The World Bank Group has changed the focus of its trade activities over the last decade, moving away from programs focused primarily on trade liberalization towards a wider range of support for clients. The Bank places emphasis on the poverty and employment impacts of trade and trade policies. These are core elements of the World Bank’s first Trade Strategy which was launched in 2011, following extensive consultations with our clients and partners. The Trade Strategy centers on supporting diversification; lowering transport and other trade-related costs; improving access to trade finance; and, focusing more on the poverty and employment impacts of the shocks and greater volatility that can be associated with trade integration. A key objective of the Trade Strategy is to improve how the World Bank helps its clients make better use of existing knowledge and deliver assistance for trade liberalization, export diversification, lower transport and other trade-related costs in real time.
Support for country trade policies and institutions
Much of the Bank’s country-level work aims to support the operational priorities and projects of developing countries in a variety of topics, including trade integration and facilitation, WTO accession, regional trade agreements, the Doha Round of multilateral trade negotiations, agricultural and services trade, export competitiveness and diversification, standards, and customs modernization.
With regard to WTO accession, of special note is the Bank’s China program, which has moved from pre- to post-accession issues. The Bank has also been engaged in Cambodia, Ethiopia, Iran, Laos, Libya, Russia, Saudi Arabia, Sudan, Syria, Ukraine, Vietnam, and Yemen.
On customs modernization, the Bank’s engagement in Lesotho is supporting collaboration with South Africa to harmonize customs and border procedures between the two countries. Activities within this project are supporting the creation of a Trade Information Portal, Information Exchange Facility, business change management program, and piloting of joint controls.
In Tanzania, the Bank has been the leading partner in promoting good practice in the Special Economic Zones (SEZ) program. This is helping to combine the country’s SEZ and EPZ into one regime; adopt a recommended priority zone; adopt a phased approach in developing the Bagamoyo SEZ; and increase private sector representation on the EPZ governing board.
In Mauritius, the fourth Trade and Competitiveness Development Policy Loan ($50 million), approved in November 2009, supports reforms that respond to two major challenges facing Mauritius: the “triple trade shock” of trade preference erosion in sugar and apparel; high oil prices; and the transition from a low-wage, low-skill sugar and apparel exporter to an innovative, knowledge- and skill-based services economy. The government’s reform program focuses on consolidating fiscal performance, improving trade competitiveness and trade regulations (Non-Tariff Measures), improving the investment climate and widening the circle of opportunity through participation, social inclusion, and sustainability.
World Bank trade-related diagnostics include comprehensive country-focused diagnostics, such as the Diagnostic Trade Integration Study (DTIS), and DTIS updates carried out under the multi-agency Enhanced Integrated Framework for Trade-Related Technical Assistance for Least Developed Countries (EIF). They also include trade chapters in Country Economic Memoranda or Development Policy Reviews, which are the key vehicles for the Bank’s overall economic policy dialogue, as well as regional studies and specialized analyses, such as Trade and Transport Facilitation Audits (TTFA), Trade Competitiveness Diagnostics (TCD), and guidelines to rationalize Non-Tariff Measures (NTMs).
Under the EIF, the Bank has completed, or is undertaking, DTIS and DTIS updates for Afghanistan, Bangladesh, Benin, Burkina Faso, Burundi, Guinea, Haiti, Liberia, Malawi, Sao Tome and Principe, Sierra Leone, Uganda, and Zambia.
The TTFA allows initial diagnostics of logistics constraints and has been conducted in over 40 countries over the past seven years. A training manual includes lesson plans, handout notes to be used as teaching aids, and five case studies. Lesson plans provide guidance on: supply chain performance, cargo clearance, transportation efficiency (time, cost, and reliability), transactions (contracts, trade finance), and organization of field work. Handouts give information on international conventions on trade and transport facilitation and customs modernization efforts. Case studies have so far been developed on Sri Lanka, Bangladesh, Lebanon, DR Congo and Malawi. The courses will be jointly implemented with development banks, and UN agencies.
The TCD provides a systematic assessment of a country’s relative trade performance and competitive positioning, including growth and orientation, diversification, quality and sophistication, and firm participation and survival. It includes a framework for analyzing the determinants of competitiveness, covering: market access, the macro-incentive framework, factor conditions, and trade promotion infrastructure. TCDs have currently been developed for a number of countries including Nicaragua, Romania, Turkey, FYR Macedonia, Russia, Kazakhstan, Qatar, Liberia, Senegal, Ghana, Kenya, Swaziland, Nepal, Pakistan, Indonesia and Georgia with regional applications in both Central America and Central Asia.
The World Bank has also developed a toolkit for policy makers to streamline Non-Tariff Measures (NTMs) and improve governance on trade regulations. NTMs may be legitimate measures addressing market or coordination failures and achieving a wide range of policy objectives from consumer safety and health to environmental purposes. However, when poorly designed, they can hurt competitiveness and unnecessarily raise the costs of doing business. The toolkit is practical and includes questionnaires and guidelines to better evaluate the underlying issues that existing NTMs are trying to address, and to devise policy recommendations to reform them. It also provides a framework to improve inter-ministerial coordination and consultation with the private sector through effective institutional setup.
This work is complemented by a growing body of analysis for the private sector through the Investment Climate Assessments and the Doing Business country data, including data on trading across borders (e.g., number of documents, time and cost to export and import) for 183 countries. Knowledge and trade data are key tools to engage with countries on policy dialogue, to inform country developing strategies, and to integrate trade into operational programs.
