In today’s economically integrated world, trade matters more than ever before. Countries that have intensified their links with the global economy through trade and investment have usually grown more rapidly over a sustained period and have consequently experienced larger reductions in poverty. Unfortunately, many low-income countries have been hindered in their efforts to integrate into the global economy by inadequate policies, institutions, and infrastructure, on one hand, and by a variety of rich country protectionist measures and other policies that restrict low-income countries’ exports, on the other.
The Bank’s work on trade has two central objectives. At the global level, the Bank advocates changes in the world trading system to make it more supportive of development, especially in the poorest countries and for poor people across the developing world. This includes collaborating with the WTO, other multilateral agencies, governments in developing countries, and donors to support a “pro-development” outcome in the Doha Development agenda, as well as working with partners to maximize the development impact of regional trading agreements.
At the country level, the Bank supports developing countries in their efforts to improve their own policies, institutions and infrastructure (i.e. roads, ports and telecommunications) in order to use trade to help spur growth and reduce poverty. This work includes strategic assistance to clients in support of pro-poor trade-related reforms, with special attention to the low-income countries that are most in need of Bank support.
This website has been created as a research, training, and outreach tool for people interested in trade policy and developing countries. A wide scope of topics are featured from the trade agenda associated with the WTO negotiations to regional integration and export competitiveness. In addition to the capacity-building activities of the World Bank Institute and the World Bank's Research Group, it provides information on complementary programs through the Integrated
Tuesday, June 26, 2007
Trade and Development
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The World Bank 2007 Global Monitoring Report subtitled "Confronting the Challenges of Gender Equality and Fragile States" was published on April 13, 2007. The report monitors how countries are progressing with respect to the Millennium Development Goals (MDGs) and assesses the contributions of developing countries, developed countries, and international financial institutions toward meeting universally agreed development commitments. Fourth in a series of annual reports leading up to 2015, this year's report reviews key developments of the past year, emerging priorities, and an assessment of performance drawing on numerous indicators. The report highlights two key thematic areas: gender equality and empowerment of women (the third MDG) and the special problems of fragile states, where extreme poverty is increasingly concentrated. The report is available here.
Order the publication
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Services Trade and Development: The Experience of Zambia, Aaditya Mattoo and Lucy Payton, a Palgrave Macmillan / World Bank publication, May 2007
Services are critical to Zambia's overall economic performance and the well-being of its people, and the constraints on service sector development due to small markets and limited endowments could be alleviated by greater regional and global integration. International negotiations can be harnessed to deliver much-needed reform, but there is also a danger that unbridled mercantilism could produce outcomes that are antithetical to development. A key rationale for this volume was to ensure that policy makers and trade negotiators in a least developed country like Zambia are fully informed about both the opportunities for expanding trade in services - unilaterally, regionally, multilaterally - and the domestic pre-conditions for successful services liberalization.
The World Bank 2007 Global Monitoring Report subtitled "Confronting the Challenges of Gender Equality and Fragile States" was published on April 13, 2007. The report monitors how countries are progressing with respect to the Millennium Development Goals (MDGs) and assesses the contributions of developing countries, developed countries, and international financial institutions toward meeting universally agreed development commitments. Fourth in a series of annual reports leading up to 2015, this year's report reviews key developments of the past year, emerging priorities, and an assessment of performance drawing on numerous indicators. The report highlights two key thematic areas: gender equality and empowerment of women (the third MDG) and the special problems of fragile states, where extreme poverty is increasingly concentrated. The report is available here.
Order the publication
*
Services Trade and Development: The Experience of Zambia, Aaditya Mattoo and Lucy Payton, a Palgrave Macmillan / World Bank publication, May 2007
Services are critical to Zambia's overall economic performance and the well-being of its people, and the constraints on service sector development due to small markets and limited endowments could be alleviated by greater regional and global integration. International negotiations can be harnessed to deliver much-needed reform, but there is also a danger that unbridled mercantilism could produce outcomes that are antithetical to development. A key rationale for this volume was to ensure that policy makers and trade negotiators in a least developed country like Zambia are fully informed about both the opportunities for expanding trade in services - unilaterally, regionally, multilaterally - and the domestic pre-conditions for successful services liberalization.
