Trade is a key means to fight poverty. It allows countries to import ideas, technologies, and know-how from the rest of the world. Trade integration is therefore vital to sustained economic growth.
However, many developing countries face many supply-side constraints, such as poor trade-related institutions, infrastructure, and logistics that impede their integration into the global economy.
The Bank aims to make the world trading system more supportive of development and to help countries benefit from increased globalization by (a) supporting the successful conclusion of the Doha round; (b) emphasizing trade and competitiveness at the core of national development strategies; and (c) promoting trade-related reforms through effective Aid for Trade programs.
To fulfill these objectives, the Bank has scaled up support for trade-related reform through analytical and advisory services, sustained policy dialogue, financial assistance, technical assistance, and capacity building. In particular, trade-related Bank lending (concessional and non-concessional) increased from US$560 million in fiscal year (FY 2003 to US$3.4 billion in FY 2009, driven by trade facilitation, regional integration, and export development and competitiveness projects. Since 2001, the International Development Association (IDA)’s efforts in trade reform have centered on: building and improving the efficiency of trade infrastructure (e.g., ports and roads); making services more efficient through liberalization, universal access, and better business regulation; promoting exports through diversification and policies to reduce trading costs; and improving customs and trade facilitation to move goods across borders more rapidly and cost-effectively.
What are the effects of the global economic crisis on trade and developing countries?
The current crisis adversely affects countries worldwide, but developing countries face even more dire consequences because of their initial, often fragile, conditions. The global recession has caused a sharp drop in trade volume worldwide but the decline appears to be touching an end. Global GDP is projected to decline by 3 percent in 2009. Developing countries face dire consequences, with global demand, foreign direct investment (FDI) and remittances dropping, causing growth in low-income countries to decrease even further by 5 percent this year.
World merchandise and services trade is expected to drop by 10 percent in 2009. A modest trade recovery is projected for 2010, with a rebound most likely be driven by developing countries, especially Asian countries.
How has the World Bank responded to the financial crisis?
IDA and other World Bank Group programs are working to help developing countries cope with the effects of the crisis and position themselves to take advantage of the eventual global economic recovery. The Bank has called for developed countries to pledge the equivalent of 0.7 percent of their stimulus packages, or as much as they can in additional money, to a global vulnerability fund to help developing countries that cannot afford bailouts and deficits.
The World Bank Group has also collaborated with public and private sector entities to boost trade financing and monitor trade policy developments. The World Bank Group has put in place trade finance programs that total US$4 billion through the Global Trade Finance Program (GTFP) and the Global Trade Liquidity Program (GTLP). Together with its official and private partners, the GTLP is expected to contribute up to $50 billion in short-term trade finance during a three-year period.
Along with partners, the World Bank has also launched the Global Trade Alert and the Global Antidumping Database to monitor trade measures during the crisis. The Global Trade Alert provides real-time monitoring of trade-distorting measures initiated during the crisis that may impact other trading partners and specific sectors. The Global Antidumping Database provides up-to-date information on the use of specific trade remedies, including antidumping, safeguards, and countervailing duties.
Aid for Trade is a World Bank priority to help integrate developing countries into the world economy. It is doing so by assisting countries to improve their trade capabilities, such as trade infrastructure—the building of ports and roads that connect production areas to markets—by funding training and supporting capacity-building and institutional reforms, such as customs improvements or improvements in the ability to meet international standards.
The Trade Facilitation Facility (TFF) was launched in April 2009 to assist developing countries’ efforts to improve trade-related infrastructure, institutions, services, procedures, and regulatory regimes.
