[From Abstrat] On June 19, 2006, policy experts met at a conference on “Trade and Poverty in Latin America and the Caribbean”, convened by the Inter-American Development Bank (IDB) and supported by Trade and Poverty Trust Fund recently established with the financial contribution of the UK Department for International Development (DFID). Participants were asked to identify knowledge gaps about the poverty impact of trade integration, and to specify the elements of a work program aimed at addressing those gaps.

The conference called into question an important piece of conventional economic wisdom: that economic integration has clear and positive effects on poverty reduction. One participant aptly summarized the event’s central point by arguing that the axiom that trade inevitably leads to growth and poverty reduction “is a precarious base for the design of public policies, given number and complexity of other variables that affect outcomes.”

It has always been understood that there will be winners and losers from trade reform, and that both the level and distribution of benefits are conditioned on complementary domestic policies and the quality of institutions. But a key message from core presentations of conference was more urgent: if a country is not prepared for the challenges of global trade and investment, losers from integration may outnumber winners, even in the long term, and net impacts may be Regressive.

While conference participants presented decidedly mixed outcomes from trade, they agreed that economic integration can be an important policy for promoting growth and poverty reduction. The conference thus presented several recommendations for the development community. First, empirical work should go beyond aggregate impacts on trade. It should employ more case studies and scale down the unit of analysis to examine sectoral and even firm-specific impacts. Research should focus increasingly on political economy pressures, analyze the provisions of actual (or proposed) free trade agreements, rather than abstract notions of free trade. Second, research on production should focus on administrative and commercial obstacles to gaining access to foreign markets, as well as the domestic institutional conditions of economic competitiveness. Finally, research on trade-related adjustment should focus on policy measures that facilitate job acquisition for those displaced by foreign competition.