Markets and trade for poverty reduction and rural development

The Millennium Development Goals, trade and markets

The United Nations Millennium Declaration considers trade to be an important engine of growth, both as an earner of foreign exchange, and through its multiplier effects as a generator of income and employment. It recognizes that the main beneficiaries of trade liberalization have been the industrialized countries; that developing countries’ products continue to face significant impediments in accessing rich countries’ markets; and that it is precisely those basic products – mainly, but not exclusively, agricultural – in which developing countries are most competitive that carry the highest protection in the most advanced countries.

The Millennium Declaration thus calls, among the 18 targets associated with the Millennium Development Goals (MDGs), for “develop(ing) further an open trading and financial system that is rule-based, predictable and non-discriminatory. This includes a commitment to good governance, development and poverty reduction – nationally and internationally.” Among the specific strategies that it proposes for moving forward are:

ensuring that developed nations fully comply with the commitments they made under the Uruguay Round of Multilateral Trade Negotiations to improve market access for products from developing countries;
ensuring significant improvement in market access in developed countries for agricultural products from developing countries; and
capacity-building and technical assistance for trade negotiations and dispute settlements.

Who is doing what at a glance

The importance of markets for rural poor people

Rural households have diverse livelihood strategies, encompassing a range of activities. For most, agriculture is a key element of their strategy; however, many are also engaged in non-agricultural activities, including microenterprises (agro-processing, trading and other off-farm occupations). Through these various activities, households seek both to ensure their food requirements and to generate the income they require to satisfy their immediate consumption needs, social purposes and investments.

Interacting with agricultural markets is thus an important aspect of the livelihood strategies of many rural households, rich and poor alike. Markets are where, as producers, they buy their agricultural inputs and sell their products; and where, as consumers, they use their income from the sale of crops, or from their non-agricultural activities, to buy their food requirements and consumption goods. Virtually all households in rural areas are, by preference, both producers and consumers, buyers and sellers; and many sell agricultural produce and buy their food at different times of year. However, rural households that, for one reason or another, are unable to interact with these markets are prevented from adopting these diverse livelihood strategies; and indeed, in many parts of the world, rural poor people often say that one reason they cannot improve their living standards is that they face difficulties in accessing markets.

For these reasons, improved market access is not an issue of consequence only to better-off producers, and it is not relevant only to cash crop, rather than food crop, production. It is of importance to all rural households, and assisting rural poor people in improving their access to markets must be a critical element of any strategy to enable them to enhance their food security and increase their incomes.

If it is true that markets, and improved market access, are of critical and immediate importance to rural poor households, it is also evident that they are a prerequisite for enhancing agriculture-based economic growth and increasing rural incomes in the medium term. Rural incomes will not be substantially increased by exclusive emphasis on subsistence food crop production; rather, more market-oriented production systems are needed. These require the intensification of agricultural production systems, increased commercialization and specialization in higher-value crops. And these must be built upon the establishment of efficient and well-functioning markets and trade systems – ones that keep transaction costs low, minimize risk and extend information to all players, and that do not either exclude, or work contrary to the interests of, the poor – particularly those living in areas of marginal productivity and weak infrastructure.

Source: Promoting market access for the rural poor in order to achieve the Millennium Development Goals, IFAD (2003)

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