differences have been largely responsible for the differences in poverty alleviation across regions. Initiatives that boost economic growth are therefore likely to be helpful in the fight against poverty, and trade liberalization is such an initiative. But cuts to subsidies and trade barriers also alter relative product prices domestically and in international markets, which in turn affect factor prices. Hence the net effect on poverty depends also on the way those price changes affect poor households’ expenditure and their earnings net of remittances. If the consumer and producer price changes (whether due to own-country reforms and/or those of other countries) are pro-poor, then they will tend to reinforce any positive growth effects of trade reform on the poor.

The effects of trade reform on global poverty can be thought of at two levels: on the income gap between developed and developing countries, and on poor households within developing countries. On the first, the CGE estimates surveyed above suggest that current developing countries, which produce just one-fifth of global GDP, would enjoy nearly half of the net present value of the global static plus dynamic gains from reducing trade barriers. Clearly that will lower substantially the income gap between developed and poorer countries on average.

How poor households _within_ developing countries are affected is more difficult to say (Winters 2002; Winters, McCulloch and McKay 2004). What is clear from Table 4 is that the agricultural policies of developed countries provide a major source of developing country gains from reform, and lowering barriers to textiles and clothing trade also is important. Both would boost the demand for unskilled labor and for farm products produced in poor countries. Since two-thirds of the world’s poor live in rural areas and, in least-developed countries, the proportion is as high as 90 percent (OECD 2003a, p. 3), and since most poor rural households are net sellers of farm labor and/or food, one would expect such reforms to reduce the number in absolute poverty. A set of analyses reported in Hertel and Winters (2006), in which GTAP and national CGE model results are carefully combined with household income and expenditure survey data for more than a dozen developing countries, tests this hypothesis and finds strong support for it in most of the country case studies considered.

The evidence on international migration’s impact on global poverty is overwhelmingly positive. That is not to say that every small developing country will have less poverty if migration is freed up, because it will depend on the skill mix of the migrants and the extent of remittances they send back, among other things; but in most cases the findings are unequivocal (World Bank 2006, Ch. 3).

# **_The environment_**

The effects of trade reform on the environment have been the focus of much theoretical and empirical analysis since the 1970s and especially in the past dozen or so years (Copland and Taylor 2003; Beghin et al. 2002). Until recently environmentalists have tended to focus mainly on the _direct_ environmental costs they perceive from trade reform, just as they have with other areas of economic change.<sup>31</sup> That approach does not acknowledge areas where the environment might have been _improved,_ albeit indirectly, as a result of trade reform (e.g., from less production by pollutive industries that were previously protected). Nor does it weigh the costs of any

> 31 See the critique by Lomborg (2001).

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