The arguments in favor of trade liberalization are well known: it promotes the efficient allocation of resources through comparative advantage, allows the dissemination of knowledge and technological progress, and encourages competition. Trade liberalization is likely to have a major impact on the lives of poor children and their families. Although this effect may be positive in the long run, the development literature recognizes that it may have a negative short-run impact in sectors that are unable to adjust rapidly enough to the new policy context. Vulnerable groups, especially children, may be affected in a variety of ways based on the effect on household livelihood and the intrahousehold distribution of power and resources. Complementary policies need to be put in place in order to cope with these vulnerabilities.
Four dimensions associated with the research on the effects of trade liberalization are relevant to the well-being of children. First, trade liberalization changes the relative profitability of economic activities, so some groups within a society may benefit while others lose—at least in the short run. Second, the effects of trade liberalization occur gradually over time. Third, trade liberalization affects not only household welfare, but also the welfare of individuals within households, so vulnerable groups may exist even in households that can benefit from trade liberalization. Fourth, trade liberalization has fiscal impacts that may generate reallocation in public spending. It is also important to note that the complex interactions of these dimensions make the welfare impact of trade liberalization difficult to trace.