World Bank Announces Stepped-Up Trade Assistance Program

CANCUN, Mexico, Sept. 10, 2003—On the opening day of the 5^th World Trade Organization (WTO) Ministerial meeting in Cancun, Mexico, the World Bank announced a new initiative to assist poor countries take advantage of new market opportunities created by such an agreement and to offset any adverse initial impacts of trade reforms.  A “good” pro-poor Doha agreement would increase growth in developing countries and lift an additional 140 million people out of poverty by 2015. 

“The program is designed to support progress on the Doha Development Agenda and will increase assistance to countries that take on development-promoting trade reforms,” said Shengman Zhang, Managing Director for the World Bank.  “It will also make needed resources available for countries implementing new trade reform programs associated with commitments they may make in the Doha Agenda.  These resources could be used to expand activities that up-grade competitiveness over the long term, such as training of workers and reforms of trade-related institutions. Such loans can be accelerated and, depending on country circumstances, could be additional to existing country lending levels.”

The Bank also called upon all countries to recognize the importance of assuming responsibilities under the development trade agenda, and stressed that rich countries should take appropriate action – such as reducing agriculture tariffs and trade-distorting subsidies - to make the world trading system more supportive of poor people’s efforts to escape poverty.

“The current round of trade negotiations has the potential to strip away many inequities in the global trading system that put developing countries – and poor people in particular – at a disadvantage,” continued Zhang.  “The outcome of this meeting – and those that follow in pursuit of the Doha Development Agenda – will determine whether the international community, working together, can take collective actions that will stimulate global growth and lift as many as an additional 140 million people above the $2 a day poverty line.”

“The Bank will provide loans to finance effective government trade reform programs, such as income maintenance, worker retraining, and new public investments to help bring goods to markets in expanding sectors,” said Gobind Nankani, Vice President of the Poverty Reduction and Economic Management Network.  “The Bank is also prepared to assist countries in designing and implementing trade reform programs.”

The Bank’s program has two components:  enhanced lending in support of programs that are designed to protect workers and vulnerable groups and assist countries over a sustained period to implement development-related trade reforms, and resources devoted to trade logistics and facilitation, including investment loans for ports, roads, and reform of trade-related institutions.

Enhanced Program Support

Reducing barriers to products produced by the poor will create new opportunities for developing countries, but will also place increased demands on them.  Governments will need to design trade reform programs that shift resources away from certain areas that are not internationally competitive toward those that provide economic opportunities.  For most countries, this will mean new investments to improve competitiveness and expand exports.

Some countries may experience temporary adverse trade impacts and costs in implementing the agreements.  For example, a few developing countries might see their preferential access to rich country markets eroded with lower tariffs in those markets, and suffer slower growth of exports as a result.  Similarly, reduced subsidies in rich countries might raise prices for some net food importing countries, and still others might have to provide new government programs to support workers.

Trade Logistics 

Many poor countries may not be able to take advantage of opportunities created by a new global trade agreement unless they can make investments in ports, roads, and better customs administration.  The Bank will increase its analytical and lending activities to assist countries and increase exports.

The program anticipates that new lending for trade logistics could increase substantially – by as much as $800 million annually.   “At present, we have an active program of some $2 billion with 50 countries,”   said Uri Dadush, Director of the Bank’s International Trade Department.  “And we foresee expanding that to as many 75 countries in the next three years.”

Dadush noted that transport costs are often more important than tariffs for poor countries in determining the landed costs—and thus the competitiveness of goods in export markets.   “Whether these are costs in getting goods to ports, getting them through customs, or getting them through the harbor, reducing these overheads by 10 percent has the same effect as reducing a tariff by 10%,” he said.  “The Bank can help developing countries realize gains that in their trade-stimulating effects are essentially equivalent to tariff cuts.” 

Bank Will Consult with member countries on Program Design  

As a Doha agreement begins to take shape, the Bank will work with countries to quantify ways they may be affected individually and, if they request, help tailor programs to their needs. Over the next six months, the Bank will hold workshops with WTO members and partner organizations to begin this analysis. 

The World Bank has been working intensively over the last three years to help ensure – through engagement, research and programs – that the world’s poorest countries and people will benefit from the global trading system. The Bank works at the global level to help governments attack inequities in the world trading system that impede development.   In addition to global research such as the newly-released Global Economic Prospects: Realizing the Promise of the Doha Agenda, regional studies have also been important, including a study on trade and job quality in Latin America, and studies on the impact of trade and integration in East Asia and the Middle East. 

At the country level, the Bank has launched comprehensive studies on how to increase trade in 20 low-income countries in the past two years, many as part of the multi-agency Integrated Framework program.  The Bank also works at the country level to help developing countries leverage trade for growth and poverty reduction through policy advice, financial resources and capacity building.