalization for

rural communities and globalization, especially within the context of developing countries, and

underscores the requirement for complementary policies to support such communities to

overcome the distributional consequences of trade liberalization and globalization. The debate

still goes on among trade economists as to the right way of liberalization that also shields

livelihoods of the rural poor from shocks ad disruption.

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1.2. Rural development concepts and challenges

Rural development is therefore key in ensuring the standard of living and well being of the

impoverished rural populace. Yet, such rural areas are often characterized by poor and weak

infrastructure, small and restricted markets, environmental degradation and policy

exclusion. These challenges need to be acknowledged in order to design effective rural

development policies and programs. Rural development is a complex process that should be

addressed in many fields, such as economics, social, institutional, and environmental. For

example, raising the productivity of agricultural activities may increase rural people’s incomes,

but incomes may still not translate to welfare improvements in the absence of investment in

health, education, and other community development. In addition, long-term sustainable

economic development of rural areas requires protection of rural environmental assets that

support such livelihoods instead of using them up to meet production demands. This has also

identified that the rural population is diverse, that is, it consists of both the smallholder farmers

who are still practicing subsistence farming as well as the large scale commercial farmers.

Source refers to the availability of resources, the limitations as well as the pace of development

that various groups of people have. Anti poverty policies may in fact be a contributing factor to

the detriment of subsistence groups while policies for commercial development may have a

negative impact on subsistence groups, it is therefore imperative that there be programmatic

interventions that addresses the realities of livelihoods along this spectrum. Last but not the least,

there is a need for the emancipation of the minority groups of people. About half of the

agricultural workers and farm laborers are women even though they have limited access to

resources and decision-making power in the countryside. Improving their rights and

representation is the common key to address fair rural development. The other disadvantaged

groups such as the landless workers, tribal population, etc., also require specifically to protect

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policies and to eradicate the problem of poverty. Regarding challenges, insufficient physical base

like roads, electricity, storage, and markets for the products produced in rural areas limit the

commercialization and diversification into more values products in rural areas. Other factors that

limit agricultural incomes are environmental factors include aspects like soil erosion, water

deficiency, and climate factors. These limitations are difficult to resolve especially in areas that

are remote and have a low population density all of which makes it a challenge to provide public

services and infrastructure given scale and distance. These structural developments are further

precipitated by market oscillations and trade policies such as subsidies for rural demographics, if

no conscious attempt is made to address such limitations, any policies dealing with rural

development will likely intensify the problem of inequity and may completely fail to capture the

concerns of more excluded groups, hence, failing to address balanced and sustainable rural

development, not to mention poverty.

1.3. Linkages between trade, agriculture and rural economies

Removing barriers to trade can potentially have significant effects on the poverty situation in

rural areas through policy reforms. One of these linkages is through agriculture as the majority of

the rural poor population in the developing world depends on this sector for

employment. Changes in import tariff rates for agriculture and improvement in export

opportunities affect the viability of farming, a development that has implications for non-farm

rural enterprises. Prime consumption items include non-farm outputs that are available for

expenditure from the increased rural income that results from a vibrant agricultural sector. But

the effects of trade reforms are not good for all there is always a special group such as sub-sector

that may benefit from import increases or low prices for their products in the market. There is

therefore need for well-coordinated policy interventions that would help in reducing the cost of

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adjustment and to ensure that trade liberalization has the intended impacts of reducing poverty

and enhancing sources of incomes in rural areas of developing countries. A broader set of GC

dynamics also influence how trade policy engages with rural economies in its mediational

circuitry. Engagement in high value added exports in agriculture and light manufacturing can

spur productivity, technology transfer and employment in rural farming based and factory based

labor supplying regions. Nonetheless, development challenges like high standard compliance

costs, skewed balance of power between small producers and large buyers, and restricted

possibilities for functional accretion tend to confine these positive externalities for the small

producer and rural workers, proper trade and labor policies are crucial for ensuring that trade

translates to pro-poor and rural development benefits. Apart from the direct effects through

agriculture, manufacturing or service chains, trade opening also alters the structural fabric and

linkages within and between rural territories in terms of infrastructure, logistics and transport. It

provides access to markets and connection to other economy to catalyze non-farm livelihoods,

business and migration, however, questions remain on the effects of trade reforms on income,

both in terms of livelihood displacement as well as distributional equity, particularly when it

comes to mobility access and the ability to access markets through connectivity upgrading. Thus,

policies aimed at the equalization of human capital formation and the setup of rural social

protection system play an important function.

1.4. Poverty metrics and measurement in rural contexts

It is important to correctly measure poverty to know and address the level of deprivation, who is

most affected and where resource should be allocated – yet measuring poverty has specific

difficulties in rural areas. Using quantitative measures such as exchange rates and international

poverty line, which have become widely used as a measure of the poverty level, the cultural and

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social complex aspects of poverty, particularly in rural areas, such as vulnerability of livelihood,

asset and infrastructure deficits, marginalization, etc. , therefore, need supplementary measures,

although to obtain accurate data at low geographical levels is a challenge. Another reason is that

compared to urban people rural populations are widely distributed hence survey administration is

expensive. Economic relations remain rather informal and incomes can hardly be measured as

subsistence activities remain prevalent. Lack of credit during lean agricultural production

periods; counts for gender discriminations in case observations are made at the household level.

These issues are further compounded if development policies and initiatives that focus on trade

cause conditions where benefits accrue more to urban areas and large-scale commercial farmers.

Two provinces in Indonesia are the case of a 2016 study of the Asian Development Bank

showing how failure to consider spatial heterogeneity conceals distributional implications – the

average welfare increase obliterates worsening inequality and emerging pockets of hardship.

Similar concerns exist for China – while the poverty reduction has been impressive in general,

inequality trends between rural and urban regions are worrying. For this reason, newer

approaches focus on contextually derived, bottom-up evaluations of poverty employing

participative mechanisms – for instance, devoting more attention to the perceptions of the

disadvantaged when defining the facets of poor quality. Such targeted assessments, which can be

carried out at least periodically, can reveal the above-mentioned localized threats that may escape

global censuses. Contained in policy feedback loops, resources can be directed in a manner that

supports the development, capacity and infrastructure of rural public services. If made

participatory empowering rural communities on how to spend the money, there are likely to be

relevant projects meeting real situation out there as decided by the communities themselves. The

decentralized governance models have been successful in Mexico in its ‘Piso Firme’ basic

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flooring program. Therefore, supplementing static PO measures with more elastic, context-

sensitive tools fine-tuned to the BI aspects of rural poverty is essential for poverty analysis and

policy intervention in the evolving context of rural spaces.

