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Trade


  • What is the role of trade in development?
  • Trade is a key means to fight poverty and achieve the Millennium Development Goals. It allows countries to import ideas and technologies, realize comparative advantage and economy of scale, and foster competition and innovation to increase productivity and achieve higher sustainable employment and economic growth.

    Countries open to international trade have tended to provide more opportunities to their population and to grow faster. As noted by the Commission on Growth and Development, all developing countries that have experienced sustained periods of high economic growth prospered by being open to global markets. However, a number of developing countries continue to face obstacles in accessing global markets due to limited supply (infrastructure) capacity and unfavorable business and investment climates.

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  • What are the key areas of trade that the World Bank focuses on?
  • The World Bank Group (WBG) trade programs aim to (a) promote a multilateral trading system that is more supportive of development; (b) make trade competitiveness a centerpiece of countries’ development strategies; and (c) support trade and trade facilitation reforms through effective “Aid for Trade” programs.

    To achieve these objectives, the WBG launched a new trade strategy in 2011 following consultations with a diverse group of stakeholders. The new strategy, Leveraging Trade for Development and Inclusive Growth, will target four priority areas: trade competitiveness and diversification; trade facilitation, transport logistics and trade finance; support for market access and international trade cooperation; and managing shocks and promoting greater inclusion.

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  • What is the World Bank doing on trade?
  • The WBG supports trade-related reforms in developing countries through analytical and advisory services, financial assistance, technical assistance, and capacity building activities.

    • IDA and other WBG programs have worked to help developing countries cope with the effects of the crisis and position themselves to take advantage of the global economic recovery. In fiscal year 2011 (FY11), the World Bank provided a total of $2.6 billion in trade-related lending to help developing countries achieve their trade-reform objectives. Lending in FY11 represents nearly a five-fold increase from FY03 levels, when lending amounted to $566 million, with the share of trade-related lending in total Bank lending also showing a rising trend in recent years, from an average of two percent for FY02-FY03 to an average of about six percent for FY09-FY11. Overall Bank lending for FY11 reached $43 billion.
    • Trade facilitation and market access continues to account for the bulk of the trade-related portfolio. Trade-related projects in the areas of trade facilitation and market access comprised almost half of the trade portfolio in FY10, followed by projects with a focus on regional integration, export development and competition, and technology diffusion. The WBG’s Trade Facilitation Facility supports improvements in trade facilitation systems that reduce developing countries’ trade costs and improve competitiveness. As of January 2011, 29 projects with a total budget allocation of $20 million were approved, benefiting mainly African countries.
    • The WBG highlighted the importance of trade finance during the 2008-09 economic crisis. As of January 2011, through the Global Trade Finance Program and the Global Trade Liquidity Program, the International Finance Corporation, the Bank’s private sector arm, has supported almost $22 billion of trade transactions. In addition, the WBG is monitoring the effects of developments in agricultural markets and rising food prices.
    • To better monitor trade policy developments, the WBG has continued to support the Global Trade Alert, a joint venture of think tanks around the world, and maintains the Temporary Trade Barriers Database.
    • The Bank also introduced a regional trade integration website featuringtheGlobal Preferential Trade Agreements Database, whichprovides detailed information on free trade agreements around the world. In cooperation with other international development partners, the World Bank launched the Transparency in Trade Initiative to provide free and easy access to data on country-specific trade policies, such as tariffs, non-tariff measures, and services regulations. In addition, during the fall of 2010, the WBG revamped World Integrated Trade Solutions, a trade analysis software tool that allows users to access a global trade database.

     

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  • Why is trade facilitation important?
  • For all sectors, trade facilitation is a central element of trade integration. Customs and border management modernization, upgrades in trade-related infrastructure, inland transit, corridor management, logistics services, information systems, and port efficiency facilitate on-time trade in goods and services at lower transaction costs.

    In general, research findings point to the need for a focus on how developing countries can diversify trade, how to connect remote areas and lagging regions to world markets, which types of trade facilitation are most effective, how best to design regional and multilateral trade agreements, and on how to increase formal-sector employment of the poor and women in the production of internationally traded goods and services.

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Contact: Alejandra Viveros, (202) 473-4306, aviveros@worldbank.org


Updated: August 2011




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