AT A GLANCE: - International trade plays an important role in the fight against poverty. It creates the potential for higher economic growth and employment. However, many developing countries are still facing supply-side constraints, such as poor infrastructure, that impede their integration into the global economy. The World Bank Group has identified key areas for trade reform to achieve better trade and economic outcomes.
- The Bank’s trade strategy aims at (1) promoting an international trading system more supportive of development; (2) making trade and competitiveness a centerpiece of countries’ development strategies, and (3) supporting trade and competitiveness reform through effective Aid for Trade.
- Bank lending in the area of trade has grown fourfold in recent years, strongly driven by trade-related infrastructure in support of regional integration, export development and competitiveness, and trade facilitation. The Bank also offers training in key areas for trade reform.
- The Bank plays an important role in informing global policy dialogue on trade and development through wide dissemination of its research, studies, data, and tools .
WHY TRADE MATTERS Countries that have become more open to international trade have tended to become more competitive and to grow faster than those that have not. However, many developing countries continue to face major constraints in realizing the gains offered by increased trade because of limited supply capacity (e.g., in infrastructure) and inappropriate government policies. Furthermore, while many developing countries have stepped up efforts to address these shortcomings, they often find themselves locked out of major developed country markets, which continue to maintain high trade barriers to exports from low-income countries, particularly in the areas in which they have a competitive edge (e.g., cotton, sugar, and textiles, and clothing). Poor countries also continue to face restrictions in penetrating some emerging economies’ markets, preventing them from gaining the benefits of South-South trade and regional integration. World Bank research and field experience have helped identify key areas for tradereform: - Trade reform in agriculture could yield the largest global welfare gains . Agriculture is much more distorted than other sectors, and roughly 70 percent of poor people in developing countries live in rural areas. Support to agricultural producers (including trade-distorting subsidies and market access barriers) in developed countries adds up to about US$280 billion per year (OECD estimates, 2006) about three times the level of 2006 global overseas development assistance.
- Trade in services has the greatest potential gains for development. Services have already become the largest contributor to global economic growth, and developing countries have much to gain both in terms of increased exports and improved quality and availability of key services.
- Labor-intensive manufactures have become the most dynamic market segment for every major region, including Africa. Yet, many developing countries’ exports face considerable obstacles in foreign markets – including high tariffs and “antidevelopment” tariff structures (when tariffs increase with the degree of processing) which discourage adding value in poor countries.
- Trade facilitation is a central element of trade development . Customs modernization, trade-related infrastructure, inland transit, logistic services, information systems, and port efficiency play an important role in development. They enhance competitiveness and facilitate on-time trade in goods and services at lower transaction costs.
- Standards and technical regulations. Standards awareness and managementare increasingly important for developing country producers seeking to compete in global export markets.
WORLD BANK TRADE STRATEGY The Bank’s objectives on trade are to make the world trading system more supportive of development and to help countries benefit from increased globalization. In particular, the Bank aims to (1) support the successful conclusion of the Doha round; (2) put trade and competitiveness at the core of national development strategies; and (3) support trade-related reforms through effective Aid for Trade programs. The conclusion of a Dohaagreement along current negotiating lines would be of considerable value for WTO members. It would lock in unilateral reforms already undertaken, collapse some tariff peaks and provide new market access in both agriculture and industrial goods, eliminate all export subsidies, and place much stricter ceilings on other trade-distorting subsidies in agriculture. Such an agreement would likely include duty-and-quota-free access for most exports from Least Developed Countries (LDCs) and support the integration of the poorest countries into the global economy. Developing countries would also benefit from services liberalization and trade facilitation. Failure to reach an agreement would likely entail significant cost in terms of the potential weakening of the rules-based multilateral system. It could fuel the protectionist sentiment across the globe; place additional stress upon the WTO’s dispute settlement system; and further encourage the proliferation of preferential trade agreements (PTAs). PTAs are not a substitute for multilateral liberalization as they cannot address systemic distortions such as agricultural subsidies, and may divert more trade than they create. Integrating trade and competitiveness into countries’ development strategies is another key Bank’s endeavor. Countries can enhance their trade competitiveness by improving incentives for private investment in tradable sectors (e.g., reforms in tariffs and tax policies); reducing the costs of trading (e.g., improving key producer services and trade facilitation); and targeted policies to promote competitiveness (e.g., strengthening standards awareness and capacities, and export promotion). Aid for Trade is also a World Bank priority to help integrate developing countries into the world economy. While not formally part of the Doha negotiations, aid for trade remains an essential complement to a successful Doha Round. Aid for trade can help developing countries address supply-side constraints and manage any transitional adjustment costs associated with trade reforms. In addition, the Bank. with a group of donors, LDCs, and multilateral agencies, also participates in the Enhanced Integrated Framework, which aims to increase LDCs’ participation in the global economy by integrating trade into poverty reduction strategies. The Bank is currently expanding its trade-related efforts in the following areas: - Increased support to country programs on trade and competitiveness, including policy analysis, lending, and technical assistance.
- More resources for trade-related infrastructure.
- Expanded programs for financing trade through the Bank’s private sector arm, the International Finance Corporation (IFC).
- Expanded assistance in trade facilitation, including logistics, transport, and supply chains.
- More investments in training and capacity building for policy-makers, particularly in low-income countries.
- Greater work on tools to help countries analyze trade obstacles, as well as indicators comparing countries. These tools will be made freely available to all countries.
- Further development of knowledge on how to harness globalization for growth and overcoming poverty, and to inform key trade policy debates.
WORLD BANK TRADE ACTIVITIES 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. Trade related Bank lending – concessional and nonconcessional – has grown from about US$400 million in total commitments in Fiscal Year (FY) 2000 to about US$1.6 billion in FY07, strongly driven by trade-related infrastructure in support of regional integration, export development and competitiveness, and trade facilitation. Loans involved 42 countries and four multi-country loans, with the majority of lending going to Europe and Central Asia, and Sub-Saharan Africa. The World Bank’s training and capacity building arm, the World Bank Institute (WBI), offers trade programs (courses and workshops) that focus on key trade reform areas such as services trade, agricultural trade, regional agreements, trade and standards, trade and poverty, and export development and diversification. Examples include support to WTO (post-) accession countries (e.g., Russia, Vietnam, and China) through the integration of learning activities with advisory services and lending projects to help improve the quality of national trade liberalization. SELECTED RECENT World Bank research, studies, and indicators Updated March 2008 Media Contact: Alejandra Viveros, (202) 473-4306
aviveros@worldbank.org |
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