1.5. Historical perspectives on trade and rural development

Trade and Rural development are two concepts that have a close relationship with one another

from the earliest of times. Agricultural societies of the prehistoric years also provided such

commodities via intricate trade systems that entailed villages, towns and sometimes even the

entire globe. This trade allowed rural parishes to acquire incomes and even goods that were

many levels above the local. But these changes were not uniform – certain sectors in the rural

areas benefited from new market opportunities, yet others found it hard to cope. In the colonial

period, imperialists dominated globalization in a way that got them to exploit colonized rural

areas for raw materials. Cash crop cultivation disrupted the initial land orders and perhaps

diverted work away from food production for local consumption. This new commercial focus has

brought incomes but also subordination and eradicable hunger. During the pre-World War I

period the global markets for agriculture and industry interlinked the rural producers into longer

and more complex supply chains. The capacities of mechanization, chemical inputs, and

infrastructure led to productivity but tied smallholder farmers by debts. National trade policies

where developed to support urban industrialization by providing incentives to municipal

governments to encourage export-oriented industries through exporting taxes supposed to be

used to finance infrastructure development in urban areas. Such an unequal internal terms of

trade was detrimental to the rural sector as it received the blot in return for its produce. In the

recent past, the reforms and agreements of the free trade liberalization have had a tendency of

reducing the barriers of trade in agricultural produce. For some rural markets, this openness

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translates into new market possibilities. However, for others has contributed to unemployment

through competition with the industrialized farming. But lifting protections also exposed rural

economies to world market price swings in commodities. However, this has been a double edged

sword that, has overtime, changed the structure of rural economies in many ways. There is less

clarity and inconsistency in terms of its effects on development and poverty. This has hinged

more on broader policies when absent, openness has posed the threat of displacement,

dependency, and marginalization of rural populations. Therefore, the fact that trade is depicted to

have effects on the rural areas is not due to the effects that trade only brings but a resultant of

other policy decisions and power relations.

2. TRADE LIBERALIZATION AND ITS EFFECTS ON RURAL AREAS

Trade liberalization which entails the elimination of restrictions on the flow of goods across

borders including tariffs and quotas has had both positive and negative effects in rural areas and

to some populations. On the one hand, liberalization has led to the opening of the market for

rural producers to expand their marketing opportunities both locally and in foreign markets, this

has the potential of enhancing economic activities and the incomes that come with it. However,

being open for trade also means that rural industries and farmers who form the largest

membership of global industries are able to compete with large global enterprises which they

cannot compete with in terms of efficiency and Economies of scale. As for the benefits on the

positive side, trade liberalization is a way of unlocking export markets for agricultural and other

rural products in developed countries. Since there are relatively fewer trade barriers, the

countryside producers can boost their exports of fruits and vegetables or other crops, handloom

products or machinery. The exposure to the global consumers enables industries in rural areas to

benefit from the economies of scale. This is because exports and trade can enable productive

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investment especially in the area of infrastructure, technology and commercial production for the

rural areas. In case of rural poor, higher income and more off farm employment may arise due to

liberalized trade which helps in development of rural industries, the latter can be useful in

achieving poverty alleviation targets. However, negative consequences also arose when the rural

sectors that were protected from competition earlier encounter competition. That is, smallholder

farming business is under pressure when cheap imported food products invade the local markets.

New opportunities are preceded by threats that enterprises that relied on protectionist policies

inherited from the planned economy can face loss of market share and jobs with their products

being replaced by imports that can be made at a significantly lower cost in countries with

cheaper labor. Consequently, when rural industries are shrinking, government, and its policies do

not support such industries, marginalized rural communities can face long-term unemployment

and poverty. Environmentally, increasing cash-crops and agro-industries for exports can lead to

environmental degradation since there are no checks to limit the volume of production by rural

producers who’s main goal is to increase their revenues. Trade liberalization has benefits in terms

of improved market access and rural development, but adjustment cost should also be

considered. It is crucial to note that while opening up to trade has the potential to economically

transform rural areas for the worse, thus leading to increased poverty levels; it is important that

governments initiate programmes that; invest in the infrastructure of the said rural areas, support

the adoption of efficient production technologies by producers, subsidise job changes and protect

other vulnerable groups within the rural areas affected by globalisation. When enacted with

proper supporting policies, trade liberalisation can be done in a manner that puts in place the

mechanisms for opening up markets for new players in the rural areas while at the same time

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managing the various risks that are associated with integration of firms into highly competitive

global supply chains.

2.1. WTO agreements and their impact on agriculture

The WTO deals that have characterized the WTO since its formation in 1995 have several effects

on the agricultural industries of the member nations. These agreements were intended to promote

liberalization and improve the access to markets through the use of commitment in efforts that

distort trade. Thus, the impact of liberalization has been somewhat ambivalent for the rural

populations that are producers and workers in the agricultural sectors. On one hand there is the

loss of export subsidies, and reductions in trade barriers in the developed countries which has led

to the expansion of export market for crops from the developing countries. In this shift there

have been beneficiaries are for example soybean farmers in Brazil or cut flowers producers from

African countries for instance Kenya. That said though, the benefits have been split in a manner

that has seen the net food importing developing countries receive the raw end of the stick; they

are now forced to pay more for their imported foods. The domestic support has also been

criticized by the farmer groups for enabling the developed countries to continue protecting their

market through the trade-distorting Ames. This has, therefore, led to an unequal market

environment for poor smallholder farmers that are in the developing countries. They do not have

counterpart institutional structures that can bolster income from farming while at the same time

they are faced with cheaper imported foods. The new orientations of export-oriented cash

cropping and of contract farming have also improved the exposure of rural households to world

price fluctuations of their cash crops. Several WTO cases in connection to dispute settlement

show that the policy space for agriculture remains substantially unequal between countries.

Though, the WTO maybe aimed at establishing a balance fair known predictable trading

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environment that is driven by standard, in actuality the agreements have oftentimes benefited the

developing countries that are heavily reliant on smallholder farming by constraining their

development and poverty alleviation initiatives. Simplifying certain elements of the agricultural

trade rules has been a persistent issue in the otherwise deadlocked Doha round of WTO

negotiations.

2.2. Regional trade agreements and rural economies

Bilateral or multilateral trade arrangements in regions that are geographically close have possible

implications on rural economic development in countries within the arrangement. Reducing trade

restrictions among members of a regional group is the main advantage of regional trade

agreements because it increases the overall level of trade and integration between the countries

involved, this can expand the economic opportunities and create new opportunities for imports

and exports of food and other agricultural products produced in the rural areas of the member

countries. For instance, small farmers and agricultural firms in rural areas are able to source a

larger and more diversified market for their products, and may well stimulate the production of

the rural sector by increasing demand and, hence, prices and incomes. Thus, when it is structured

properly with frameworks to protect other vulnerable groups, RTAs can bring opportunities for

rural counterparts to enhance poverty alleviation and economic growth via trade. However, the

flip side is that there is potential for foreign producers to replace the domestic producers that are

part of the problem, which would harm rural economies if transition measures are not put in

place. While entering into a regional trade deal could be beneficial to the overall economy, it is

also important for policymakers to consider the uneven impacts in the form of sectoral

distribution – between the urban and rural sectors – and to put in place measures to address the

social costs the deal has imposed on rural folks and ensure that the benefits accrue to all groups

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in their region. A sample study indicates that the gains from regional trade liberalization are

likely to be more in urban areas than in rural areas where the population is likely to suffer more

losses from changes. The main relevant recommendation is that governments should always have

complementary policies in place to make sure that rural households do not feel that the

opportunities are now fewer than before. Issues to consider include agricultural subsidies offered

in other countries that may negatively impact domestic rural producers, limited access to

education and credit for rural workers to train and improve their skills when adapting to a new

trade system following the conclusion of a trade agreement, and food security of rural people

during shocks and trade adjustment in line with a trade agreement. The regional trade agreements

that aim at balancing the regional trade challenges and opportunities with a specific focus to the

rural regions can enable the promotion of the rural economic diversification alongside the

regional integration on the fair terms and conditions thereby promoting poverty reduction in the

rural regions. Nevertheless, if the policymakers do not address and promote the rural economy

during trading block formation and subsequent negotiations, and afterwards, they slow down

poverty reduction, then the trade agreements are likely to have a negative effect on rural areas.

