World trade lost momentum by mid-2011, with export value growth stagnating in developing regions, as advanced economies reeled from budget crises. The WTO has recently lowered its predicted merchandise volume growth forecast for 2011, down from 6.5 percent, to 5.8 percent.
In Latin America export growth was hesitant through 2011, with gains of 6 percent (m/m) in May turning negative by July, as demand fell in one of their biggest markets - China. China’s brake in import demand corresponds with its own dwindling export orders, a trend reflected in the EAP region more broadly.
The region still depends on final demand from high income export markets for two-thirds of its trade, markets affected by the Eurozone crisis and the US debt ceiling row. Export value growth in MENA and ECA turned negative by mid-2011, also indicative of the downturn in their main market – the EU, and disruptions due to the Arab Spring in MENA. Monthly export growth in Africa was already negative by March. Headline trade growth in South Asia paused in June, as the region’s biggest economy, India, struggled to contain inflation.
In the face of gloomy economic growth prospects, the risk of rising protectionism is real, and the issue of 'currency wars' is emerging. In Latin America, Brazil has ramped up efforts at the World Trade Organization to galvanize support for its proposal to study the relationship between exchange rates and international trade.
Brazil also increased taxes by 30 percent on foreign vehicles, with the government blaming an appreciation of the real against the dollar for undermining the competitiveness of its industry in export markets and leading to a flood of cheaper imports. Argentina increased the use of non-automatic import licensing, delaying import approvals. These measures cover a large variety of industrial products, and reflect import substitution objectives. It is important that countries refrain from these kinds of protectionism measures that will put more strains on the economic recovery.
The upcoming Economic Premise Note ‘Taking stock of trade protectionism post-crisis' shows that so far trade protectionism following the 2008 crisis, peaked in 2009, but has since eased, with governments pursuing a mix of trade restrictions and trade liberalization. Monitoring of these policies remains critical to avoid any slippage in policy trends.
|THE TRADE DEPARTMENT|
With non-tariff measures (NTM) being the new frontier in trade policy, co-authors Mariem Malouche (PRMTR), Sebastian Saez (PRMTR) and Olivier Cadot (Trade Consultant) presented to the ECA and LAC country teams the new "Streamlining NTMs: A Toolkit for Policymakers" (it will be circulated for review shortly). The toolkit reflects client demand and PRMTR engagement in countries. It provides a framework and set of tools (including questionnaires, indicators, and analytical tools) that allow for a comprehensive or targeted identification of NTMs, assessment of their impact (on trade, prices, welfare), and guidelines for policy responses. Several countries are already taking steps to strengthen their work in NTMs. For example, the Indonesian government has adopted a decree this summer to institutionalize the review process of new NTMs issued by the Ministry of Trade in-line with the approach adopted in the NTM toolkit. In Mauritius, the government is including a measure in the DPL to put in place a public-private steering committee to review NTMs.
|The effects of policy interventions on women are of increasing concern to policy makers in all fields, and trade is no exception. The Economic Premise, Gender-Informing Aid for Trade: Entry Points and Initial Lessons Learned from the World Bank,by Elisa Gamberoni (PRMGE) and José Guilherme Reis (PRMTR) in July 2011 reviews recent World Bank projects and studies that “gender inform” trade-related interventions and uses the Bank’s experience to promote gender-equal opportunities by highlighting entry points at which trade projects, studies, and policies can effectively address gender issues. The paper finds that interventions inadequately tailored to handling all circumstances or to meeting the particular requirements of women in specific places can aggravate inequalities and reverse previously achieved gains for women because such interventions could favor only a subset of firms or workers in the target population. To read more, click here.|
|A new measure of connectivity in the global air transport network, covering 211 countries and territories for the year 2007 has been constructed. Created by Jean Francois Arvis (PRMTR) and Ben Shepherd (Trade Consultant), it is a global measure of connectivity, in the sense that it captures the full range of interactions among all network nodes, even when there is no direct flight connection between them. To read more, click here.||IN THE REGIONS|
| ||VIEWS FROM THE FIELD:|
In each quarterly edition, we profile a Bank staff member who is doing interesting work on trade in the field. This month, we interviewed Donato De Rosa, Senior Private Sector Development Specialist (ECSF). He is working on a global value chain and trade competitiveness project in Turkey.
|PRMTR: How has Turkey’s trade sector been performing in terms of competitiveness?|
De Rosa: Turkey’s export basket has been gradually moving from lower value-added production – like textiles, garments – to machinery, equipment, automotive. That’s one issue. The value-added of Turkish exports, their competitiveness,” has been increasing. At the same time – the main market was of course the E.U. and it still is the E.U.– but in 2008, unlike many other countries, you can observe a redirection of trade away from the E.U. and towards, for example, the Middle East, and other countries in a different area which were less affected by the financial crisis. It tells you that something is boiling, that there is a very vibrant enterprise sector under there.
