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Trade and Development Quarterly - 27th edition

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International Trade Department 

www.worldbank.org/trade

GLOBAL TRADE UPDATES 

  Global Uncertainty Dampening Trade Recovery

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Global uncertainty is dampening what had looked like a robust recovery, with global trade growth turning negative in August 2011. The slowdown is more marked in high-income countries. EU import demand growth turned negative in Q3 2011, with imports dropping by 4 percent in both France and Germany compared to Q2 2011. Month-on-month import growth for September in the US and Japan was also negative, falling 3 and 6 percent, respectively. Developing country import growth has held up better; rising 6.5 percent in China in October over September.

   European Slump Weighs on Trade Partners

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South Asia’s exports, driven by India's trade with China, eclipsed the performance of any other developing region in the first three quarters of 2011, but plummeted subsequently, posting a 15% drop in October over September.  Most regions saw their export growth decline from positive rates in the second quarter to negative or zero growth by the third quarter.  MENA and SSA third quarter growth is yet to be seen, but monthly growth in MENA was flat from June through August.  In Africa monthly growth showed volatility over the same period, reflecting swings in commodity prices.  Latin America showed strong growth in August over July.  The region is less affected by EU demand, having closer ties to US and Chinese markets. Third quarter performance in ECA was the worst, reflecting close trade connections with Europe, though October showed a mild recovery.

THE TRADE DEPARTMENT

Trade Policy

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Trade in services is growing faster than trade in goods. While developed countries maintain the lion's share of trade, developing countries are increasingly exporting services. India is a well-known success story, and the Philippines is now the third-largest player in the global business process outsourcing market, accounting for 15 percent of the market output. India holds 37 percent of the market and Canada maintains 27 percent. The latest PRMTR book "Exporting Services: A Developing Country Perspective" by Arti Grover Goswami, Aaditya Mattoo, and Sebastián Sáez attempts to disentangle the determinants of trade in services from developing countries. The authors review the experience and performance of several developing countries, including Brazil, Chile, the Arab Republic of Egypt and the Philippines.

 

Trade Competitiveness

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PRMTR participated in the successful dissemination of the  Policy Note on Trade Competitiveness in Macedonia in November. The note was prepared jointly by ECSPF and PRMTR, using the Trade Competitiveness Diagnostic approach. The team explored firm level data and was able to link customs and registry data bases. Both the Deputy Prime Minister and the Governor of the Central bank participated in the main dissemination event. The Government is willing to embrace most of the report's recommendations as evidenced by statements to the media and the interest to work with the Bank on their implementation. The study will be followed by a programmatic series of development policy loans on competitiveness, which will likely be organized around the main areas of recommendations of the policy note, namely, FDI attraction and export promotion, skills, quality and innovation and business environment.  Among the recommendations, the report suggests measures to maximize the benefits of foreign direct investment that is currently being attracted to the country, like introducing new measures to facilitate the integration of FDI firms into the domestic economy, target future efforts to attract FDI in export oriented industries where Macedonia has clear competitive advantage and promote institutional reforms to enhance the effectiveness of the Technological Industrial Development Zones (TIDZs).

 

Trade Facilitation

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Trade Facilitation and Logistics has been selected as a new Global Expert Team (GET), a mechanism to encourage sharing of experience and expertise across regions and networks, and significantly improve the quality and timeliness of services provided to clients. The GET for Trade Facilitation and Logistics (GET-TFL), housed in the Trade and the Transport departments, is led by Jordan Schwartz, Lead Economist, LCR. It is a cross-sector resource that includes Bank professionals from PREM, SDN (TRANS and ARD), and FPD networks. The GET-TFL will help Bank teams to leverage wide-ranging skills, tools and experience to enhance their response to clients in areas such as international trade and transport infrastructure, customs and border management, and the development of logistics and freight services, trade corridors, regional facilitation initiatives, and food supply chains.

IN THE REGIONS

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In each quarterly edition, we profile a Bank staff member who is doing interesting trade work in the field.  This month, we interviewed Sjamsu Rahardja, Senior Trade Economist, about the impact the shake up at Indonesia's Ministry of Trade is having on the country's political economy.


PRMTR:
What are some of the changes that have been happening in Indonesia’s Ministry of Trade?

Rahardja: There have been significant changes at Indonesia's Ministry of Trade – both the Minister and Vice Minister of Trade were replaced. Minister Mari Pangestu, who was a close counterpart of the Bank, was replaced by Gita Wirjawan, an investment banker who previously headed the Investment Promotion Board. Vice Minister Mahendra Siregar, who is the G20 Sherpa for Indonesia, was replaced by Bayu Krisnamurthi, an academic who previously was Vice Minister of Agriculture.

PRMTR: Are these changes related to fears around the global economic crisis?

Rahardja: The changes were part of an overall reshuffle to improve the performance of the Cabinet. The changes suggest that the government would like to increase the synergy between the Ministry of Industry and the Ministry of Trade in working together to support industrialization and strengthen absorption capacity of domestic market for domestic industries.

These are in line with the government's agenda to combine incentives and trade policies to increase downstreaming in the domestic manufacturing industry. Nevertheless, changes in the Ministry of Trade suggest that there is a growing political pressure for the government to address the perceived large influx of imports from low-cost countries, such as China.

World Bank: How will this impact World Bank work in Indonesia? 