2.3. Case studies of trade liberalization outcomes

The following are examples that show the impact of trade liberalisation on the rural regions in

the developing world. After the implementation of NAFTA in 1994, the crop yields and

productivity in accessible areas with transport and credit in Mexico increased while product

availability for corn was affected by cheap imports from the United States in the isolated rural

regions. Real wages, thus falling under the competition with US agribusiness, also led to the rise

of rural poverty. Likewise, after the discrimination in the early 1990s when trade liberalization as

part of structural adjustment policies were implemented in Peru, the alpaca industry could not

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cover the cheap textiles as government aids were rationed. The following years observed a

decline in their real incomes for the rural weaving communities that relied on alpaca herding. On

the other side, the development of asparagus farming in the rural Ica Valley in Peru for export of

the same crop, reflects the possible benefits of trade liberalisation. This can be compared to the

experience of Ghana, that suffered a negative impact from trade liberalization especially from

1980s and 1990s in which many of its rural farmers lost market for their rice to cheap imported

rice from Asia but at the same time, facilitated exports of horticulture produce from rural areas

that has suitable climate for production of crops like pineapples. In relation to a range of sectors

and poverty targets, the impact of trade liberalization strongly depends in many ways on the

ability of rural enterprises and farmers to finance the acquisition of inputs, access to

infrastructure and other complementary factors to capitalize on new export opportunities and on

exposure to competition from import goods in hitherto sheltered industries at home. When rural

areas do not have the necessary supplements and frameworks to capitalize on trade openness and

its risks, the rural poor suffered through income declines. It is thus possible to enhance the

economic gains from trade in a way that is more inclusive and takes into account the rights of

weak and vulnerable groups in rural areas through proper policies; investments; and strategies.

However, without these accompaniments, shock opening of domestic markets has often made

rural poverty worse, even as it generates islands of export performance that are disconnected

from the poverty problem in rural areas.

2.4. Effects on small-scale farmers and rural enterprises

The policy of trade liberalisation and de regulation such as lowering of import barriers and

elimination of export incentives has also influenced the operations of smallholder farmers and

rural businesses in developing countries. As the country imports cheaper produce, particularly

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from the agriculture sector, most smallholder farmers lack competitive prices for their produce.

Smaller yields and slim profit margins can result in smaller production floors or dropping out of

farming by most rural farmers. The people who move to other income generating activities may

feel that trade liberalization is taking away their wages and employment opportunities in rural

areas as large farms gain more land, and automated systems reduce the demand for labor. Rural

non-farm entrepreneurs are also similarly threatened by competition and research has indicated

that trade openness leads to higher mortality and lower birth rates among rural manufacturing

firms, trade can contribute to rural-urban migration with the negative impact of reducing

enterprise in the rural areas. However, some small farmers are the beneficiaries of more open

trade by exporting specialty products or diverting resources to sectors that possess a competitive

edge. They are net and context dependent effects. Trade promotes efficiency through scale by

favoring large scale production units involved in exports, but the small farmers who were at the

marginal side may be pushed even further to poverty traps. So, liberalization of trade has led to

increase in income inequality and vulnerability of some rural households. To this end, it is

essential to design appropriate accompanying measures to reduce adjustment costs, ensure that

the benefits are widespread, and use trade liberalization as a tool that does not deepen poverty

but, on the contrary, helps to overcome it among the rural population in developing countries.

Policy measures that need to be embraced are increasing spending on human capital,

infrastructure, and innovation; inclusion and access to value chain; enhancing social assistance;

and adjustment costs such as credit.

2.5. Gender dimensions of trade policies in rural settings

The effects of trade liberalisation policies also impact men and women located in the rural areas

in a different manner due to some of the gender disparities and gender roles that exist. According

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to a global review, women constitute a large percentage of SHFs and agricultural laborers in

developing nations while they encounter additional barriers than man in gaining access to

production inputs, markets, and trade opportunities. With liberalization of trade, opportunities in

export of tradable commodities in commercial agriculture may accrue more to male farmers who

have larger land sizes and better access to inputs, credit, transport, information etc. The female

farmer who mostly practices subsistence agriculture is on the other hand, subjected to cheap

imports of agricultural produce without adequate support to change to other tradable crops.

Global value chains also affect gender relations in some ways On the other Expansion of .

Economic activities characterized by commerce agriculture for export market require less

dependency on permanent employees than on seasonal and waged workers of which many are

women. Yet, women remain in sectors that provide low wages and limited employment security

or promotion prospects that require more skills. Whenever cases of lay-offs arise due to trade

shocks, retrenchment normally targets women employees to start with. Displacement also leads

to deterioration of traditional gender roles since women are left with the responsibility of

catering for their families while men are out looking for other sources of income. Trade

liberalisation may distort availability of basic commodities and other service delivery

requirements in the rural areas in a way that discriminates between genders. This implies that

through lower tariffs goods like food, fuel, health care etc can be priced lower and hence be

affordable to the poor rural women. However, withdrawal of state subsidies together with

volatile international markets can also pull out key sources of support they depend on particular,

female headed households. Government revenues may decrease, and thus, social service

provisions that help to alleviate the care workload may drop further. Gender focus in trade

policy formulation and administration is crucial for supporting rural transformation. Measuring

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the relative effects on women and men, developing gender-relevant policies, focusing on

strengthening women’s capacity in order to level playing field and finally preventing policy from

shifting the costs disproportionately on women are some of strategies which can be implemented

by policymakers into account. The measures which should be taken need to also address

ethnicity, income-class etc.

3. DOMESTIC AGRICULTURAL POLICIES AND TRADE

Policies that are implemented at the national level are also capable of impacting a country’s

ability to participate in trade and therefore impact on the development of the agriculture and

poverty alleviation in these areas. To this end, measures including import tariffs, quotas, and

subsidies are used in a bid to protect domestic farmers and agricultural producers from what is

deemed as competition from abroad. However, such policies focus on domestic markets and such

measures may more favor the large agricultural enterprises than the smallholder farmers and are

sometimes costly to the taxpayers and consumers. On the other hand, more open trade policies

afford chances for countries to take advantage of their comparative advantage in the integrated

Markets. For instance, the ones with more land and workforce can optimize on these resources to

realize efficiency and scale economies in the production of agricultural commodities for export.

