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Trade and Development Quarterly: The Global Dialogue

Books - Publications

Distortions to Agricultural Incentives in Europe’s Transition Economies, Edited by Kym Anderson and Johan Swinnen, World Bank publication, June 2008.

This book provides an overview of the evolution of distortions to agricultural incentives caused by price and trade policies in the economies of Eastern Europe and Central Asia (ECA) that are transitioning away from central planning. It includes country and sub-regional studies of the ten transition economies of ECA that joined the European Union (EU) in 2004 or 2007, of seven other large member countries of the Commonwealth of Independent States (CIS), and of Turkey. Sectoral, trade and exchange rate policies in this region have been changed hugely since the dissolving of the Soviet Union in 1991, but much remains to be done to reduce trade barriers, and with it the anti-export bias in the policy regime of especially those countries exporting primary products. To progress reform - and to see how recent policies line up with those of the EU - requires better information on the extent of progress during the past fifteen years and of current policy influences on incentives within and between sectors. Prior to their transition to market economies, policies in ECA countries greatly distorted producer and consumer incentives, especially for agricultural products. While those distortions have been reduced substantially in several countries, large variations remain - and distortions appear to be growing again in some of the countries. This book provides the necessary stocktake required for these countries - policymakers to be able to move reforms forward in an informed way.

For more info, the table of contents is listed below and the book can be accessed here.

Of Note

  • The World Bank’s World Trade Indicators, released in June 2008.

    The World Trade Indicators (WTI) is a unique new database and a ranking tool produced by the World Bank that allows benchmarking and comparisons among 210 countries and customs territories, across multiple trade-related indicators. The easy-to-use web-based tool is aimed at helping policymakers, negotiators and researchers assess each country’s performance relative to others’ as well as relative to its historical achievements.

  • Why Aid for Trade? Interview with Uri Dadush, Director, International Trade Department, July 2008

    Uri Dadush, Director of the International Trade Department  and a World Bank expert on global development, answers questions about the purpose and hoped-for impact of aid for trade.  More >>

  • Landlocked Countries: Higher Transport Costs, Delays, Less Trade, web story, June 2008
    Being landlocked is a major reason why 16 of the world’s 31 landlocked developing countries are among the poorest in the world, say three World Bank economists working on trade logistics issues. More>>

Trade Notes

  • No. 36 - Has Product-Specific Aid for Trade Increased Exports? by Paul Brenton and Erik von Uexkull

    Recent evaluations state that many aid for trade programs have raised awareness and knowledge of trade policy issues and facilitated integration into the multilateral trading system.1 But for export development, the results are much less clear. Some programs improved the environment for trade or encouraged exports in nontraditional sectors, but generally evaluators found it difficult to measure impact, especially in the long run. The Policy and Operations Evaluation Department of the Dutch Ministry of Foreign Affairs criticizes a general lack of measurable outcome indicators in such programs in its 2005 review of technical assistance from international organizations.

    The impact of technical assistance on exports and export diversification should be the key measurable outcome of the projects financed by these activities. This note reviews the results of a recent study that enhances understanding of aid for trade by looking at the impact of product-specific export development programs. This study has one big advantage over previous evaluations. By focusing on programs targeted to a specific product, it has a measurable outcome variable: exports of that product. Comlete text of the note >>

  • No. 35 - Barrier, Catalyst, or Distraction? Standards, Competitiveness, and Africa’s Groundnut Exports to Europe, by Luz Diaz Rios and Steven Jaffee

    Countries have a legitimate right to protect their consumers. But the concern is that more stringent food safety standards will hurt developing-country suppliers’ market access or competitiveness. So, standards are often cast as barriers to trade. A less pessimistic view emphasizes the potential opportunities of the evolving standards environment—and the likelihood that some developing countries can turn these opportunities to their competitive advantage. Among the most controversial food safety regulatory measures in its trade impacts has been the European Union’s adoption of harmonized standards for mycotoxins, particularly for aflatoxins in groundnuts and groundnut products - stricter than standards established by the Codex Alimentarius Commission. Complete text of the note >>

  • No. 34 - Global Food Price Crisis: Trade Policy Origins and Options, by Jean-Pierre Chauffour

    The current spike in global food prices has deep roots in decades of trade-distorting policies that have encouraged inefficient agricultural production in rich countries and discouraged efficient production in developing countries. High-income countries have historically protected their domestic producers and subsidized inefficient production - most recently biofuels - and dumped surpluses onto global markets. In turn, developing countries have often used trade and other domestic policies to simultaneously tax and protect their agricultural sector, with the net effect in many countries of taxing farmers. Overall, the world has suffered from declining agricultural prices, overproduction in high-income countries, and underproduction in poor countries. This has resulted in thinner global agricultural markets than otherwise would be the case, more volatility, and lower overall reserve supply capacity and food security.
    Complete text of the note >>

  • No. 33 - The Doha Development Agenda: What’s on the Table? By Bernard Hoekman, Will Martin, Aaditya Mattoo, and Richard Newfarmer, July 2008.