Progress in making trade part of country growth strategies and Country Assistance Strategies (CASs) has been noticeable since 2006, when the last review of trade in CASs was undertaken by the Independent Evaluation Group (IEG). More than 65 percent of Country Assistance Strategies include trade or trade-related activities in their programs. Most trade programs in CASs focus on trade facilitation and export promotion rather than traditional market access issues. Trade is therefore on the agenda of the majority of the Bank’s clients and is translating into increased operational support, through analytical work, lending, and technical assistance. Through its Trade Strategy, the Bank is working to accelerate this trend.
Support for multilateral and regional trade negotiations
In an interdependent global economy, many trade challenges confronting developing countries cannot be addressed solely by unilateral action. A country’s ability to advance its development objectives through trade depends in part on the market access conditions that confront its exports and on the extent to which agreements limit its ability to use specific policies. National trade policies can impose externalities, both positive and negative, on other countries. Identifying negative spillovers and inducing trading partners to attenuate these is a major challenge for many developing countries. The World Bank is working on three priorities in this area.
The first priority is engaging in analysis and advocacy to make international trade rules and institutions more supportive of the needs of developing countries. The World Bank continues to examine policies that create major distortions in global markets and adversely affect the poor (e.g. agricultural subsidies, including for biofuels) and advocate for their removal. During the past decade, the World Bank has supported both regional and multilateral (WTO) trade negotiations through research and analysis of policies that have negative effects on developing countries – such as agricultural export subsidies, restrictive rules of origin, tariff peaks and escalation, and the implications of potential international disciplines affecting investment, competition, procurement, the protection of intellectual property and bio-diversity. The World Bank undertakes such research and analysis to promoting pro-development outcomes through multilateral cooperation as well as to identify policy options that can help governments achieve desired outcomes.
A second priority is supporting the processes of regional market integration. Regional trade agreements increasingly address policy areas that are entirely new to developing countries. These agreements are no longer just about tariff reductions, but revolve increasingly around “behind-the-border” policies that will promote development and facilitate engagement in international supply chains. Experience suggests that what matters for developing countries in the design of such agreements is evidence-based analysis and policy advice on what works for economic development and the poor. The emergence of new global growth poles is also driving countries to form alliances with new partners. Major traders, including the EU, China and the US, have made preferential trade agreements a centerpiece of their trade policies. As these large regional groups/countries pursue agreements with each other and with smaller trading partners, it is important that governments of developing countries have access to information and analysis concerning the rule-making options they confront and their possible implications. The World Bank therefore continues to undertake analysis of prevailing PTAs, placing a greater focus on assessing the experiences of countries implementating specific PTA provisions on behind-the-border regulatory policies.
The third priority is supporting regulatory reform and cooperation. Investments in regional infrastructure are key to regional trade and market integration. Firms need cheap and reliable access to high-quality backbone services to compete effectively in output markets. However, inadequate inter-governmental cooperation often prevents the construction of regional infrastructure that can realize welfare gains from regional trade. Similarly, regional cooperation on common standards and accreditation requirements is important for regional services trade. Of particular importance is assisting governments to reduce non-tariff barriers to trade through streamlining of existing measures and through the adoption of better regulatory practices. The World Bank has developed an NTM toolkit tailored to the needs of developing countries based on the principles of Regulatory Impact Assessment. The development of a Temporary Trade Barriers Database has also been particularly useful in identifying these barriers, as will be a new NTM database (currently being developed in partnership with Geneva-based agencies and regional development banks) and cooperation on services data. A new instrument – knowledge platforms –is also being deployed to support regional market integration, particularly in the area of services policies and associated capacity-building needs. The scarcity of data on services policies renders the World Bank’s efforts to collect such data as a global public good even more important.
Economic and Sector Work (ESW)
Most trade ESW falls into three categories: (i) broad, trade-centered studies, such as DTIS conducted under the EIF, and growth and competitiveness studies; (ii) trade chapters in Country Economic Memoranda; and (iii) on-demand policy notes requested by governments. Topics vary widely and include tariff and non-tariff policies, impacts of regional agreements, WTO accession, liberalization of services, and FDI.
Examples of recent trade ESW include:
- Reports on food trade such as Africa Can Feed Africa highlighting the importance of removing barriers to regional trade in food staples and The Grain Chain that considers critical aspects to the wheat import supply chain and proposes various strategies Arab countries can consider to mitigate import risks;
- Trade chapters in Country Economic Memoranda (CEMs) for Lesotho, Malawi, Madagascar, Mozambique, Mauritius, Peru, and Nigeria;
- A diverse program on services trade in Africa that is delivering analytical work on professional, health and education services, financial services, tourism, distribution services, and ICT services;
- A major program on regional integration in South Asia, including policy notes (e.g., on services, export diversification, non-tariff barriers and trade in lagging regions) and a regional trade facilitation study to identify ways to reduce trade costs between countries.
The Bank’s trade-related research is an important source of information and analysis, playing a key role in informing developing countries of the implications of trade policy choices at the national or regional level, and for WTO negotiating options. For example, the Bank’s analysis of agricultural trade barriers has highlighted the importance of market access relative to domestic support or export subsidies in the WTO Doha Round. In fiscal year 2012 (FY12), Bank research on trade covered, for example, firm-level determinants of export success; impacts of the financial and food crises on trade; the role of technology adoption and import competition for exporting firms; impact evaluation of trade support interventions; migration; and, the interactions between labor mobility and trade, investment and technology flows. The World Bank’s research group has also developed a widely used index to measure the trade restrictiveness of countries’ trade barriers and a database for monitoring temporary trade barriers, e.g. antidumping. The Bank also provides assistance to research institutes based in developing countries.