The export revenues earned enable nations to buy foods and other necessary items at a cheaper

price. Openness to trade thus enhances the possibility for specialisation in line with comparative

advantage. Export-led development may also foster increase in efficiency since exporter farmers

and firms seek to improve on their efficiency weiten they are exposed to competition. Also, by

integrating domestic producers to the global value system an open regime of trade promotes

diffusion of knowledge, technology and skills. According to the findings, liberalization of trade

was found to have brought about faster decrease in poverty rates in rural areas among the

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developing nations as compared to nations that maintained high trade barriers. Market access

opportunities encourage agricultural commercialization and crop diversification towards higher –

value crops, thereby increasing farmers’ income. Such reforms may require public expenditure in

construction of road, port and telecommunication network to improve trade linkages, or in R4D

and extension to improve farmers’ capacity to produce food. Compensations would also be

required to enable the smallholders to effect the change and address the issue of rent seeking by

those who benefit from trade. Finally, there is a requirement of the coordinated approach for the

outward-oriented agricultural trade policies and practices with the other physical, health,

education, and other social protection program in the rural areas.

3.1. Subsidies, tariffs and non-tariff barriers

There are domestic support policies implemented in many countries involving the agricultural

sector such as subsidies, import tariffs and various non-tariff barriers to trade given directly to

farmers. As intended to finance and protect the sector agriculture there are usually short, medium

and long term mixed effects of these interventions on on-going rural development and poverty

trends. That is why agricultural subsidies can represent a direct source of income in the short run

that may help to stabilize rural living standards. However, subsidies that are given depending on

the production levels may lead to overproduction in the long-run and cause some distortion in

prices in both domestic and international markets. This can be a disadvantage to developing

countries and the farmers in them as it reduces the competitiveness and export ability of the non-

subsidized farmers. While some subsidies are given for the uplift of small and marginal farmers,

it is mostly the large farmers who gain the most. Continuing decline in global agricultural food

prices in the long-run, driven by overproduction through subsidies in some countries, limit’s

reinvestment in agriculture and export led growth and development in other developing country

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markets. Tariffs also have the objective of ensuring that local farmers and particularly farmers in

rural areas have stable incomes, but in the process, they end up increasing costs for countries that

import foods as well as limiting the opportunities for efficient exporting farmers in the world

market. Likewise, non-tariff measures, such as complicated formalities, can add cost burdens on

the exporters in the developing countries who are keen on entering the high-income country

markets to foster the rural economy. Although subsidies, tariffs and trade barriers can benefit

some producers and protect them in the short-run, they also negatively affect unprotected farmers

in the long-run by sustaining distorted structure of world prices for commodities and restricted

market access for their products. The arguments above suggest the need for more favorable

domestic support policies which are transparent and customized to accommodate trade-led

agricultural development as a way of addressing rural poverty across the world.

3.2. Price support mechanisms and their implications

Basic interventions like minimum support prices (MSPs), subsidy programs, and procurement

strategies are intended to offer reasonable and stable income for farmers and guarantee more

adequate rates for crops to encourage production. However, if pursued to the extremes and over

long-term periods, they have the potential of skewing the market supply and demand forces.

While it is helpful for net-selling large farmers in the short-run, its role on the general potential

of agrarian development is disputable. The available evidence shows that subsidising input prices

affects larger landholders to a larger extent than smallholders, thus excluding the bottom one

third who are considered to be in the poverty bracket from improvement. In the long run, higher

support prices also lead to more production of supported crops, which may further encourage

methods like excessive use of fertilizers and water. In addition, input subsidies are a costly

venture to governments, hence implying a constraint on the finances required in areas such as

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research and development in agriculture, technical support, water supply and spare capacity for

storage amongst others, this is a hidden cost of rural development that is frequently neglected, it

also negatively affects landless laborers who rely on agricultural employment by decreasing the

crop options and diversification. At the same time, support mechanisms’ impact on domestic

prices decreases price competitiveness in the international markets, which call for protective

barriers such as export control. However, these distortions only serve to split domestic and

international markets for commodities and severely dent farmer earnings when global prices

slump because of a glut. Hence, in order to use price instruments for targeting smallholder

incomes in the short term, policy makers should strive for welfare goals on one hand and growth

and productivity for the other in the long run, but should employ instruments like direct income

transfers. Correcting incentives would not only construct an efficient domestic agricultural sector

linked to the global market but also promote rural development and eradiation of poverty in

several areas.

3.3. Land reform policies and trade outcomes

From the analyses, it can be inferred that trade liberalization results in the altering of rural

development and poverty level in a country. One of them is through effects on agriculture – an

area that economically incorporates a large number of people in rural developing countries.

Opening to trade such as measures that ease restrictions on imported agriculture products and

fluctuating world market prices can be detrimental to rural folks in the short-run. For instance,

the effect that cheap imported grains exert pressure on many smallholder producers who cannot

compete effectively while experiencing shrinking incomes due to decreased crop revenues and

unpaid loans. Rural poverty therefore either remains prominent or worsens as there are structural

constraints that limit easy shocks to higher value cash crops for exports. But it is also crucial to

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note time-related effects of trade on landownership and food quality to understand rural

poverty. Proper policies that place emphasis on the support of secure individual rights and

operational scale can allow for increased investments in yield-improving inputs, mechanization,

and sustainable agriculture. However, if supported by suitable incentives offered through trade

liberalization, diversification into commercial export production is possible for a larger extent of

smallholder producers. For instance, early and preferential access through trade partnerships can

foster market linkages that create integrated value chains for processing and exporting high-value

horticulture, livestock or aquaculture products from small-scale farmers. Such market linkages

ensure that rural communities get better incomes as compared to few and limited opportunities in

the remote regions. They also provide employment openings in secondary activities such as

transport, packing, and trade channels in rural areas. Domestic markets also continue to grow as

a result of higher incomes, rural transformation, as well as dynamism for multiplier impacts.

Thus, although opening up can deepen transitional difficulties, other policies fine tuning the

ownership regimes, input controls and export promotion establishes the degree and persistence of

trade-induced rural poverty. That is, when well-designed, trade policies can help to untangle

distortions by efficiently reallocating both land and labor. This structural change helps initiate

and sustain commercial agriculture, skill generation and predictable wages – together allowing

hitherto excluded rural groups in the Global South to engage effectively in new dynamic

GVNs. Therefore, trade outcomes centralize to the international commodity prices and domestic

factor markets. Thus, it is the coherence of land rights, inputs and incentives for smallholders to

the trade opportunities and competition that determine the patterns of beneficial rural

development for the poor.