Trade and Poverty Reduction
* International trade plays an important role in the fight against poverty by helping to drive economic growth and to provide jobs. Countries that have entered export markets, increased their reliance on imports, and strengthened their investment climate so as to become more internationally competitive have tended to grow faster than those that have not.
* But many developing countries are hindered by poor infrastructure and government policies that have failed to promote investment and economic certainty. They also continue to face important trade barriers in export markets, particularly in areas where they have a competitive edge, such as agriculture, labor-intensive manufactures and services.
* The WTO Doha negotiations are an important opportunity to address these barriers and to promote domestic reform in all WTO members. The Bank welcomes the resumption of the Doha negotiations and urges all parties to demonstrate the necessary flexibility and political will to reach a breakthrough on key issues in the next few months.
* The Bank will continue to work at the country level to promote trade reform and competitiveness in developing countries. The Bank will continue its support to the aid-for-trade agenda to facilitate the integration of developing countries in the world economy.
* The Bank is rapidly expanding its trade-related activities at the country level. Trade - related lending in 2006 at roughly US$1.6 billion exceeded 2005 lending (US$1.1 billion) and is almost three times higher than 2003 trade related lending (US$566 million). From July to December 2006, trade-related lending has reached $0.8 billion, and the uptrend is expected to be sustained. Lending expansion has been driven by trade-related infrastructure projects in support of regional integration in Africa (e.g, regional projects), trade infrastructure in East Asia, and budget support to support competitiveness reforms in Latin America.
* But many developing countries are hindered by poor infrastructure and government policies that have failed to promote investment and economic certainty. They also continue to face important trade barriers in export markets, particularly in areas where they have a competitive edge, such as agriculture, labor-intensive manufactures and services.
* The WTO Doha negotiations are an important opportunity to address these barriers and to promote domestic reform in all WTO members. The Bank welcomes the resumption of the Doha negotiations and urges all parties to demonstrate the necessary flexibility and political will to reach a breakthrough on key issues in the next few months.
* The Bank will continue to work at the country level to promote trade reform and competitiveness in developing countries. The Bank will continue its support to the aid-for-trade agenda to facilitate the integration of developing countries in the world economy.
* The Bank is rapidly expanding its trade-related activities at the country level. Trade - related lending in 2006 at roughly US$1.6 billion exceeded 2005 lending (US$1.1 billion) and is almost three times higher than 2003 trade related lending (US$566 million). From July to December 2006, trade-related lending has reached $0.8 billion, and the uptrend is expected to be sustained. Lending expansion has been driven by trade-related infrastructure projects in support of regional integration in Africa (e.g, regional projects), trade infrastructure in East Asia, and budget support to support competitiveness reforms in Latin America.
Why Trade Matters
International trade can play an important role in the fight against poverty by helping to drive economic growth and to provide jobs in developing countries. Many developing countries face major hurdles in realizing the potential gains offered by increased trade, including limited supply capacity (e.g., in infrastructure) and government policies that have failed to encourage foreign and domestic investment and economic certainty.
Many developing countries’ governments have stepped up efforts to address these shortcomings, however, they have found themselves locked out of major rich-country markets, Indeed, rich countries continue to impose higher trade restrictions - as captured by ‘Overall Trade Restrictiveness Index’ that includes both tariff and non-tariff barriers - on exports from low-income countries than on exports from other trading partners. Market access restrictions and other trade distortions, such as domestic subsidies, remain high particularly in the areas in which developing countries have a competitive edge - such as cotton, sugar, and textiles and clothing.
