WORLD BANK GROUP WORLD BANK GROUP TRADE STRATEGYTRADE STRATEGY

MombertMombert Hoppe, Economist, World Bank Geneva Hoppe, Economist, World Bank Geneva OfficeOfficeBern, February 22, 2012Bern, February 22, 2012

Why a Trade Strategy?1

This is the first WBG Trade StrategyTo date activities guided by a 2001 Development Committee paper; Board papers; a 2006 review by the Independent Evaluation Group and results of the Bank’s research programFocus in 1980s and 1990s primarily on trade incentive framework created by tariffs and other “at the border” policies (“effective rate of protection”) and (real) exchange rate (“anti-export bias”)

The Trade Agenda has Changed2

Globalization has led to deep inter-linkages among countries and increased vulnerability to shocksDeveloping countries are new drivers of global trade (“multi-polarity”)Tariffs often no longer a binding constraint to tradeTrade increasingly involves global value chains and intra-firm transactions → FDI-trade-labor market/skills linkagesHigher demand for natural resources/commodities and potential for services trade offer new opportunities to developing countries – but also

Trade/GDP and South-South trade3

Trend decoupling—starting in early 90s

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1965

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High IncomeHigh Income TrendDeveloping CountriesDeveloping Countries Trend

World Growth 1965 ‐ 2011

• Sustained high growth levels associated with expanding trade• World trade has grown twice as fast as global GDP

Services trade: expanding, but big differences across developing countries5

Drivers: Trade Liberalization6

010

2030

4050

Tarif

fs(%

)

0 2000 4000 6000 8000GDP per capita(US dollars)

1980s 1990s2000s

MFN Applied Tariff Rates versus GDP per Capita

Source: Mattoo and Neagu, 2011

Drivers: Lower transaction costs (NTMsand trade costs); now relatively more important7

40‐50% range

Shepherd, 2010

Drivers: Technology (FDI, ICT, global supply chains)

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Vertical specialization as a share of exports: 33% for Developing Countries in 2005

Source: Canuto, Dutz, and Reis (2010)

Regionalism: spaghetti, noodles, etc.

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Source: Chauffour and Maur, Preferential Trade Agreement Policies for Development, 2011

Trade Openness: Volatility & Risk of Shocks

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Implication: A More Complex Trade Agenda

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Competition is fiercer—more opportunities but also faster displacement of firms/farms/workersMany countries still highly dependent on a few exports: diversification critical for sustaining higher growthMany constraints to international trade and supply chains lie “behind-the-border” – logistics, trade finance, servicesNeed to manage shocks—and limit volatility A multi-dimensional agenda that extends well beyond the remit of Trade Ministries

Strategy informed by consultations:12

Four priority areas 13

Competitiveness/diversification:(better) jobs, including in supplier firms; “self-insurance” against volatility

Facilitation/logistics(Fixed) trade costs/access to (trade) finance more detrimental for SMEs/poor households/remote producers

Trade cooperationCoherence – negative impacts of globally distorting policiesMarket access and market entryRegional market opportunities for smaller firms, farmers

Volatility and inclusionPoor have less capacity to deal with shocks; many do not have opportunity to benefit from trade (“connectivity”)

Relevance to poverty-reduction14

Overarching principles15

Improve coordination, both internal & externalCoordination failures from multi-sectoral dimension of trade

Focus on sources of comparative advantageCountry presence; economy-wide focus; cross-sectoralexpertise; financing capacity and flexibility (investment lending; budget support)

Leverage/build stronger partnershipsRecognize many other sources of trade assistance

Strengthen monitoring and evaluationData to better monitor and evaluate programs and impactKnowledge to ensure informed policy decisions are made (research analysis)

Trade Competitiveness and Diversification

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Export diversification, 1991-2006:Intensive margin (more markets) dominates17

1-year firm survival rates < 50%18

Support to address specific constraints:Asparagus in Peru19

Services input costs/quality: enhancing competition

Trade Facilitation/Logistics & Finance

(and trade-related infrastructure)

21

Africa’s Regional Power Network22

Source: Africa’s Infrastructure: An Agenda for Transformative Action, World Bank, African Development Bank, African Union, 2010

Africa’s Regional Transport Network

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Source: Africa’s Infrastructure: An Agenda for Transformative Action, World Bank, African Development Bank, African Union, Sept. 2010

“Software”: Trade facilitation-related costs

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Documents to export (number)

Time to export (days)

Cost to export (US$ per container)

OECD 4.4 10.9 1,058.70 East Asia & Pacific 6.4 22.7 889.8 Eastern Europe & Central Asia 6.4 26.7 1,651.70 Latin America & Caribbean 6.6 18 1,228.30

