At a Glance 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 supply-side constraints, such as poor trade-related institutions, infrastructure, and logistics that impede their integration into the global economy.The World Bank’s trade strategy aims to (a) promote an international trading system that is more supportive of development; (b) make trade and competitiveness a centerpiece of countries’ development strategies; and (c) support trade and competitiveness reform through effective Aid for Trade programs.For decades, the International Development Association (IDA), the World Bank’s fund for the poor, has helped developing countries gain access to global markets for goods and services through advisory services and interest-free grants that have supported trade policy reforms and improvements in domestic trade infrastructure.In times of crisis, resisting protectionism and preserving a rules-based multilateral trading system is essential to keeping markets open. To help mitigate the impact of the crisis, the World Bank Group is assisting developing countries through funding for trade reform, trade facilitation, and trade finance, as well as monitoring of trade policies.
Why Trade MattersCountries open to international trade have tended to be more competitive and 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, including emerging economies’ markets, and in reaping the benefits of trade opportunities due to limited supply (infrastructure) capacity and unfavorable business and investment climates. Bank research and field experience have helped identify five key areas for trade reform: · Agricultural Trade could yield global welfare gains but is currently distorted and unbalanced. While agricultural producers in developed countries received subsidies that total US$265 billion in 2008, which is 3 times the amount of development assistance in 2007, 70 percent of developing countries’ population still resides in rural areas and relies on subsistence farming. · Services Trade has the potential to deliver gains for development. Developing countries can gain from increased exports and improved quality of key service industries. · Labor-intensive manufacturing can serve as dynamic market-entry strategy. However, developing countries’ exports may face obstacles in foreign markets due to high tariffs or other trade barriers that discourage value-added manufacturing in developing countries. · Trade facilitation is a central element of trade development. Customs modernization, upgrades in trade-related infrastructure, inland transit, logistics services, information systems, and port efficiency facilitate on-time trade in goods and services at lower transaction costs. · Standards and technical regulations are important considerations for export competiveness. The ability to conform to internationally recognized standards is increasingly important for developing country producers seeking to compete in global export markets. The World Bank and Trade for DevelopmentThe Bank’s objectives for trade are 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. · Concluding the Doha Round becomes ever more essential with the crisis. Such conclusion would strengthen the rules-based multilateral trading system, ease protectionist pressures, and provide a boost in confidence for global economic cooperation. · Integrating trade and competitiveness into countries’ development strategies involves improving incentives for private investment in tradable sectors (e.g., reforming tariff and tax policies); reducing trading costs (e.g., improving services delivery and trade facilitation); and promoting competitiveness through targeted policies (e.g., strengthening standards and export promotion). · Supporting Aid for Trade to help integrate developing countries into the global economy by addressing supply-side constraints and adjustment costs linked to trade reforms. 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. The World 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 FY 2003 to US$3.4 billion in FY09, driven by trade facilitation, regional integration, and export development and competitiveness projects. Since 2001, IDA’s efforts in trade reform have been 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. World Bank Group (WBG) Response to the Financial Crisis IDA and other WBG 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 current crisis adversely affects countries worldwide, but developing countries face even more dire consequences because of their initial, often fragile, conditions. 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, which cannot afford bailouts and deficits The WBG has also collaborated with public and private sector entities to boost trade financing and monitor trade policy developments. The WBG 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 US$50 billion in short-term trade finance during a three-year period. Along with partners, the Bank has also launched the Global Trade Alert and the Global Antidumping Database, real-time databases that monitor trade-distorting government measures initiated during the crisis that may affect other trading partners. Selective 2009 World Bank Trade Publications-The Fateful Allure of Protectionism: Taking Stock for the G8, by S. Evenett, B. Hoekman, O. Cattaneo. -Unlocking Global Opportunities: The Aid for Trade Program of the World Bank Group, the World Bank. -Managing Trade Policy during the Economic Crisis, World Bank Trade Note, by S. Saez. -Implementing Trade Facilitation - Chapter in the 2009 World Economic Forum’s Global Enabling Trade Report, by J.F. Arvis, M.A.Mustra, G.McLinden and L. Ojala. -Clusters for Competitiveness-A Practical Guide and Policy Implications for Developing Cluster Initiatives, by the World Bank. -Negotiating Trade in Services, A Practical Guide for Developing Countries, by the World Bank. Media Contact: Alejandra Viveros, (202) 473-4306, aviveros@worldbank.org Updated August 2009 |
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