As part of its wider poverty-reduction strategy, the World Bank advocates trade reform at the global and individual country levels to help developing countries take advantage of new market opportunities and diminish the anti-export bias of their own trade policies. Some of the key areas for trade reform are:
* Trade reform in agriculture would yield the largest welfare gains because agriculture is so much more distorted than other sectors and as roughly 70 percent of poor people in developing countries live in rural areas. Trade barriers in agriculture are extremely important to reduce poverty. At present, support to agricultural producers (including trade-distorting subsidies and market access barriers) in developed countries adds up to about $280 billion, more than three times the level of 2005 global overseas aid. Developing countries are investing to increase their agricultural productivity, but gains will not be fully translated into poverty reduction unless industrial and some middle-income countries reduce agricultural trade distortions. In the absence of reforms in developed countries, increased productivity in agriculture will instead give rise to overproduction and price declines for many commodities, undermining competitive poor countries' efforts to expand exports and rural incomes.
* Trade in s ervices has a great potential for growth as services have become the largest contributor to the world economy.The potential for development is high, both in terms of increased services exports and using openness to increase and improve the availability of basic services. Unfortunately, regulations in some developing countries still protect inefficient state monopolies from competition - a drag on growth. And limits on temporary labor mobility impede potential benefits for both receiving and sending countries. Opportunities for further development of trade in services are particularly high in sectors such as tourism, telecommunications, and business and professional services.
* Labor-intensive manufactures have been the most dynamic market segment for every major region, including Africa. Yet many developing countries’ exports face considerable obstacles in foreign markets – including high tariffs and “antidevelopment” tariff structures (when tariffs increase with the degree of processing) which discourage adding value in poor countries.
* Trade facilitation is a central element of trade development. Customs modernization, trade-related infrastructure, inland transit, logistic services, information systems, and ports efficiency play an important role in development as they enhance a country’s competitiveness and allow it to trade goods and services on time and with lower transaction costs.
Many developing countries’ governments have stepped up efforts to address these shortcomings, however, they have found themselves locked out of major rich-country markets, Indeed, rich countries continue to impose higher trade restrictions - as captured by ‘Overall Trade Restrictiveness Index’ that includes both tariff and non-tariff barriers - on exports from low-income countries than on exports from other trading partners. Market access restrictions and other trade distortions, such as domestic subsidies, remain high particularly in the areas in which developing countries have a competitive edge - such as cotton, sugar, and textiles and clothing.
As part of its wider poverty-reduction strategy, the World Bank advocates trade reform at the global and individual country levels to help developing countries take advantage of new market opportunities and diminish the anti-export bias of their own trade policies. Some of the key areas for trade reform are:
* Trade reform in agriculture would yield the largest welfare gains because agriculture is so much more distorted than other sectors and as roughly 70 percent of poor people in developing countries live in rural areas. Trade barriers in agriculture are extremely important to reduce poverty. At present, support to agricultural producers (including trade-distorting subsidies and market access barriers) in developed countries adds up to about $280 billion, more than three times the level of 2005 global overseas aid. Developing countries are investing to increase their agricultural productivity, but gains will not be fully translated into poverty reduction unless industrial and some middle-income countries reduce agricultural trade distortions. In the absence of reforms in developed countries, increased productivity in agriculture will instead give rise to overproduction and price declines for many commodities, undermining competitive poor countries' efforts to expand exports and rural incomes.
* Trade in s ervices has a great potential for growth as services have become the largest contributor to the world economy.The potential for development is high, both in terms of increased services exports and using openness to increase and improve the availability of basic services. Unfortunately, regulations in some developing countries still protect inefficient state monopolies from competition - a drag on growth. And limits on temporary labor mobility impede potential benefits for both receiving and sending countries. Opportunities for further development of trade in services are particularly high in sectors such as tourism, telecommunications, and business and professional services.
* Labor-intensive manufactures have been the most dynamic market segment for every major region, including Africa. Yet many developing countries’ exports face considerable obstacles in foreign markets – including high tariffs and “antidevelopment” tariff structures (when tariffs increase with the degree of processing) which discourage adding value in poor countries.
* Trade facilitation is a central element of trade development. Customs modernization, trade-related infrastructure, inland transit, logistic services, information systems, and ports efficiency play an important role in development as they enhance a country’s competitiveness and allow it to trade goods and services on time and with lower transaction costs.
