Abstract:
Any policy reform will bring positive impacts as well as adverse impacts to the society, depending on the
economy and on the characteristics of the population group. The impacts of trade liberalisation, particularly
the impact of trade policies in developed countries and inequality in developing economies, is strongly
debated in the international trade and development arena. Objective of this paper is to present a
comprehensive review of the theoretical and empirical literature on the effect of agricultural trade
liberalisation on poverty, in particular, focusing in Sri Lanka.
Methods used for analysing the complex poverty impacts of trade liberalisation include partial equilibrium
models, econometric analysis, general equilibrium models, and micro/macro simulation models, which
combine macro-level simulation with micro-level household models. Agricultural trade liberalisation in
particular tends to adversely affect small farmers in developing countries while large scale farmers/producers
and the farmers from developed countries gain through agricultural trade liberalisation. Therefore,
agricultural trade liberalisation tends to supports consumers while adversely affecting rural producers.
However, country-specific studies are needed to explore the outcomes for particular groups in particular
countries. Each and every policy reform will bring positive impact as well as adverse impact to society,
depending on the economy and on the characteristics of the population group.
