CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Today, the issue of global poverty remains one of the most urgent and critical challenges facing our world. Despite ongoing efforts and contributions to alleviate poverty, overcoming this issue has proven to be extremely difficult. Unfortunately, despite progress made in the previous generation (World Bank, 2022), setbacks have occurred, reversing the achievements in poverty reduction. According to WHO (2022), the sudden emergence of the coronavirus pandemic has further exacerbated the situation, pushing the poverty rate to its highest levels. Consequently, combating poverty has become one of the most urgent global priorities today (Roser and Ortiz-Ospina, 2013).
The issue of poverty is critical due to the multitude of hardships associated with it. Adults, youth, children, and even newborns are all affected by poor living standards, which can have lifelong consequences. Living in impoverished conditions often means lacking access to basic necessities such as food, nutrition, hygiene, and shelter. These circumstances create an uncertain future and strip individuals of their basic human rights. Moreover, poverty limits opportunities for stable income, hindering social mobility and employment prospects for families. Additionally, without access to education and limited educational achievements, families are unable to create better circumstances for their children's future or provide them with essential needs such as food, shelter, and education, resulting in instability (World Bank, 2022). The adverse effects of living in poverty, including psychological and physical harm, predominantly affect children who are deprived of the basic necessities that every child deserves (APA, 2009).
The global objective of eradicating poverty has been pursued for many years, with notable progress and the establishment of new goals. In September 2015, a momentous event took place when the United Nations General Assembly approved the 2030 development agenda, encompassing a comprehensive set of 17 ambitious sustainable development goals (SDGs) accompanied by 169 targets. This significant milestone reflects the global commitment to tackle various socio-economic and environmental challenges for a better future. These goals are action-oriented, applicable worldwide, and address economic, social, and environmental aspects of sustainable development, acknowledging their interconnectedness (Bellmann and Tipping, 2015).
The primary goal among these SDGs is to "end poverty in all its forms everywhere," aligning with objectives such as eliminating hunger, promoting better health and well-being, ensuring quality education, facilitating access to water and sanitation, reducing inequality, fostering economic growth, and preserving nature (Chau, 2022). This demonstrates the global scale of the challenge and emphasizes its significance for overall development.
Economists have been extensively studying the factors that contribute to varying rates of growth and levels of prosperity among different countries. One such factor is trade. However, although international trade can generally promote economic growth, there is no assurance that its advantages will be distributed equally among trading partners (Obadan and Okojie, 2012). Hence, international trade refers to the complete autonomy of countries in terms of the production and consumption of goods and services (Gbanador, 2005).
In the current uncertain economic climate, international trade has gained significant importance and prominence as a crucial economic activity between countries. The exchange of goods and services across borders has emerged as a means for countries to attain and foster economic self-sufficiency, while also serving as a platform to convert natural resources such as crude oil, gold, and diamonds into economic wealth. The wealth generated through this process is utilized by governments to provide essential infrastructure, thereby improving the living standards of the population and ultimately driving economic growth and development (Owolabi-Merus et al., 2015).
International trade plays a crucial role in fostering economic growth and development, especially in developing countries like those in Africa. It creates a positive ripple effect by providing valuable opportunities for local industries to broaden their horizons and tap into the international market. This expansion leads to potential market growth and increased profits, fostering the growth and development of local industries and creating employment opportunities for the growing population (Owolabi-Merus et al., 2015).
While governments have already recognized the broad avenues through which trade policy can contribute to the 2030 Development Agenda, the implementation stage requires a more detailed and specific approach. Given the importance of sustainable development, the FfD document acknowledges the need for the General Council of the World Trade Organization (WTO) to thoroughly assess the potential contributions of the WTO in this regard.
The significance of international trade in driving economic progress cannot be overstated. Both classical and neoclassical financial analysts agree that international trade serves as the lifeline of developed nations. In the past three centuries, the world economy has become highly interconnected through globalization, and international trade plays a central role in shaping the development of a modern global economy. Structural changes within a country's economy can be observed as a result of the impact of international trade. By allocating resources to countries with a comparative advantage in production, international trade enhances the efficient production of goods and services (Frankel and Romer, 1999).
In today's world, international trade has become an inevitable activity driven by the growing global demand for energy. This reliance on natural resources has led to the recognition of charcoal as a crucial fuel source on a global scale. The total value of wood charcoal exported from all countries reached an impressive $1.44 billion in 2021, showing an average increase of 32.8% compared to $1.1 billion in 2017. Moreover, the value of globally exported charcoal grew by 8.1% in comparison to $1.33 billion in 2020 (Workman, 2022).