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3.4. Rural infrastructure development and trade facilitation

Development of infrastructure especially in the rural areas and ease of trading for the rural

dwellers are important tools in ensuring that the benefit from trade cuts across every segment of

the society hence eradicating poverty. Lacking transport facilities, storage and communication,

electricity and information communication technologies demerits the cost and restricts clients in

the rural areas. Improving rural infrastructure in the forms of roads, ports, railways, warehouses,

cold storage, telecommunications and broadband internet enables efficient trade flows for

agricultural products from rural regions both domestically as well as internationally. This enables

the rural farmers and firms to minimize on the transaction costs when sourcing for inputs,

transporting their produce to markets, when storing their produce in safe and secure places and

also in a bid to access information on prices and consumers demand in the markets. Moreover,

the improvement of trade enabling environment through the reduction of bureaucracy and cost at

borders through adoption of transparent, efficient customs procedures and standardization,

enhance the engagement of SFBs and rural MSMEs in value chains. Reducing onerous

paperwork, the complexities involved in the process of obtaining import/export permits, the

clarity on testing and certification procedures, and eliminating paperwork through the use of

technology can be more beneficial to rural small-scale producers than their counterparts in urban

areas. Thus, rural infrastructure development accompanied with trade liberalization provides a

chance for new rural inhabitants to enhance productivity and income levels due to new markets

access. Promoted by enhanced rural infrastructure and trade, further market connection

encourage higher commercialization and investment in the farming sector. For instance through

extension of contract farming schemes that provides linkages between smallholder farmers and

such players as food processors and exporters. Hence, increase in income and or employment

resulting from improvement in accessibility to domestic and global markets has a direct positive

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impact on the reduction of rural poverty. Hence, infrastructure investments and trade reforms that

focus on the identified barriers and high transaction costs to SMNEs especially in rural areas are

important to enable farmers to engage in agricultural value chains and thereby, improve the

poverty reducing impacts of trade in rural economies.

3.5. Agricultural extension services and export competitiveness

A liberalization trade can influence rural poverty and development in developing countries by the

changes that may occur within the agricultural sector and the access to markets. Extension

services, which comprise training, technical support, input and credit resources for farmers, and

assistance in linking them to export markets, is an important factor in determining the

competitiveness of the agricultural export sector. Several rural communities rely on agriculture

hence increasing the export competitiveness of this segment through improved extension will

increase incomes in these areas. On the same note, the critics have noted that trade liberalizations

have led to a decline of the available public funding for extension while at the same time

providing export opportunities for improvement of farmer productivity. Structural adjustment

policies forced developing countries to decrease their public expenditure on available and needed

rural development services. However, the private sector has not fully complemented this gap in

extension due to low purchasing power, scale farmers do not have profit motive. Withdrawing

state funded extension means leaving vulnerable groups in rural areas technically and

organizationally deficient. Policies play a crucial role in trade liberalization to enhance the

growth of PPRs as marketed in consumer markets. Available evidence supports the need for

continued public investment in extension so as to ensure that smallholder farmers are able to

meet quality requirements demanded by GVFs for high value agricultural exports, this involves

skills in production processes, transportation, and proper farming practices to come up with

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products that will meet the international market standards. The constraints of scale and

coordination in linking Rural farmers to export markets can be overcome through organizing

forms such as cooperatives and producers associations. Other measures are also essential,

including reducing the nontariff barriers that have been erected against exports of agricultural

products from developing nations. Accompanied by long-term extension support that suits

smallholders and trade openness, rural groups can ascend up the EFV, benefiting productivity,

income, and the resistance to volatilities over the long haul. Measures to ensure that smallholder

farmers get improved access to extension services are therefore crucial in ensuring that the

efforts towards integration of developing country farmers into world markets yield the desired

fruits in poverty reduction. Export-oriented rural development cannot be achieved only through

deregulation of markets since there is need for continuing public investments and other forms of

support to ensure that the opportunities offered by growth in world trade are accessible by the

poor especially those living in the rural areas. The effects of trade opening on poverty therefore

mainly hinge on other policies that foster the buildup of productive assets in rural areas as well

as the safeguarding of the livelihoods of poor agricultural stakeholders. Current liberalisation

policy for trade can complement the country’s agricultural export competitiveness and enhance

its policies for rural development in poverty-stricken areas. But if no such measures are taken,

then the liberalisation of domestic agricultural sectors through globalisation is likely to create

both winners and losers, and the least capable of grabbing opportunity are peasants barely

making a living. Trade- led rural growth must also be inclusive of disadvantaged groups through

improvements in extension services and organization requires conscious policy efforts.

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4. GLOBAL VALUE CHAINS AND RURAL PARTICIPATION

The concept of Global Value Chains (GVCs) today forms a major part of world trade and thus

presents an option for developing countries to connect with the global economy and foster

development in rural areas. To foster poverty reduction through GVCs, there must be fair trade

that will allow the rural poor to engage in the GVCs. One of the issues is that lead firms in GVCs

pursue the strategy of managing cost and risks through relying on a limited number of qualified

suppliers, which makes it difficult for less efficient rural firms to get access to the GVCs. There

are ways this can be addressed through trade policies, such as through the creation of rural

capabilities, for instance, programs that help rural enterprises to address international standards

such as the production of safe food, or compliance with labor laws enable them to operate in

GVCs. Other trade enabling factors such as infrastructure in transport and logistics are also

relevant in connecting remote agricultural communities. Moreover, measures such as those that

foster expansion of value-added agriculture and Agro-processing industries stimulate demand for

rural produce while value addition is done at home. The kind of upgrading that has occurred

along the supply chain has been essential in achieving poverty reducing GVC participation as

seen in the case of Vietnam. Furthermore, the enhanced and more inclusive GVC engagement

needs more equal distribution of the benefits. First-party value added tends to dominate leading

firms, meaning policies of competitive, investment, and taxation-consciousness are crucial for

generating superior returns for second-tier producers and employees. Last, but not the least,

special attention is given to the weak links like the smallholder farmers and women to fight the

constraints that hinder them in accessing inputs, technologies and markets. There appears to be a

need for active government engagement, particularly in trade and industry policy making

together with Rural Development initiatives. Therefore, although GVCs are viewed as positive,

these have to be complemented by trade as well as social policies for poverty reduction in rural

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areas and to ensure that the disadvantaged communities are also able to benefit in an equitable

manner.

4.1. Structure and governance of agricultural value chains

The type and organizational structure, as well as governance of agricultural value chains, remains

central to the experiences of participants in rural economies. HCs that are highly co-ordinated

and with well-defined standards involve are likely to be controlled by strong and strategic lead

firms who drive the establishment of chain participation. They are usually large global

companies that have the muscle in dictating very high standards and benchmarks that are to be

implemented in the supply chain. The high entry costs for compliance and the internal power

relations are regarded as major problems for smallholder farmers who want to enter such

chains. However, there are also risks for its participants and benefits on the form of assured

demand and price. On the other hand, the value chains that involve predominantly the

transactions in the spot market are significantly less coordinated between actors, and setting of

standards is minimal. In the case of open-market trading, although there are less restrictions that

hinder smallholders’ involvement, they have no protection on the prices they get or into markets.