South Asia 8.5 32.3 1,511.60 Middle East & North Africa 6.4 20.4 1,048.90 Sub-Saharan Africa 7.7 32.3 1,961.50

Fragile states and logistics performance

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Trade Cooperation (multilateral; regional)

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Global level: Analysis and advocacy of pro-development policies and “win-win” multilateral cooperation

Examples: DFQF market access in G-20, trade impacts of agricultural and climate-change-related policies; access to natural resources (export restrictions); trade as part of solution to collective action problems (e.g., food)WTO; Doha; (NB: Doha ≠ WTO!); multilateralizingregionalism

Regional cooperation: design and implementation of agreements

NTMs; Integrating services markets; Regulatory reformsInfrastructure

Global and regional trade cooperation

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Greater inclusion; managing shocks

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2010-11 global food price surge

Wheat, maize, many other commoditiesUsed detailed data on the extent of pass-through into domestic pricesData on 28 countries & 38 commoditiesEstimate that 44 million have been pushed below the $1.25/day poverty line

68 million entering poverty; 24m escaping

Poverty impacts by country, % pt

Source: Ivanic, Martin and Zaman, “Short run impacts of the 2010-11 food price surge on poverty” WB Policy Research Working Paper 5633

Implementation of the Trade Strategy

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Three main instruments:LendingTechnical assistance, knowledge and policy dialoguePartnerships

ViaRegion-specific work

programs and activities by central units units

Trade in World Bank Country Assistance Strategies

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More than two-thirds of CAS include trade in their operational programs.

CAS increasingly emphasize trade facilitation & the behind-the-border agenda

Lending: WBG is the Largest Provider of Aid for Trade

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World Bank trade-related lending is greatest for Africa

WBG Trade Lending Grew in FY09-10

Stronger focus on “behind-the-border” issuesInclude more ‘software’ (policy/regulatory reform) in transport and trade facilitation projectsMore targeted interventions in competitiveness projects/loans to support diversification, moves up value chainIncreased focus on projects/support for regional integration/cooperation

Including regional Development Policy Operations

Proposed changes in emphasis in lending

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1. Cross-country and cross-industry trade and policy indicators (Trading Across Borders, LPI, Services Policy Restrictiveness Database)

2. Technical assistance for statistics (STATCAP)3. Software platforms and diagnostic toolkits (TTFAs,

DTIS, WITS/McMAPS, TRIST)4. Policy dialogue and project

identification/design/development5. Research and analysis

Implications of changing patterns of international integrationImpact evaluation and policy assessments (NTMs, services, etc.)Greater focus on a “wholesale” model: work with research institutes in developing countries; invest in

Operational knowledge, technical assistance and research

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1. Supporting clients through new knowledge platforms that include a wide variety of external partners

Mechanism to collect, analyze, and diffuse knowledge/good practices on services regulation/reform within/across Regions

2. Cooperation with specialized organizations in the provision of technical assistance

“Annex D” agencies on Trade Facilitation3. Collaboration to provide global public goods such as

datasets; support for multilateral trading systemTransparency in Trade (TnT) data initiative (AfDB, ITC, UNCTAD) WITS/McMAPS

4. Agreements re: specific areas of expertise and collaboration

E.g.: AfDB—monitoring implementation of PTAs; IMF/WCO: technical assistance in the customs/revenue area

Partnerships as implementation instruments

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Partners/partnerships37

International organizationsRDBs, WTO, ITC, UNCTAD, IMF, WCO, OECD, etc.

Global initiativesEnhanced Integrated Framework

Private sector (data; public goods)Global Facilitation Partnership (freight forwarders; logistics and express industries)Private sector aid for trade—e.g., software for Customs

Development partners (donor community)CSOs and national/regional policy research

Better Internal Coordination38

Trade is multi-sectoralInfrastructure; finance & private sector development; IFC, MIGA, agriculture, transport, etc.

Cross-cutting issues such as managing trade shocks, food prices, and climate change require coordination (social safety nets; environmental policies/programs)Address overlaps that can lead to uncoordinated views/policy advice across the Bank Group and missed opportunities for synergies/complementaritiesCountry teams and clients may be unaware where

ti i t / t b ht

Three New Internal Coordination Mechanisms

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Better Coordination within the Bank

40 A Bank Group-wide Trade Council

Results Focused41

Indicators of global progressFirms’ ability to access international markets; diversification; market reach; export survival; services

Outcomes / impacts in client countriesResults in the main priority areas identified by the Strategy

Results by WBGOrganizational changes aimed at implementation of the StrategyMeasures relating to knowledge generation, dissemination and useMeasures that concern quality of TA and lending/credits

http://www.worldbank.org/tradestrategy

Thank you