World Bank Launches Trade Strategy

22 June 2011

The World Bank Group released its first ever Trade Strategy on Thursday 16 June, after conducting a six-month series of consultations with stakeholders from government, civil society, the private sector, bilateral donors, and other international organisations. The strategy will guide the Bank's trade support activities for the next decade.

The move to develop a trade strategy came in response to a 2006 report from the Independent Evaluation Group, the World Bank Group's internal evaluation unit. The IEG report, while recognising the Bank's success in opening trade markets, criticised the organisation's trade-related projects for not "consistently or systematically address[ing] poverty and distributional outcomes."

The IEG also found that the Bank "paid insufficient attention to trade-related operations; countries' external environments; and, to complementary policies that can improve their competitiveness in world markets," according to the Trade Strategy's overview of the 2006 report.

Much of the motivation for developing an official trade strategy was to adjust to a "changing trade landscape," with developing countries making up a growing amount of global merchandise trade. The report notes that exports from developing countries increased by 80 percent between 2000 and2009, while the rest of the world only saw a 40 percent increase. However, the growing openness of trade over the last couple of decades has also made countries vulnerable to global shocks, such as the recent financial crisis.

Bernard Hoekman, Director of the International Trade Department at the World Bank, was on hand to present the report at the Geneva launch event, held at the WTO.

After outlining the Bank's earlier focus on the "trade incentive framework" - i.e. tariffs and other "at the border" policies, Hoekman noted that today's "policy agenda is increasingly a ‘behind the border' agenda." In other words, the main obstacles for developing countries the costs of producing and exporting goods to markets, as opposed to tariffs.

The new Trade Strategy outlined four pillars around which the Bank plans to structure its trade-related activities, in light of this new trade environment. These priorities include trade competitiveness and diversification; trade facilitation and trade finance to cut transport costs; support for market access, international trade co-operation for better integrated regional and global markets; and managing external shocks.

With trade facilitation, for instance, the Bank hopes to address the infrastructure problems and high transaction costs that make it difficult for developing countries to engage in international trade. The Bank, through its International Finance Corporation (IFC) branch, hopes to improve firms' access to trade credit.

Food prices, regional co-operation

Hoekman also emphasised that the World Bank's efforts would target the 2010-2011 global food price surge (for more on food prices, see our article on the OECD-FAO Agricultural Outlook in this issue). The Bank is "going to stress in the trade strategy...the role trade can play" regarding improving food security and "attenuating" volatility.

When discussing the Bank's focus on improving global and regional co-operation, Hoekman briefly alluded to the struggling Doha Round at the WTO. "What I would stress is Doha is not the WTO"; given the Round's current challenges, the Bank intends to help "leverage those agreements already in place" so countries can benefit from those agreements.

The Bank intends to implement its trade-related work via region-specific work programmes, which will span over a series of years. The region-centric work will be co-ordinated via an internal Trade Council. The Bank's activities will primarily take the form of lending and technical assistance; knowledge and policy dialogue; and external partnerships, combined with improvement co-ordination with development partners.

At the event, WTO Deputy Director General Harsha Vardhana Singh praised the Bank for developing the strategy, as "this is the moment where we must build on wealth" that the world market has created, especially in a world where some people are living at "one-half the cost of a cup of coffee." He emphasised that trade must be "part of an inclusive development approach."

At the same time, Singh urged the Bank to avoid delays, as they would weaken "the credibility of the strategy."

Areas for further research remain

ICTSD Chief Executive Ricardo Meléndez-Ortiz provided the commentary at the Trade Strategy launch event. Meléndez-Ortiz commended the Bank for their four pillars, noting that these track with many of the priority lists that least developed countries (LDCs) have put together in recent years.

While the idea of a Bank-wide strategy was a step forward from previous sporadic research-based and ad hoc activity, Meléndez-Ortiz pointed out that there were some issue areas that required more focus and bank attention.

For instance, he urged the Bank to explore further the policy implications of twenty-first century trade transactions that bundle together goods, services, technology, and investment, and involve multiple actors in diverse jurisdictions in the production of final tradable products. He also suggested that the Bank further investigate the links between trade and poverty, beyond the traditional job and price effects, as that is an area of research that is still "very poorly understood."

In this context too, he noted that it is critical for the Bank to incorporate a better reading of the nature of trade-led growth, which can "lift people out of poverty" or generate perverse welfare outcomes, such as jobless growth or exacerbation of inequality. Therefore, interventions on trade need to contain methodologies and review processes that ensure "how at least not to do harm with trade policy."

He also recommended that the Bank look into green growth strategies and transformative low-carbon policies, as well as examine the potential implications of different Doha Round options.

The World Bank Trade Strategy can be viewed online at the World Bank website.

ICTSD reporting.

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