Sitting in between these two poles of the spectrum of the degree and type of coordination

between the supply chain members are various intermediate structures that contain some

elements of collective action of the members to set certain simple rules. Evaluating the

certification schemes is another tactic of coordination among lead firms and smallholder

suppliers key to sustainability, but controversies still surround the fair sharing of cost and

benefits. It is relevant for understanding poverty reduction how and to what extent the

governance models that exist in value chain systems incorporate or exclude the rural

smallholders since a global population of 2. 5 billion people depends on agriculture. The essence

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of agricultural value chain has shown efficiency in ensuring that rural farmers are linked to better

income opportunities and basic facilities including extension services, inputs and credit. But the

opportunities associated with high value agricultural exports in today’s globalizing world are

only available to medium and largescale farmers due to these challenges that smallholder farmers

face. It is against this backdrop that poverty reduction strategies in rural areas must give due

consideration to value chain determination and upgrading initiatives to embrace a broad cross

section of inhabitants in the rural regions.

4.2. Opportunities and challenges for smallholder inclusion

Smallholders are in a majority that practices farming on limited pieces of land and are part of the

impoverished populace in developing countries. There are prospects as well as dilemmas that

come with including these smallholders in the new value systems. Properly designed to ensure

that smallholders do not bear most of the risks without reaping similar benefits, value chain

participation has the potential of giving smallholders better market access, higher and more

dependable incomes, credit, and technology, and incentives to produce better. For instance,

through contract farming schemes, some small holders have been in a position to provide a

stream of supply major food processors and retailers, come out of the subsistence production.

However, smallholders are still faced with numerous challenges in being able to engage and

capture value in new and modern value chains that are responsive to the quality conscious

consumers in the global HILMIC markets. Such buyers have specific and stringent food safety,

quality and environmental sustainability standards that entail elaborate practices and costs of

entry that resource limited smallholder farmers in the remote rural regions cannot afford.

Smallholders are often equally limited in business, negotiation and organizational skills to

negotiate with the downstream chain actors. Policymakers claim that value is created because

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intermediaries represent consumers, but in reality, they get most of the value through information

advantage or undue bargaining power. A shift in focus by manufacturing firms towards

agribusiness and bargaining power asymmetry can also be enhanced through concentration. This

underlines the need for public policy action to set a more propitious starting point for contractual

relations, cooperation, competition regulation, and information access. Even though global value

chains spread standards and procurement models that could pressurize and overwhelm the less

developed chain actors, they also pass on knowledge and facilitate the distribution of superior

technology that creates capabilities. The gradual improvement of the innovation targeted at

practice-oriented early wins for initial innovative smallholder groups may enable demonstrating

benefits more diversified. It is patient capital where public, private and donor funding is utilized

to solve information asymmetry issues, manage risks, obtain technical services and access early

stage financing that is crucial to the widening of opportunities in a manner that delivers tangible

and proportionate gains. When designed to integrate with smallholder constraints, GVCs can

make an enormous contribution towards sustaining the rural transformation process efforts.

4.3. Fair trade and ethical sourcing initiatives

The general principles of fair trade and ethical sourcing are as follows: fair trade seeks to redress

imbalances between buyers and sellers in trade relations and provide better prices to struggling

producers in the third world. Small-scale farmers, rural artisans, and agricultural workers can be

incorporated into the value chain of fair trade products with an aim of capturing export markets

that would otherwise not be achievable. Some of the fair trade standards are that goods must be

bought at a price that fully covers the cost of production that is sustainable, support in form of

credit and technical assistance to producers and long-term direct cooperation that is based on

equal negotiations and transparency. Some of the ethical sourcing programs of key brands and

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retailers also comprise pledges to working standards, wages, and health and safety of workers as

well as their environments in supply chain systems. A rather weak link has been established that

integration of social and environmental production standards in global value chains may support

rural development and poverty reduction objectives. There are various impact evaluations for

Fair Trade certification schemes, one of the latest of which is a 2019 World Bank study that

concluded that, on average, FT has had moderate positive impacts on FT producers’ incomes.

They could sell more of their produce, get better prices, and have more secure earnings therefore

because of it. In some instances the positive effects were also observed among external scheme

participants, indicating the prospect of extending the spread of the benefits throughout the rural

area. But what is important to note is that these impacts are highly variable and conditional on

context, capabilities already existing at the local level and the strength of farmers

organizations. Ranch up requires expanding beyond ethical markets to engage the rest of the

global supply chain system. The attempt at getting industries collectively approve and implement

voluntary standards has held the potential of elevating manufacturing standards across the

industries. ETI is a multi-stakeholder platform that includes companies, trade unions and non-

governmental organizations to analyze the systemic causes of labor rights abuse in supply chain

and develop joint strategies. The critics have advocated that voluntary standards can actually

mask on-going exploitation and power differentials, without any simultaneous policy and

regulatory measures from states. Legal obligations such as mandatory human rights due

diligence or living income provisions are being demanded more and more and even enacted in

various large consumer countries but their effectiveness has not been systematically

assessed. Adopting ethical trade principles in global value chain governance may help create a

possibility for more individuals from rural areas to engage in globalization and increase their

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share of global trade Global trading relationships themselves need to be changed in their unequal

systematic setup by a set of voluntary and regulatory actions by various global and national

public and private organizations in the coordinated partnership. Effects vary by chain and power

dynamics within them, meaning that, for promoting sustainable and equitable rural development,

it may be most beneficial for a specific chain to develop localized, conversational strategies for

connecting food producers in rural regions to the appropriate markets.

4.4. Technology adoption and value chain upgrading

Technology adoption helps producers and firms in developing countries to move up the

technology ladder or gain better positions in GVCs, leading to improved standards of living of

the people in rural areas and decreasing poverty incidences. Upgrading is the transition by

producers and firms to higher value added activities in a chain, which leads to enhanced

knowledge and skills and requires more technology than the previous chain and is more

rewarding. In the rural sector this means that for agricultural producers it can involve taking up

newer seeds, more efficient methods of irrigation, or improved farming implements that increase

the yields and quality of their products to feed the global markets. For value addition through

agro-processing of raw materials to produce consumable products, it can mean upgrading to

packaging technology or cold storage equipment for SMEs from rural settings to undertake

processing rather than just supply of raw materials. The ability of increasing technology adoption

in the longer length of the rural value chains of the developing countries enables the producers

not only to upgrade the product characteristics, but also to shift to higher tiers of the chain

functions, create their own product and process improvements, and even functional upgrade to

other value chains entirely. Notably, improving the technological level within chains is required

for income growth and poverty reduction. Upgrading, therefore, bring about higher sales,

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investment, wages and standards of living for producers and firms in rural areas by allowing the

producers and rural firms to develop higher order capabilities, add more value locally and

penetrate more valuable market segments. Research data from Asia and Latin America shows

that incorporation into technologically superior links is positively associated with skill and pay.

However, the necessary organizational changes in diffusing relevant knowledge for the adoption

of suitable technologies across the rural business sectors can be realized through clustering,

public private partnership and agricultural extension services. Specific to the strategy of

harnessing GVCs for inclusive rural development, governments should put into place

requirements such as R&D funding, ICT, technology fund and incentives for private players to

undertake widespread upgrading activities that reduce marginalization.