Read Rosa's full interview online.
|SPOTLIGHT ON TRADE PROJECTS:|
Launching the Trade Competitiveness Diagnostic in Nicaragua and Macedonia
|Export performance of Nicaragua over the last decade was mediocre, but some encouraging signs are observed. Today, Nicaragua is more open to international trade than it was a decade ago, but exports have grown well below imports. This uneven relationship puts Nicaragua as the country with the largest trade deficit in the Central American region. In this context, unlocking the main restraints to export competitiveness will prove useful for Nicaragua to reap the benefits of trade integration.|
Despite effective macroeconomic management and significant progress on many important reforms of the micro economy, growth in Macedonia is still below many regional peers and is insufficiently addressing the very high levels of unemployment and poverty that persist in the country. In moving the economy to a higher growth trajectory, the export sector will be critical as it is often the case in small economies. Upgrading the capabilities of SME exporters and facilitating the emergence of dynamic, mid-sized exporters; developing the innovative capacity of larger exporters; and leveraging the potential of FDI are several possible solutions.
BBL: Special Economic Zones: Progress, Emerging Challenges, and Future Directions
The latest book by Thomas Farole (PRMTR) offers an in-depth look at the successes and challenges of Special Economic Zones. Since the mid-1980s, the number of newly-established zones has grown rapidly, with dramatic expansion in developing countries. But in the post-crisis environment, the context in which zones operate is changing; increasingly, the effectiveness with which they are designed, implemented, and managed will determine their success.
To read more of the book, click here.
To read “Special Economic Zones: What Have We Learned” featured in The Economic Premise, click here.
Zoellick Speaks at 3rd Annual Aid for Trade Global
|The third global Aid for Trade Review organized by the WTO took place in Geneva July 18-19, 2011. Robert Zoellick was a speaker on the high-level panel and delivered a speech on Aid for Trade and the importance of concluding the Doha Round. During the event, the World Bank presented a number of private sector case studies on trade-related capacity building, and disseminated the new World Bank Trade Strategy as well as a recent book developing an analytical framework for AFT impact evaluation.||The Bank also organized a side event where Zoellick, joined by high-level representatives from the African Development Bank, the International Trade Centre, and UNCTAD, formally launched the joint Transparency in Trade (TNT) Initiative that aims to increase the amount of trade data collected in the areas of tariffs, NTMs, temporary measures, and policies affecting services trade; and to make access to these data and related tools to all users free of charge. For more information on this initiative, please visit http://www.tntdata.org/|
BBL: Transport Facilitation for Central Africa
Central Africa holds the key to regional integration as a connector of regional trading blocs in Sub-Sahara Africa (SSA). PRMTR hosted a BBL in late September that explored options for such a transformative agenda in the framework of the implementation of the Africa Strategy and the World Bank Group strategy. Success in regional integration in Central Africa could stimulate economic growth and intra-regional trade for the entire continent.
Access the powerpoints and read about the event here.
The Future of Trade Policy: A Growing Role for the South
During the Annual meetings, panelists discussed the "quiet trade policy diplomacy" of the growing economic power houses and its impact on other developing economies. Emerging economies are active trade policy reformers using preferential regimes, bilateral relations and lowering transaction costs; as a result South-South trade has grown faster than average, but protection remains higher in the South. Finally, the roundtable led to a reflection on what the new balance of power means for future multilateral and regional cooperation on trade.
Read about the event here.
The Asia-Pacific Trade Facilitation Forum 2011
On October 4-5 in Seoul, Korea, PRMTR provided a training workshop on the Trade and Transport Facilitation Assessment guidelines and a session on the Logistics Performance Index. Presentation of technical training modules covering concepts, planning and implementation, as well as practical case studies developed to illustrate each TTFA component to help facilitate its use. A key conclusion of this workshop is the importance of devising trade facilitation and logistics reforms that are customized to a country’s needs, rather than applying a one-size-fits-all approach to solving logistics obstacles. Workshop participants also emphasized the critical role public-private partnerships play in the implementation of trade facilitation reforms.
Read PRMTR's blog post on the event.
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