In 2021, Asia emerged as the leading continent in terms of charcoal exports, with suppliers from the region exporting charcoal valued at $738.2 million, accounting for more than half (51.3%) of the global total. European exporters ranked second, contributing 27.3% to the worldwide charcoal shipments. Latin America, excluding Mexico but including the Caribbean, accounted for 8.7% of global charcoal exports. Africa, North America, and Oceania represented smaller shares, contributing 7.6%, 5%, and 0.1% respectively, with Australia and Fiji being the main exporters in Oceania.
The export of charcoal to global markets serves as a vital catalyst in generating income, fostering employment opportunities, and holds the potential to enhance living standards within the communities involved. Based on this premise, this study aims to investigate the impact of international trade, specifically focusing on AVS charcoal export, on poverty alleviation.
1.2 Statement of the Problem
Previous economic research has reached a consensus that trade has a sustainable impact on economic growth, but it also acknowledges the existence of both positive and negative consequences. Scholars, including Berg and Krueger (2002, as cited in Brooks, 2003), have put forth arguments supporting the notion that, on average, trade liberalization and increased trade openness have a positive impact on poverty reduction, particularly in comparison to the rest of the population.
However, it is essential to take into account the viewpoints of critics who argue that along with increased trade flows, liberalization, and positive expansion, there are associated risks and uncertainties. These risks include potential disruptions to social stability and adverse social conditions that the poorest members of society may experience (Brooks, 2003). These contrasting perspectives highlight the intricate nature of international trade and the potential trade-offs involved in poverty alleviation efforts.
This highlights the need to examine the specific case of AVS charcoal exports to assess whether international trade in this sector has contributed to poverty reduction or exacerbated existing challenges.
1.3 Aim of the Study
The aim of this study is to examine the impact of AVS charcoal exports, as a case study of international trade, on poverty alleviation.
1.4 Objectives of the Study:
The specific objectives of this study are as follows:
- To assess the impact of AVS charcoal exports on income generation and job creation, with the aim of determining its contribution to poverty reduction.
- To analyze changes in household consumption and expenditure patterns resulting from AVS charcoal exports to evaluate their influence on poverty levels.
- To examine the extent to which AVS charcoal exports have improved social well-being, reduced disparities, and consequently alleviated poverty in the exporting communities.
- To determine whether AVS charcoal exports have facilitated the accumulation of productive assets, land, housing, or other forms of wealth, indicating a reduction in poverty levels.
- To evaluate the environmental sustainability of AVS charcoal exports, ensuring they do not exacerbate poverty by depleting natural resources and negatively impacting local communities' livelihoods in the long term.
1.5 Research Questions
- Have AVS charcoal exports contributed to increased income levels and job creation, leading to poverty reduction?
- What are the changes observed in household consumption and expenditure patterns resulting from AVS charcoal exports, and how have they influenced poverty levels?
- To what extent have AVS charcoal exports improved social well-being, reduced disparities, and contributed to poverty alleviation in the exporting communities?
- Have AVS charcoal exports facilitated the creation and accumulation of productive assets, land, housing, or other forms of wealth, indicating a reduction in poverty levels?
- Are AVS charcoal exports environmentally sustainable, ensuring they do not exacerbate poverty in the long term by depleting natural resources and negatively impacting the livelihoods of local communities?
1.6 Research Hypothesis
H1: AVS charcoal exports have not significantly contributed to increased income levels and job creation, leading to poverty reduction.
H2: There are no significant changes in household consumption and expenditure patterns resulting from AVS charcoal exports that influence poverty levels.
H3: AVS charcoal exports have not significantly improved social well-being, reduced disparities, and contributed to poverty alleviation in the exporting communities.
H4: AVS charcoal exports have not facilitated the creation and accumulation of productive assets, land, housing, or other forms of wealth, indicating a reduction in poverty levels.
H5: AVS charcoal exports are not environmentally sustainable and may exacerbate poverty in the long term by depleting natural resources and negatively impacting the livelihoods of local communities.
1.7 Justification of the Study
International trade has become an integral part of the global economy, and understanding its impact on poverty alleviation is crucial for policymakers, researchers, and stakeholders. By focusing on AVS charcoal exports as a case study, this research aims to contribute to the existing body of knowledge on the relationship between international trade and poverty reduction.
By examining multiple dimensions, including income, consumption, social well-being, wealth accumulation, and environmental sustainability, this study aims to provide a comprehensive understanding of how AVS charcoal exports can contribute to poverty alleviation.
1.8 Scope of the Study
The scope of this study focuses on the impact of AVS charcoal exports on poverty reduction. It includes examining the economic, social, and environmental implications of AVS charcoal exports and their potential contributions to poverty alleviation.