4.5. Role of cooperatives and producer organizations

The cooperatives and producer organisations have a significant role in the engagement of

smallholder farmers and the rural people in the value chains for their rural development and

poverty reduction. Cooperatives have the potential to respond positively to some of these

challenges since they bring together small-scale producers in large group formations, which

counteracts some of the major barriers to entry into the modern value chains such as scale,

market linkages, access to technology, and bargaining power. This is because although individual

small scale producers are dispersed in rural areas, when packaged together to form a larger entity,

transaction costs and other costs that buyers have when sourcing produce from individual

farmers are reduced, economies of scale when sourcing farm inputs can be realized and common

assets like storage and transport facilities can be established, and direct links to commercial

buyers and export markets can be established. It also means that members can focus on the

production and marketing functions in a more efficient way because it is easier for them to align

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production and marketing expenses with members’ comparative advantages, this in turn can

improve the general effectiveness, efficiency and competitive advantage of products in the

market. Additionally, through collective bargaining, cooperatives are able to be on the favorable

side when negotiating the terms of trade, have higher product prices and equitable share in the

trade benefits. These include improved terms of contracts with the buyers in the value chain that

guarantee that members of the latter are able to get their fair share of increased value added as

commodities are being converted into final products. Cooperatives empower traditional small

producers by availing the organizational and institutional push that enables rural and

smallholders to gain entry into value chains; this is apart from improving rural incomes and

employment that leads to poverty reduction, they also foster sustainable rural development

through other steps like upgrading market linkages and accessing modern technologies and

practices. In this way, cooperatives help global value chains to be used in a way that benefits the

rural areas rather than being an addition to the already existing disparities. Cooperative action

being crucial for collective efficiency, policies on trade and government interventions should

integrate and promote investments in rural cooperatives, directly through funding and indirectly,

through building of the supportive capacities for such collective forms of organization, as an

essential component of the national and global value additions.

5. TRADE POLICIES FOR POVERTY REDUCTION AND SUSTAINABLE DEVELOPMENT

Openness and trade liberalization policies provide the best opportunity for poverty reduction and

sustainable economic development especially to the rural communities of developing countries.

When cast in the right way trade rules can encourage new investment, promote transfer of

technologies, help producers in developing nations to gain better access to overseas markets for

their agricultural and other products, and create more and better jobs. For instance, efforts

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towards liberalization, including the Doha round’s aim of decreasing tariffs, quotas, export

subsidies, and domestic support measures in sectors such as agriculture and textiles enable

developing country actors to more effectively exploit their competitive advantages in these

industries. The expansion of market access leads to greater export and import activities to and

from farms and firms in poor rural areas that are otherwise, have been locked out from the

market system. This leads to the creation of more and high-paying jobs in tradable industries

which in turns increases incomes and acts as a source of escape from poverty for farmers.

Policies regarding trade also promote a higher competition that subsequently leads to lower

prices for the consumer, especially around the basic needs such as food, fuel, and apparels –

products that are part of the higher share of poor household consumptive basket. Greater trade

liberalization also makes it easier to disseminate technology and encourage better farming

practices that help to increase productivity and yield results on the basis of equitable partnership.

Thus, from the angle of growth and equity, trade openness and GI to value chains holds the

prospect of significant benefits. However, achieving those benefits is contingent on comparable

policies to avoid adverse effects on vulnerable groups during shifts and transformations. Trade-

adjustment assistance programs, human capital development, enhancements of economic

infrastructure, and equitable social protection measures can cushion the short-term costs and

ensure that the extended and disadvantaged sections of society fully benefit from the

gains. When trade reforms are accompanied by careful consideration of policies, these changes

comprise a valuable ability to work towards growth, inclusion, and sustainable practices to

achieve the goal of reducing poverty in rural areas.

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5.1. Pro-poor trade policies and their implementation

The concept of pro-poor trade policies is designed to make trade work for the poor, as a way of

improving employment and income opportunities for poor people, all the while safeguarding the

most susceptible. They can be defined as the proper timing and coordination of the trade reform

policies within the overall package of policy reforms for the purpose of obtaining the best results

and minimizing the adverse impacts. For instance, removing high tariffs on capital goods and

intermediate inputs in sectors in which agriculture and labour-intensive manufacturing sectors

can compete can help the poor. Trade relations facilitating trade with neighboring countries in the

form of regional integration agreements can foster the development of rural infrastructure and

value added chains. Measures like duty drawback and reduced port charges could help exporters

to be involved in value chains. It is important to upgrade the quality standards certification

schemes to assist producers particularly the small producers to access better markets. As one

liberalises, it is reasonable to retain some tariffs on sensitive products during the transition to

avoid loss of livelihoods. . The social protection policies during the reform transitions enable the

workers to move to new sectors of the economy. Mainstreaming pro-poor objectives involve the

conceptualization and integration of pro-poor objectives into overall trade policy discourse,

measuring impacts on the poor through sustainability evaluations, adjusting regimes based on the

knowledge gained from Implementation, and the complementary policies. Export promotion

should also entail ensuring that governments enhance capacity of exporters on standards

compliance, strengthen rural infrastructure, increase dissemination of research findings, provide

appropriate financial services and reduce costs that affect business operations and inhibit

involvement in value chains. This is a policy prescription implying that the design process of

such policies ought to be open with the private sector and civil society providing inputs mostly

on how to reduces the costs of adjustment and the gains for the targeted groups. The impact

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evaluation of the MTE using panel surveys monitors the effectiveness on poverty reduction. For

that reason, it is imperative that all the goals set by various government agencies be harmonized.

Reducing subsidies to cotton in developed countries, improving the current tariff preferences for

the entitled poor countries, and increasing the possibilities of temporary movement across

borders would contribute much more for the overall improvement of the trade liberalization

processes and the poor population

5.2. Trade and the Sustainable Development Goals (SDGs)

The blueprint for the promotion of international development till 2030 is a set of 17 Sustainable

Development Goals (SDGs) that will cover the spheres of the economy, society, and the

environment. The global trade must grow, and the trade related policies must align with the given

SDGs, if poverty is to be eradicated. Identifying and developind the role of trade integration in

productivity, employment opportunities and income growth when accompanied by right policies

as a result of trade reforms. Trade liberalisation on the other hand has not automatically driven a

‘gains from trade dividend-for-the-masses’ requiring complementary policies to ensure that the

benefits translate to the bottom-most strata of society. SDG 1 goals with the focus on eliminating

poverty through increasing income level as well as access to the necessary services. Experience

has shown that most poverty is inherent in the rural areas, and therefore any trade liberalisation

in the agricultural sector under the SDG must be followed by investments in transportation,

energy, storage and information systems, this helps foster smallholder farmers to engage in

regional value systems and export products. Trade policies that include tariffs and other nontariff

measures employed by large economies on imports of agricultural products also limit the

incomes of rural farmers in developing countries and therefore derail the achievement of SDG 1.