The World Bank and the trade agenda at the global level
At the global level, the Bank aims to contribute to the development of an international trading system that is more supportive of developing countries. The Bank is working with developing countries, non-governmental partners and other World Trade Organization (WTO) members to encourage progress on the Doha Round - the multilateral trade negotiations launched in Doha, Qatar in November 2001 – that have development at their center. In particular, the Bank provides information, analysis and data to support the negotiations.
The World Bank welcomes the resumption of the Doha negotiations on February 7, 2007. The talks had been suspended six months earlier, on July 23 2006, to allow a “time out” to review positions and examine available options. There is now a narrow window of opportunity to conclude a preliminary package that could pave the way for a final. All parties will need to demonstrate flexibility and political will for this to happen. The key to reaching such a package remains greater cuts by the US on trade-distorting agricultural support, greater agricultural market access by the EU and further market opening in manufactures by developing countries such as Brazil and India.
Failure to reach a deal would likely also cost significantly in terms of: the potential weakening of the rules-based multilateral system. The access to large markets, predictable framework and transparency provided by this system are important for all countries, but especially for poorer countries for which global markets are critical for economic growth and poverty alleviation. Failure to conclude a deal could also see a surge in the protectionist sentiment in developed and developing countries; increased stress on the WTO’s dispute settlement system; and increased scope for trade diversion from the rapid growth of preferential trade agreements (PTAs), which cannot address systemic distortions such as agricultural subsidies. Moving multilaterally to cut trade barriers remains the best alternative to promote development and reduce poverty.
While not formally part of the negotiations, aid for trade remains an essential complement to a successful Doha Round. Many world’s poorest countries are unable to take advantage of new trade opportunities because of lack of the basic machinery for trade, lack of efficient trade institutions and poor regulation. Aid for trade can help countries address these supply-side constraints and assist countries manage the transitional adjustment costs associated with trade liberalization. The Bank will continue to support aid-for-trade agenda to facilitate the integration of developing countries in the world economy.
Regardless of trade agreements, all countries can benefit from reforming their own trade regimes - to promote economic efficiency and growth while diminishing budgetary waste. The Bank is continuing to advocate for reform of harmful developed country policies, and to work at the country level to promote trade reform and competitiveness in developing countries.
The World Bank welcomes the resumption of the Doha negotiations on February 7, 2007. The talks had been suspended six months earlier, on July 23 2006, to allow a “time out” to review positions and examine available options. There is now a narrow window of opportunity to conclude a preliminary package that could pave the way for a final. All parties will need to demonstrate flexibility and political will for this to happen. The key to reaching such a package remains greater cuts by the US on trade-distorting agricultural support, greater agricultural market access by the EU and further market opening in manufactures by developing countries such as Brazil and India.
Failure to reach a deal would likely also cost significantly in terms of: the potential weakening of the rules-based multilateral system. The access to large markets, predictable framework and transparency provided by this system are important for all countries, but especially for poorer countries for which global markets are critical for economic growth and poverty alleviation. Failure to conclude a deal could also see a surge in the protectionist sentiment in developed and developing countries; increased stress on the WTO’s dispute settlement system; and increased scope for trade diversion from the rapid growth of preferential trade agreements (PTAs), which cannot address systemic distortions such as agricultural subsidies. Moving multilaterally to cut trade barriers remains the best alternative to promote development and reduce poverty.
While not formally part of the negotiations, aid for trade remains an essential complement to a successful Doha Round. Many world’s poorest countries are unable to take advantage of new trade opportunities because of lack of the basic machinery for trade, lack of efficient trade institutions and poor regulation. Aid for trade can help countries address these supply-side constraints and assist countries manage the transitional adjustment costs associated with trade liberalization. The Bank will continue to support aid-for-trade agenda to facilitate the integration of developing countries in the world economy.
Regardless of trade agreements, all countries can benefit from reforming their own trade regimes - to promote economic efficiency and growth while diminishing budgetary waste. The Bank is continuing to advocate for reform of harmful developed country policies, and to work at the country level to promote trade reform and competitiveness in developing countries.
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