    The Doha Development Round negotiations have now been under way for almost seven years. In the areas where negotiations are most advanced, they have generated complex and detailed proposals. This note takes stock of the major components of what is currently on the table for trade in goods and services, as well as the key elements relating to economic development - duty free, quota-free access for the poorest countries, trade facilitation, and aid for trade. In a nutshell, what is on the table offers major gains in security of marker access in goods and substantial progress in binding services trade policies, as well as new market opening? The average bound tariff for agricultural products would fall at least 30% and that for non-agricultural goods would fall to some 5%. The extent of binding of services policies will increase by almost 50%. History is replete with cases where governments, undisciplined by bound commitments of their trading partners, and so the value of reducing maximum permitted levels of protection is a significant result. Complete text of the note >>

  • PREM Note: Carbon labeling and poor country exports, Paul Brenton, Gareth Edwards-Jones, and Michael Friis Jensen

    Carbon labeling is being adopted by private firms as a mechanism for mitigating climate change. Such schemes are likely to have a significant impact on low-income country exports due to the need for transportation and the small size of their exporters. However, transport emissions may be offset by favorable production conditions and size bias may be reduced. The design and implementation of carbon labeling will need to take into account a number of complex, technical challenges. As innovative solutions emerge, it is important that low income countries are involved in discussions on the design and implementation of carbon labeling.
    Complete text of the note >>


  • Global E-learning Course on Food and Agricultural Trade

    Dates: October 06 - Novemeber 07, 2008
    Location: Global E-learning Activity - World-Wide
    Description: This course aims at strengthening the capacity of policy makers and analysts:
    1. to understand global trends in food and agricultural trade;
    2. to contribute to the design of appropriate agri-food trade policy reforms; and
    3. to effectively participate in international negotiations.

Audience: Policy-makers, negotiators, government officials, researchers and private sector and civil society stakeholders in developing countries.
Application form>>

  • Global E-learning Course on Trade in Services and International trade Agreements

    Dates: October 27 - December 19, 2008
    Location: Global E-learning Activity - World-Wide
    Description: Reflecting its rising role in international trade, trade in services has become an important component of domestic reform agendas as well as of the WTO Doha negotiations and bilateral and regional trade agreements.  To strengthen the ability of trade officials, advisors, analysts, and representatives of business and consumer associations to understand the economic implications of services liberalization and trade, the World Bank Institute is offering a “Trade in Services and International Agreements E-learning Course”. As a result of the course, participants will be better able to contribute to the formulation of their country’s trade in services reform and negotiating agenda.
    Audience: Policy-makers, negotiators, government officials, researchers and private sector and civil society stakeholders in developing countries.
    Application Form for external applicants

    Bank staff can apply using the “myLearning” catalogue links (first is a short description, second is to submit application) at:
  • Course on CGE Modeling of Services and FDI in Africa

    : September 22 - October 03, 2008
    Location: Dar es Salaam, Tanzania
    Description: The workshop will provide an introduction to the use of general equilibrium models for analysis of policies regulating services and Foreign Direct Investment (FDI). The focus is highly practical. The workshop will develop the participants’ skills in using GAMS and MPSGE software for quantitative analysis, and widen the participants’ knowledge about economic modeling and advanced policy analysis. The workshop will both provide a general introduction to general equilibrium modeling and discuss the existing models of Tanzania and Kenya, and how to adapt these models to data for another country.
    Audience: Researchers and analysts
    Application: By Invitation Only
    More info for external participants  |   More info for Bank staff

For the record

  • The Almaty Programme of Action and the World Bank Program on transit and Land-Locked Developing Countries (LLDCs), October 2008