The second Sustainable Development Goal is focused on the elimination of hunger through

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efficient agricultural practices and food systems. Trade can also help meet demand when food

production is insufficient in a certain country. However, poor countries cannot rely on food

imports as the main source of food supply; this calls for enhancement of productivity growth in

staple crops. Trade policies should therefore combine a focus on achieving domestic food

sufficiency with the competitiveness of exports. It should also be noted that despite the key

position of women in smallholder agriculture, they are more restricted. This means that trade

reforms need to facilitate women’s participation in export production by providing them with

inputs technology and or financial services. Enhancement of gender perspectives on agricultural

trade policies contributes to the attainment of SDG 5 that tackles gender equality and SDG 2 that

focuses on zero hunger.

5.3. Climate change, trade and rural resilience

Local interests especially for rural areas are in direct contact with the trade policies and

agreements and how they address or fail to address climate change. Of the people living in rural

areas, especially from the poor countries, they source their incomes and sustenance from natural

resource. But climate change risks crop and livestock yields, fish resources, and water – all

necessary for supporting rural income as well as well as poverty reduction . Hence, the trade

policies designed for poverty reduction have to consider the ways of enhancing climate resilience

among the rural poor. For example, measures such as policies that encourage farmers to cultivate

alternative crops, adoption of appropriate technology and farm implements, insurance products

based on climatic conditions, and advance warning of adverse weather conditions can act as

mitigation mechanisms. It may also encourage trade by offering subsidies for insurance of such

resilience-enhancing projects, lower tariffs for the countries adopting them and better access to

the adaptation financing. It would also contain damaging tendencies that contribute to climate

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risks –for instance,via carbon taxes on highly emitting exports, or higher export taxes on

unsustainable goods. Also, easing of barriers and enabling easier exports and imports of

technologies and services that enable low carbon development and access to renewable energy

also has an indirect way of enhancing the capacity of rural communities to cope with the impacts

of climate change. Yet, while devising such policies, the challenge is to find ways of pursuing

trade-led economic development, and, at the same time, ensuring that resources are not exploited

in a manner that harms the environment, which is a feature of many rural developing regions

with ecologically sensitive land. The rural poor are even more exposed to climate change impacts

in the long term, when natural capital is used in the short term to compensate for the losses.

Hence, trade agreements should have clear provisions on environmental governance and

conservation before entering into other liberalization processes, especially for crucial sectors

such as agriculture, forestry and fishing which affect the climate vulnerability of rural people.

This means that there is need for civil society organizations and farmer groups to demand for

trade relations that take the trade climate resilience into consideration in order to ensure that the

gains and shocks from climate change are fairly distributed to ensure that poor farmers in the

rural areas benefit from trade liberalization. Thus, it should be more about just rural transitions

involving a diversification of rural economies towards climate-compatible ones together with

climate-smart services delivery instead of only trade-driven poverty eradication, this requires

involvement in areas beyond trade/environment but also agriculture, infrastructure/technology, as

well as humanitarian assistance within multilateral policy making and policy commitment

processes.

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5.4. Social protection measures in trade-affected rural areas

Free trade is also socially destructive in the same way for the poor and other socially vulnerable

groups in the rural areas who cannot adapt to the new market conditions because they lack the

skills or capital to do so and this is why there is need for compensatory policies to be put in place

for these groups. Most of the rural families depend on agriculture as the main source of income

and food, and they are affected when the flood of imported products affects the local production

of crops. Such situations may lead to impoverishment of families without any governmental

social support among which loss of livelihoods is a critical point. Such social protection

strategies that can be employed when trade affects the incomes of rural people include cash

transfers, public works, and subsidies that maintain the incomes of rural entities in the short term,

these seek to contain the proliferation of income inequality arising from trade by sharing the

benefits more equitably. For instance, in 2006 India launched the National Rural Employment

Guarantee Scheme to guarantee employment for rural households at 25$ per day for 100 days per

year provided by funding projects chosen by village councils. A somewhat similar mechanism of

operation, the program acts as a social safety net for the rural poor, as well as assisting in the

enhancement of communal and agricultural production capacity. To support farmers in need

more overtly, TAAs in the US incorporate skill redevelopment, financial assistance to support

income, and other possible programs to assist farmers to shift to other income-generating

undertakings that do not involve farming. These active labor market programs are of particular

use as they offer a safety net for which people can engage in other means of living. As for the

policy recommendation, according to the scholar, the financial resources from the increases in

trade should be utilized for the maintenance of these initiatives to protect capabilities and

incomes for the rural people affected by liberalization. There are also similar investments in

healthcare, education, and rural development as these areas are necessary to address the burdens

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and unlock economic growth. When it comes to the trade policy, there is no reason why the trade

should not bring about a positive change on the rural economy. Of all the different forms of

PMAs, it is specifically the Preferential Market Access initiatives that seek to promote

agricultural development in the LMN. For instance, the Everything But Arms which grants least

developed nations duty-free preferential access to EU markets for all products except weapons, it

enables rural sectors in the impoverished nations to market their products world over. With the

right transition policies, the increase in trade relationships can lead to the enhancement of

agricultural market opportunities, farmers’ income, and poverty reduction in rural regions in the

long-term. Overall, it becomes clear that helping the affected vulnerable groups to make positive

adjustment to avoid suffering disproportionate costs is a policy direction that should be pursued

to ensure that trade liberalization does not deepen poverty but on the contrary leads to poverty’s

reduction.

5.5. Policy coherence for trade, agriculture and rural development

Better coherence across trade, agriculture and rural development policies enhance the poverty

reduction effects of trade policies besides fostering sustainable rural livelihoods, it is often the

case where international trade liberalization-oriented rules are in conflict with domestic policies

oriented toward sustainable support of small farmers and rural population. Closing these gaps

entail, therefore, coordinating trade opening and growth plans with more targeted investments,

safety nets or policy measures that would allow the beneficiaries in the rural areas to capture the

benefits of the opening up of trade rather than be captured by it. For instance, trade liberalization

that seeks to liberalize markets in the developing countries in areas such as agrifood products

leads to eradicating prices and the ability to compete for small scale farmers. Such related

policies may include increased extension services, development of rural infrastructure, and trade

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adjustment assistance which can reduce these shocks and assists farmers to enter new and better

markets. Moral: It appears that achieving the right policy mix is also critical for the appropriate

balance of growth and sustainability goals. Market-led agriculture that increases food production

but at the same time leads to the loss of soil fertility or other productive resources might help the

poor in the short run but hurt them in the long run. Applying these technologies such as

sustainable land, water and pest management systems in trade related agricultural development

programs and policies can encourage sustainable and climate smart development. In sum, the

poverty reduction and sustainability advantages of increased trade openness are highly

contingent on pro-trade ‘flanking measures’ that ensure the broad dispersal and efficient

utilization of the ensuing income windfalls, aversion of adverse employment effects, prudent

stewardship of natural resource endowments, and enhancement of resilience. It is noteworthy

that policy coherence is about forging interconnectivity between trade and development domains

and constructing comprehensive, place-based, and people-oriented strategies rooted in rural

settings. It entails the application of trade not as an end but as a tool, and the design of rules,

cooperation and platforms in a way that generates economic potential to develop capacities, open

access, increase earnings, raise food security, and conserve bio-physical assets crucial for the

wellbeing of the rural poor.

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