TRADE LIBERALIZATION AND CHILDREN Understanding and coping with children vulnerabilities

1. TRADE LIBERALIZATION AND CHILDRENUnderstanding and coping with children vulnerabilities Javier Escobal Group for the Analysis of Development

2. Trade Liberalization – Growth and Poverty • The development community tends to agree that the long-term effect of trade liberalization is positive. • It is reasonable to expect that increased trade will generate growth and employment in an economy. However, it is also expected that the effects of trade liberalization will not be equal for all sectors: there will be winners and losers and poorest segments of a society may not have the opportunity for taking advantage of trade liberalization as an engine of growth without appropriate complementary policies. • Trade liberalization will affect children’s welfare and poverty status and will tend to have a long-term effect on their development over their life-course, generating intergenerational transfers of poverty or wellbeing

3. Long Versus Short Run Effects • Trade liberalization has both direct and indirect effects in child wellbeing. Some of these channels operate in the long run while others may play a role in the short run. • Impact on domestic prices of goods and services, and the impact of these price changes (consumption good prices and hourly labor income) on both household consumption and household income • effect on tax revenues which may affect the supply of goods and services provided by the Government. • Depending on the intra-household distribution of power and resources, these changes may affect children time allocation between work, school and play; may affect their access to health services and may affect its consumption of good and services.

4. How Trade Liberalization Affect Children Welfare • Most researched topic: the impact of trade liberalization on child labor • The effect is ambiguous: depends on the changes in the opportunity costs of children’s time and whether there is an income effect on child labor brought about by changes in employment or wages • Short-term impact of trade liberalization over child labor and schooling decisions is critically mediated by two key factors: whether or not the household faces credit constraints and whether or not female labor participation increases due to trade liberalization.

5. Young Lives Evidence • Young Lives, a long-term international research project investigating the changing nature of childhood poverty recording changes in child poverty over a 15 year period, provides a unique opportunity the effects of trade liberalization on children wellbeing. YL is a long-term international research project, investigating the changing nature of child poverty in Ethiopia, India, Peru and Vietnam • Aims • To produce good quality long-term quantitative and qualitative data about the changing lives of children living in poverty. • To develop a replicable methodology for monitoring child welfare over the long-term. • To trace linkages between key policy changes and child welfare. • To ensure the information produced is used to inform policy and action for reducing child poverty.

6. Young Lives • Young Lives has been running since 2001 and has completed two rounds of child and household surveys in each of the study countries. (12,000 children in 4 countries over 15 years) • The partners in this project are: Oxford University, Save the Children UK and research institutions in Ethiopia, India, Peru and Vietnam. Project is mainly funded by DFID, UK • The data collected to date and in forthcoming surveys is based upon a broad understanding of child welfare, and includes information on child development in addition to the more conventional nutritional and education measures. It includes assessments of access to key services, work patterns and social relationships as well as income and wealth indicators. • A database containing the survey data is being created in a publicly available archive system • http://www.esds.ac.uk/aandp/access/online_form.asp

7. Young Lives: Trade Liberalization and Child Poverty • The project has studied the relationship between trade liberalization and child welfare for two countries that are moving towards trade liberalization and for which the project is collecting longitudinal data • For Peru: the likely impact of a Free Trade Agreement (FTA) between this country and the United States. • For Vietnam: the impacts of increased trade liberalization occurring since the access of this country to the World Trade Organization in November 2006

8. YL: Evidence from Peru • School attendance and time children have available for studying and playing (as opposed to time assigned to work) as indicators of skills formation. • Employability of the mother or caregiver which may increase the burden of children (especially girls) in household chores and in taking care of their younger siblings. • Young Lives research found that boys and girls, specially those living in Peruvian rural areas may be vulnerable, and may be exposed to reduced school attendance if, after the reduction of tariffs that the FTA may bring about, complementary policies are not put in placed.

9. YL: Evidence from Vietnam • The study looked at both the quantitative analysis of the Young Lives Vietnam longitudinal survey and a in depth qualitative analysis based on two key sectors that are expected to affected by trade liberalization (aquaculture and sugarcane sectors). • The study looked at child work, educational attainment and health status. Girls as well as children from ethnic minority group households, female-headed households, households with low levels of maternal education, impoverished households that are susceptible to economic shocks, as well as communes with a high concentration of poverty are likely to be the most vulnerable in the context of greater economic liberalization.

10. Key Messages and Policy implications • Effects of trade liberalization are difficult to trace • Avoid moving from “picking the winners” to “picking the losers” • YL shows that children are vulnerable to the negative effects of trade liberalization. Policy options that may be considered to deal with this vulnerability are :  • Conditional (or unconditional) cash transfers in order to provide the household with cash to face liquidity constraints coming from the shock they may be faring due to trade liberalization. • HOWEVER there is a need to revise: Targeting needs to take into account not only information on structural poverty but some indicator of vulnerability. (In general Safety nets are not well design on this respect)

11. Key Messages and Policy implications • Contingency funds separated in order to be allocated whenever a negative event occurs. In this way “losers “are identified and appropriately compensated ex-post. • with well-designed triggers • Improving the capabilities of the poor in order to allow them to cope with uncertainty. • Example: An increase in supply of child care centers may help reduce the probability that children take over the domestic chores that were previously done by those adults that may enter the labor market thanks to the opportunities that trade liberalization may bring about.

12. Thank You