Rahardja: The changes certainly bring new dimensions to the World Bank work in Indonesia. The changes suggest that institutional constraints often make first-best policy either unattainable or only possible through alternative methods. The World Bank work on trade policy in Indonesia will need to find the right tone to address the issues. One way would be to focus more on areas that can gather support, such as improving logistics and reform to improve competitiveness of Indonesia's manufacturing sector, which in recent years has suffered from a "growth recession". The other way would be continue building capacity and consensus on maintaining and managing openness.

 

Read  Rahardja's full interview here.

 


  UPCOMING EVENT

PREM Week Events to be held in April.
Washington D.C., World Bank Headquarters

The PREM network plays a key ‘integrator’ role in the Bank by taking the lead on many high-profile issues in development. Policy responses to the recent global crises have demonstrated the centrality of PREM's work – from financial crisis and economic growth, to food security, gender, jobs, equity, improvements in public finance and overall governance, and competitiveness. Learn more at PREM days, held April 25-26, 2012, and PREM Learning Week, which spans from April 30 to May 11, 2012.
PRMTR will be offering learning events on tools and indicators for trade performance, trade competitiveness and implementing trade and transport facilitation performance assessments.

 


Sustainable Development: A Key Theme at UNCTAD XIII 
Doha, April 21-26, 2012
The 13th session of the United Nations Conference on Trade and Development will focus on inclusive and sustainable growth and development. The conference will include a working lunch on April 25, 2011 to discuss the international agenda on non-tariff measures (NTMs).  Read more here.


InfoShop: Exporting Services Book Launch 
Washington D.C., J1-050, February 2 (3-4:30 PM)
PRMTR and DEC are co-sponsoring this book launch featuringSecretary General Jose Miguel Insulza at the Organization of American States. Editors Arti Grover Goswami, Aaditya Mattoo, and Sebastián Sáez will present their latest book that looks at the growth of trade in services in developing countries such as Chile, Malaysia and the Philippines.

OTHER NEWS

How do Natural Disasters Affect Supply Chains?

In the Growth and Crisis blog, Thomas Farole, PRMTR senior trade specialist, writes about a recent mission to Indonesia where he witnessed first-hand how natural disasters affect supply chains. Like the massive earthquake in Japan earlier this year, the floods in Thailand are again exposing the weaknesses of fragmented global supply chains. Read more here.

A Time to Reflect on the State of Food in Africa
Ian Gillson, PRMTR senior trade economist, writes about rising food prices on Nasikiliza's "I am Listening" blog.  Gillson writes that on a global scale, there is no food shortage. In 2010, the world produced 2.2 billion tons of cereals, up from 820 million tons 50 years ago. The problem is that the surplus food does not always get to those in need. Often shipments of perishable goods are stopped at the border and excessive inspections frequently cause delays. Read more here.
Taking Stock of Trade Protectionism since 2008
Trade protectionism has been on the rise since the onset of the current financial criss, with many countries actively using trade policy instruments in response to the global recession, according to the latest Economic Premise by Mohini Datt, Bernard Hoekman, and Mariem Malouche (PRMTR). The analysis, based on monitoring reports issued by the World Trade Organization (WTO) and Global Trade Alert data, found that between 1,243 and 1,593 new trade measures have been implemented since late 2008 -- about 300 a year.  To read more, click here.


EVENT RECAP


 

BBL: Measuring Trade Costs in Goods and Services Markets
Jean-Francois Arvis provided an update and preliminary results of current efforts by PRMTR and UNESCAP to develop datasets on bilateral trade costs for goods markets and trade costs in services markets. Trade costs include all "before the border" effects, such as the impact of distance, international logistics but also some at the border (tariffs and non-tariffs) and behind the border measures. This work makes it possible to measure the full range of trade transaction costs that are relevant from a trade policy and competitiveness standpoint. The datasets will be relevant  in policy dialogue and may also help identify the relative importance of possible sources of trade costs.

For more information, contact Jean Francois Arvis at jarvis1@worldbank.org.

The First Joint IMF, World Bank and WTO Workshop
The December trade policy event featured remarks by Robert Zoellick, president of the WB; Justin Lin, chief economist of the WB; and Pascal Lamy, director-general of the WTO. Lamy emphasized the importance of inter-institutional coherence in trade work, especially in monitoring, research, statistics, development, and capacity building.  Zoellick highlighted the important role of research in connecting theory with practice. He encouraged further research on value-added trade and trade facilitation with a focus on beyond-the-border barriers, better trade data collection, food and agriculture trade, Doha, and the structural reform agenda.
Read about the papers and watch video from the event here.

BBL: Thinking Equal in Trade Facilitation
This month, PRMTR and PRMGE discussed the first guidance note addressing gender equality in trade facilitation and logistics projects. Kate Higgins, of the North-South Institute, was note's author. She gave examples of trade-related development projects that integrated a gender dimension. She also provided practical advice for project managers to better encompass gender-specific concerns in future work. As a caveat, Higgins noted that literature on trade and gender links is very limited, in general, and has not kept up with the rapidly expanding range of trade interventions. She encouraged practitioners to collect data in a way that would allow gender dimensions of trade work to be examined.

Read more about the event here and the blog here.

Check out the new Gender and Trade website

 
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www. worldbank.org/trade

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