    The World Bank has put in place a program on regional trade facilitation and transit regimes for land-locked countries, including assessing the cost of being landlocked and developing corridor monitoring indicators. The World Bank organized two experts meetings in collaboration with the United Nations (UN) as part of the ongoing Almaty Program of Action of landlocked developing countries. The meetings took place in New York (June 2nd) and Washington (June 3rd) and focused on ways to reduce the obstacles to landlocked countries’ trade and growth. The World Bank has also contributed to the UN mid-term review of the Almaty Programme of Action (October 2-3) with the publication of a report on ‘Improving Trade and Transport for Landlocked Developing Countries’ (October 2008) based on the outputs and experience of current World Bank projects. The UN Secretariat gave special recognition to the role and contribution of the Bank. It also praised the focus given to corridor infrastructure in the World Bank transport strategy, as well as the contribution of IFC’s doing business to the understanding of the FDI challenges in LLDCs. More info >>

Workshop on Logistics Performance Indicators: Monitoring the Implementation of the Alamty Programme of Action on Trasit Transport Cooperation (pdf - 25k)

  • WTO Aid for Trade Symposium, September 15-16, 2008, Geneva, Switzerland

    Country delegations from the 150 WTO members attended the WTO Aid for Trade Symposium on monitoring Aid for Trade on September 15-16, 2008.  The agenda, introduced by the DG Pascal Lamy, was structured around three issues: (i) the supply side of aid for trade in the form of the flows tracking system of the OECD; (ii) the demand side of aid for trade in the form of needs linked to trade related capacity and to the trade performance of developing countries; and (iii) the match between demand and supply of aid for trade. The World Bank actively contributed to the organization of the event and was a lead participant. Mr. Newfarmer, World Bank Special Representative to the UN and WTO made two presentations:
    • “Aid for Trade: Changing Context and World Bank’s efforts”
    • “Aid for Trade: Matching Demand with Supply” based on the findings of Gamberoni and Newfarmer (2008) technical paper “Aid for Trade: Matching Potential Demand and Supply”. The paper was designed to help both the beneficiary governments and donors of aid-for-trade identify countries that are under-performing in trade and which are receiving less aid for trade than their global performance might otherwise suggest is necessary.  The paper also provides a conceptual framework for selecting indicators of trade performance and its policy determinants that the WTO and its partners might monitor closely as part of the aid for trade initiative.

More info >>

Working Papers

  • 4735- Multilateralism beyond Doha, Aaditya Mattoo and Arvind Subramanian

    There is a fundamental shift taking place in the world economy to which the multilateral trading system has failed to adapt. The Doha process focused on issues of limited significance while the burning issues of the day were not even on the negotiating agenda. This paper advances five propositions: (i) the traditional negotiating dynamic, driven by private sector interests largely in the rich countries, is running out of steam; (ii) the world economy is moving broadly from conditions of relative abundance to relative scarcity, and so economic security has become a paramount concern for consumers, workers, and ordinary citizens; (iii) international economic integration can contribute to enhanced security; (iv) addressing these new concerns - relating to food, energy, and economic security - requires a wider agenda of multilateral cooperation, involving not just the WTO but other multilateral institutions; and (v) despite shifts in economic power across countries, the commonality of interests and scope for give-and-take on these new issues make multilateral cooperation worth attempting.

  • 4710- Trade diversion under selective preferential market access, Ingo Borchert

    Through its diverse trade preference schemes, the European Union provides different groups of developing countries with different degrees of market access. This paper is the first to demonstrate empirically that such staggered market access induces sizable trade diversion to the detriment of relatively less preferred beneficiary countries. In particular, preferences granted to African, Caribbean and Pacific economies are shown to impair the export performance of seven developing countries whose products only qualify for basic preferences under the Generalized System of Preferences. Exports to the European Union decline by about 30 percent if the African, Caribbean and Pacific tariffs falls by 10 percentage points. In terms of forgone trade volume, losses for these relatively disadvantaged countries amount on average to 9 percent of their total trade with the European Union, depending on the country and its main exports. These intra-developing country distortions are driven by highly substitutable, often labor-intensive commodities.

