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Trade and Poverty Reduction

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At A Glance

 

·         Trade is a key means to fight poverty and achieve the Millennium Development Goals, specifically by improving developing country access to developed country markets, and supporting a rules-based, predictable trading system.

·         The World Bank Group’s (WBG) trade programs (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.

·         World Bank trade-related lending to help developing countries achieve their trade reform objectives is to increase to $3.0 billion in fiscal year 2013 (FY13), which substantially exceeds the FY12 lending total of $1.9 billion. This is nearly a six-fold increase from FY03 level of $566 million.  The share of trade-related lending in total Bank lending has grown from 3 percent in FY03 to a projected 7.3 percent in FY13. Overall Bank lending for FY13 is to be $41.3 billion.

·         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, targets 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.

·         The WBG is also committed to building knowledge through research, analysis, tools and data, as well as through the delivery of technical assistance.

 

Trade Matters

Countries open to international trade tend to grow faster and provide more opportunities to their population. 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.

 

Trade and Development

Our aim is to make the world trading system more supportive of development and to help countries benefit from increased globalization by:

·         Supporting the conclusion of pro-development trade agreements (multilateral, regional, and bilateral).

·         Emphasizing trade and competitiveness at the core of national development strategies.

·         Promoting trade-related reforms through effective “Aid for Trade” programs. 

 

WBG Trade-related Lending Increases

·         The WBG has worked to help developing countries cope with the effects of the 2008 global crisis and continues to support developing countries in the face of ongoing economic uncertainty, increasing trade-related lending from $1.9 billion at the end of FY12 to a projected $3.0 billion in FY13 (excluding infrastructure projects).  Sub-Saharan Africa is expected to overtake Europe and Central Asia as the largest recipient of trade-related lending in FY13, while the primary focus of activities funded by WBG trade lending will shift from trade facilitation and market access to regional integration.

·         The WBG has stepped up its support of trade finance since the 2008-2009 financial crisis. As of June 2012, the International Finance Corporation (IFC), the Bank’s private sector arm, has supported over 35,000 global trade transactions worth $45 billion, through the Global Trade Finance Program (GTFP) and the Global Trade Liquidity Program (GTLP). Launched in 2009, the GTLP was extended for another 3 years in January 2012. The IFC has already committed $100 million in the $1 billion program extension through a facility with Wells Fargo, and expects to mobilize a total of $1 billion from program partners and $2 billion from commercial banks, for a portfolio of $4 billion. The IFC also launched the Critical Commodity Finance Program (CCFP) in January 2012, a three-year risk-sharing program with global and regional banks to channel funding to support the global agricultural commodities trade and refined energy imports in developing countries. In FY12, the IFC committed $750 million through the CCFP, partnering with ING, Rabobank, and Société Générale to maintain and expand commodity trade finance for their emerging-market clients. The IFC expects to commit an additional $750 million under the program in FY13. Together, the GTLP and CCFP are seen supporting up to $36 billion in emerging-market trade finance over the next three years.

·         The WBG is assessing the potential effects of a deterioration in economic activity in Europe and other major economies on the exports of developing countries through a series of Trade Vulnerability Country Briefs, having thus far covered most countries of Europe and Central Asia and Latin American and the Caribbean.

 

Trust Fund Support

·         The second Multi-Donor Trust Fund for Trade and Development (MDTF-TD2) is an umbrella facility to fund analytical trade work across the World Bank from 2012-2015. It supports work programs developed annually by the regions, networks and other operational units of the WBG that work on trade to implement activities that fall under the four pillars of the Trade Strategy referenced above. The WBG has received $18.9 million in pledges to the MDTF-TD2 over the next three years.

·         The WBG’s Trade Facilitation Facility (TFF) supports improvements in trade facilitation systems that reduce developing countries’ trade costs and improve competitiveness. As of August 2012, 55 projects with a total budget allocation of $42.4 million have been approved, mainly benefiting African countries.

 

Improving Access to Trade Data

·         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. Hallmarks of this initiative include the recently revamped  World Integrated Trade Solution (WITS) and the Services Trade Restrictions Database, both of which are available online and  accessible to the public.

·         In May 2012, the WBG launched the third edition of the Logistics Performance Index (LPI). Based on a worldwide survey of operators on the ground—such as global freight forwarders and express carriers—the 2012 LPI builds on data from 2007 and 2010 to measure the logistics "friendliness" of 155 countries. The data, which include temporal and geographical comparisons, help countries identify the challenges and opportunities they face in their trade logistics performance and what they can do to improve.

·         The new Exporter Dynamics Database offers the most comprehensive picture yet of exporter characteristics and dynamics in 45 developed and developing countries. It allows for cross-country comparisons of exporters based on factors such as size, survival, growth, and concentration.

·         To better monitor trade policy developments, the WBG has supported the Global Trade Alert, a joint venture of think tanks around the world, and maintains the Temporary Trade Barriers Database. Both databases allow users to track the use of trade-distorting government measures initiated since the 2008 crisis.

 

Examples of Operational Work

·         The World Bank is the largest multilateral provider of “Aid for Trade”, providing $15 billion per year since 2002, towards trade policy and regulation, economic infrastructure (ports, roads, airports, telecommunications, and energy), capacity building, and trade-related budget support.

·         In Central America, WBG technical and advisory services have supported trade facilitation efforts aimed at deepening regional integration. Customs assessments and trucking surveys have been carried out in Nicaragua and Costa Rica to enhance supply chain efficiency and are now set to take place in Guatemala, Honduras and El Salvador. The project fosters greater harmonization of regulations among the countries and envisages an improvement in the trading capacity of small market participants.

·         In Lao PDR, WBG technical assistance and other international donor support contributed to the June 2012 release of the Lao Trade Portal, a “one stop shop” online tool which serves as a singular authoritative source on the country’s trade laws, regulations, and procedures. The trade portal reduces the amount of time needed for local and international traders to acquire information and carry out transactions, enabling them to expedite the import and export process.

 

Trade Knowledge and Publications

·         Since 2002, the WBG has delivered more than 1,000 pieces of analytical work on trade issues. To access our publications, go to http://www.worldbank.org/trade

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

 

Updated September 2012

 




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