In September 2015, the United Nations general assembly adopted 17 Sustainable Development Goals (SGDs) to be achieved by 2030. Goal number one is to eradicate extreme poverty for all people everywhere and to reduce the share of people of all ages living in poverty by half. For developing economies, reducing incidence of poverty is indeed a great challenge, especially in the presence of unclear progress towards eliminating extreme poverty. This is not a standalone issue for developing economies and many depend heavily on international organisations—World Bank, Asian Development Bank, World Trade Organization (WTO), United Nations, sovereign states and other donors—for financial and technical assistance to accomplish development goals. Mobilising resources for vulnerable groups have become a top priority for global economies.
One possible solution toward achieving the 2030 extreme poverty goal is to integrate developing economies into the global trade arena. Evidence from around the world show that trade plays an important role in elevating poverty. While there is significant assistance from international communities to harness the benefits of trade expansion and globalisation, outcomes in different economies are often mixed. This is because trade liberalisation does not affect every poor household in the same way. Many country-specific factors such as location (rural or urban), skills level, trade policies and employment (industry, firm, formal or informal sector) matters. These are important areas that need further investigation to harness the full potential of trade.
It is important to understand the relationship between trade and poverty from a theoretical perspective in order to devise effective policies. A recent joint Reserve Bank of Fiji-Griffith University study provided an analysis on trade and poverty in selected Pacific Island Countries (PICs) namely, Papua New Guinea, Fiji, Samoa, Solomon Islands and Vanuatu. Data for Fiji, Samoa and Vanuatu show that extreme poverty has declined, but remains high in Papua New Guinea and Solomon Islands. Papua New Guinea and Solomon Islands are resource rich countries with fewer resources concentrated on the services sector while Fiji, Samoa and Vanuatu have had persistent trade deficits but gained from favourable net services.
This indicates that PICs can expand on services trade, possibly by employing unskilled labourers and produce goods concentrated mostly in rural areas, untwine resources for tourism-related services and encourage inclusion of more women in trade to lower poverty. The study also provides some basis for future research and highlights the need to address the lack of robust data on PIC social indicators.
Devendra Narain, and Kelera Rogoiruwai (Reserve Bank of Fiji) and Griffith Asia Institute member, Associate Professor Tarlok Singh.
This joint Reserve Bank of Fiji-Griffith University working paper is part of an ongoing extensive research capacity building program led by Griffith University for the South Pacific central banks. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors and do not necessarily represent the views of the Reserve Bank of Fiji, its board or the Government of Fiji.
Please click here to read the full working paper, “Trade and poverty: Some considerations for Pacific island countries”.