  • 4707-Technology adoption and the investment climate: firm-level evidence for Eastern Europe and Central Asia, Paulo G. Correa, Ana M Fernandes, Chris J. Uregian

    The international diffusion of technology presents an opportunity for developing economies distant from the world technological frontier to reduce their income gap relative to advanced economies. It is therefore crucial to understand why, when faced with similar technological alternatives different firms in different countries choose to adopt different vintages of capital. This paper examines technology adoption across firms in Eastern Europe and Central Asia. The findings show that access to complementary inputs - managerial capacity, skilled labor, finance, and good infrastructure - and to international knowledge - through foreign direct investment or exports - is an important correlate of technology adoption. The link between market incentives and technology adoption is more nuanced. Although consumer pressure results in technology adoption, competitor pressure does not, suggesting that only firms with rents are able to adopt technology given substantial resource constraints. Privatized firms exhibit better technology adoption outcomes but only when a clear private owner with a profit incentive is present. Better governance is associated with technology adoption only in the countries that joined the European Union in 2004. Future increases in technology adoption by firms in the region will require complementary reforms of the investment climate.

  • 4689- China and central and eastern European countries: regional networks, global supply chain, or international competitors? K.C. Fung Iikka Korhonen, Ke Li, Francis Ng

    China has emerged as one of the top recipients of foreign direct investment in the world. Meanwhile, the successful transition experience of many Central and Eastern European countries has also allowed them to attract an increasing share of global foreign direct investment. In this paper, the authors use a panel data set to investigate whether foreign direct investment flows to these two regions are complements, substitutes, or independent of each other. Taking into account the role of host country characteristics - such as market size, degree of trade liberalization, and human capital - the authors find no evidence that foreign direct investment flows to one region are at the expense of those to the other. Instead, the results suggest that foreign direct investment flows are driven by distinct regional production networks (and thus are largely independent of each other) and the development of global supply chains (indicating that foreign direct investment flows are complementary).

  • 4680- Safeguards and antidumping in Latin American trade liberalization, J. Michael Finger, Julio J. Nogues

    The binding of tariff rates and adoption of the General Agreement on Tariffs and Trade/World Trade Organization-sanctioned safeguards and antidumping mechanisms provided the basis to remove a multitude of instruments of protection in the Latin American countries discussed in this paper. At the same time, they helped in maintaining centralized control over the management of pressures for protection in agencies with economy-wide accountabilities. The World Trade Organization's procedural requirements (for example, to follow published criteria, or participation by interested parties) helped leaders to change the culture of decision-making from one based on relationships to one based on objective criteria. However, when Latin American governments attempted to introduce economic sense - such as base price comparisons on an economically sensible measure of long-run international price rather than the more generous constructed cost concept that is the core of WTO rules - protection-seekers used the rules against them. They pointed out that World Trade Organization rules do not require the use of such criteria, nor do procedures in leading users (industrial countries) include such criteria. In sum, the administrative content of the rules supported liberalization; the economic content did not.

  • 4672 - The Doha development agenda: What's on the table? Will Martin, Aaditya Mattoo
    The outlines of a potential agreement, emerging after seven years of negotiations, imply that Doha offers three key benefits: reduced uncertainty of market access in goods and services; improved market access in agriculture and manufacturing; and the mobilization of resources to deal with the trade problems of least developed countries. WTO Members have offered to make large reductions in legally bound levels of protection in goods and services. The reductions in currently applied levels of protection are smaller. For the least developed countries, the proposed "duty free and quota free" access will only add significantly to their access under existing preferential access arrangements if industrial and developing country members include vital tariff lines. The initiatives on trade facilitation and aid for trade can play a valuable catalytic role in promoting reform and mobilizing assistance, but substantial effort is still needed to translate notional benefits into actual gain.

  • 4668 - Currency undervaluation and sovereign wealth funds: A new role for the World Trade Organization, Aaditya Mattoo, Arvind Subramanian
    Two aspects of global imbalances - undervalued exchange rates and sovereign wealth funds - require a multilateral response. For reasons of inadequate leverage and eroding legitimacy, the International Monetary Fund has not been effective in dealing with undervalued exchange rates. This paper proposes new rules in the World Trade Organization to discipline cases of significant undervaluation that are clearly attributable to government action. The rationale for WTO involvement is that there are large trade consequences of undervalued exchange rates, which act as both import tariffs and export subsidies, and that the WTO's enforcement mechanism is credible and effective. The World Trade Organization would not be involved in exchange rate management, and would not displace the International Monetary Fund. Rather, the authors suggest ways to harness the comparative advantage of the two institutions, with the International Monetary Fund providing the essential technical expertise in the World Trade Organization's enforcement process. There is a bargain to be struck between countries with sovereign wealth funds, which want secure and liberal access for their capital, and capital-importing countries, which have concerns about the objectives and operations of sovereign wealth funds. The World Trade Organization is the natural place to strike this bargain. Its General Agreement on Trade in Services, already covers investments by sovereign wealth funds, and other agreements offer a precedent for designing disciplines for these funds. Placing exchange rates and sovereign wealth funds on the trade negotiating agenda may help revive the Doha Round by rekindling the interest of a wide variety of groups.

  • 4650 - Do the biggest aisles serve a brighter future? Global retail chains and their implications for Romania, Beata Javorcik, Yue Li

    During the past two decades many economies have opened their retail sector to foreign direct investment, yet little is known about possible implications of such liberalization on the economies of developing host countries. Using firm-level data from Romania, this study examines how the presence of global retail chains affects firms in the supplying industries. Applying a difference-in-differences method, the econometric analyses yield the following conclusions. The expansion of global retail chains leads to a significant increase in the total factor productivity in the supplying industries. Their presence in a region increases the total factor productivity of firms in the supplying industries by 15.2 percent and doubling the number of chains leads to a 10.8 percent increase in total factor productivity. However, the expansion benefits larger firms the most and has a much smaller impact on small enterprises. This conclusion is robust to several extensions and specifications, including the instrumental variable approach. These results suggest that the opening of the retail sector to foreign direct investment may stimulate productivity growth in upstream manufacturing and extend our understanding of foreign direct investment in service sectors.

  • 4642 - Are low food prices pro-poor ? Net food buyers and sellers in low-income countries, M. Ataman Aksoy, Aylin Isik-Dikmelik (#)

    There is a general consensus that most of the poor in developing countries are net food buyers and food price increases are bad for the poor. This could be expected of urban poor, but it is also often attributed to the rural poor. Recent food price increases have increased the importance of this issue, and the possible policy responses to these price increases. This paper examines the characteristics of net food sellers and buyers in nine low-income countries. Although the largest share of poor households are found to be net food buyers, almost 50 percent of net food buyers are marginal net food buyers who would not be significantly affected by food price increases. Only three of the nine countries examined exhibited a substantial proportion of vulnerable households. The average incomes (as measured by expenditure) of net food buyers were found to be higher than net food sellers in eight of the nine countries examined. Thus, food price increases, ceteris paribus, would transfer income from generally higher income net food buyers to poorer net food sellers. The analysis also finds that the occupations and income sources of net sellers and buyers in rural areas are significantly different. In rural areas where food production is the main activity and where there are limited non-food activities, the incomes of net buyers might depend on the incomes and farming activities of net food sellers. These results suggest the need for reevaluation of the consensus on the impact of food prices on food needs. Further work on the regional differences, and more important, on the second order effects, are necessary to answer these questions more precisely. Only on the basis of further analysis can we start generating better policy responses.

  • 4628 -The anatomy of China's export growth, Mary Amiti, Caroline Freund

    Decomposing China's real export growth, of over 500 percent since 1992, reveals a number of interesting findings. First, China's export structure changed dramatically, with growing export shares in electronics and machinery and a decline in agriculture and apparel. Second, despite the shift into these more sophisticated products, the skill content of China's manufacturing exports remained unchanged, once processing trade is excluded. Third, export growth was accompanied by increasing specialization and was mainly accounted for by high export growth of existing products (the intensive margin) rather than in new varieties (the extensive margin). Fourth, consistent with an increased world supply of existing varieties, China's export prices to the United States fell by an average of 1.5 percent per year between 1997 and 2005, while export prices of these products from the rest of the world to the United States increased by 0.4 percent annually over the same period.

  • 4615- Trade facilitation in ASEAN member countries: measuring progress and assessing priorities, Ben Shepherd, John S. Wilson

    This paper reviews recent progress and indicators of trade facilitation in member countries of the Association of Southeast Asian Nations. The findings show that import and export costs vary considerably in the member countries, from very low to moderately high levels. Tariff and non-tariff barriers are generally low to moderate. Infrastructure quality and services sector competitiveness range from fair to excellent. Using a standard gravity model, the authors find that trade flows in Southeast Asia are particularly sensitive to transport infrastructure and information and communications technology. The results suggest that the region stands to make significant economic gains from trade facilitation reform. These gains could be considerably larger than those from comparable tariff reforms. Estimates suggest that improving port facilities in the region, for example, could expand trade by up to 7.5 percent or $22 billion. The authors interpret this as an indication of the vital role that transport infrastructure can play in enhancing intra-regional trade.




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