Aid for Trade: Mainstreaming Trade

1
Aid for Trade Mainstreaming Trade

• Richard Newfarmer
• Special Representative to the WTO and UN
• World Bank
• Geneva

WTO Aid for Trade Meeting November 19, 2007
2
Should trade receive greater attention in
national development strategies? Yes, in most
countries
Average ratio of exports / GDP
High Performing 13 N13
MICs N44
LDCs N37
Source Bank staff calculations based on data
from World Economic Outlook
3
LDCs share of the global market is stagnant, and
competitiveness has lagged
Total share in world exports of goods
High Performing 13 N13
MICs N44
LDCs N37
High performing countries are the 16
fastest growing, non-oil countries over the 25
year period, 1980-2005 here we exclude three
high performing LDCs (Burkina, Cambodia and
Uganda), and remaining 13 are Botswana, Chile,
China, India, Indonesia, Korea (Rep.), Malaysia,
Mauritius, Pakistan, Singapore, Sri Lanka,
Taiwan, Thailand. Averages are unweighted to
eliminate effects of country size. LDCs include
3 high performers, but exclude 12 of the 49 LDCs
for which data are not available.
4
Improving competitiveness goes beyond trade
ministry and includes trade-related institutions
Days
Average Days to Export and Import in 2005
LDCs
MICs
HPs
Source Bank staff calculations based on data
from Doing Business Report 2006.
5
Improving competitiveness goes beyond trade
ministry and includes trade-related
institutions... And infrastructure
Internet Price in 2005 (USD per month)
USD
LDCs
MICs
HPs
Source Bank staff calculations based on data
from WDI.
6
Improving competitiveness goes beyond trade
ministry and includes trade-related
institutions... And infrastructure
Days
Average Number of Electrical Outrages (days)
Source Bank staff calculations based on the
latest data available from Enterprise Surveys.
7
Ways to make trade more central to development
strategies?

• Country awareness that competitiveness matters
  for growth and poverty reduction
• Importance of openness to drive productivity
  growth
• Exports provide wider markets and economies of
  scale
• Imports provide lower cost inputs, embodied
  technology and competition
• Movement of people provides access to greater
  skills
• Easing restrictions on financial flows can lead
  to increases in investment and in technology
• Investors, including domestic ones, have a choice
  of location
• Governments have to develop their own strategies
  and integrate into national development programs
• Some country-specific combination of
  liberalization complementary policies
• Competitiveness requires that the whole economic
  cabinet be involved -- and eventually private
  sector and civil society involvement

8
The Enhanced Integrated Framework can help LDCs
with the competitiveness agenda

• Country control of resources and projects is
  essential to ownership and success
• Governments can commission diagnostics and obtain
  policy advice
• Governments can use it to mobilize and organize
  donors
• Governments can use it to lever project finance
• but creating a new institution has taken time
• Meantime, Government should use existing
  mechanisms to secure greater investment in
  overcoming constraints
• Non-LDC low income countries have to look for
  other facilities
• Including the World Banks Multidonor Trust Fund
• Other Trust Funds and resources e.g., EU funds
  associated with EDF might help Japanese trust
  funds

9
Ways the World Bank supports government programs
to improve competitiveness

• Country studies
• Regional studies

• Policy
• Sector loans
• Project loans

• Small projects
• Technical assistance

World Bank is the largest provider of aid
for trade to LICs, providing 3.1 b. Source
WTO/OECD
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World Bank programs services government can
request

• Concessional lending 3.1 billion lending
  (WTO/OECD, 2007)
• Development policy lending 1.7 billion
  (2002-2005) (WTO/OECD)
• Nonconcessional lending for economic
  infrastructure 4.7 b.
• Training Over FY 2006-07, the WBG held an
  average of 48 trade-related training courses
  (around 14,000 participant training days per
  year),
• Technical assistance activities (free-standing)
  36 per year in 2006-2007
• Analytical and policy advice (policy notes,
  country studies, regional studies) 72/year
• Guarantees to leverage private finance For
  example, Global Trade Finance Program 1 b.
  revolving fund to stimulate trade financial flows
  to developing countries
• on 87 banks in 48 developing countries
• Trust funds, for example
• Standards Trade Development Forum -- Trust Fund
• IF and EIF
• Multi-donor Trust Fund
• Africa Catalytic Growth Fund
• Global public goods Doing Business, Overall
  trade restrictiveness index WITS

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Aid for trade, according to the WTO/OECD
LDC and other Low income countries LDC and other Low income countries Middle Income Countries Middle Income Countries Total aid for trade Total aid for trade
US Billion of total US Billion of total US Billion of total
Japan 2.2 15.9 2.8 26.2 5.0 20.4
United States 0.6 4.4 3.1 29.0 3.7 15.2
EC 1.9 13.5 0.8 7.5 2.7 10.8
Other EC Members a/ 1.1 8.0 0.7 6.1 1.8 7.2
United Kingdom 0.9 6.5 0.2 2.2 1.1 4.6
Germany 0.4 3.0 0.7 6.0 1.1 4.3
France 0.4 2.9 0.3 3.0 0.7 2.9
Canada 0.2 1.1 0.1 0.8 0.2 1.0
Italy 0.1 0.7 0.1 1.1 0.2 0.9
Other bilateral b/ 0.4 2.9 0.2 1.8 0.6 2.4
Sub total bilateral 8.1 58.8 9.1 83.7 17.2 69.8
World Bank 4.2 30.6 0.5 4.2 4.7 19.0
Asian Development Bank 0.6 4.3 0.4 3.9 1.0 4.1
African Development Bank 0.6 4.6 0.1 0.5 0.7 2.8
Interamerican Development Bank 0.1 0.8 0.1 1.0 0.2 0.9
Other agencies 0.1 0.8 0.7 6.6 0.8 3.4
Sub total multilateral 5.7 41.2 1.8 16.3 7.4 30.2
Total 13.8 100.0 10.8 100.0 24.6 100.0
Average 2002-05 in constant 2004 dollars
Source World Bank Aid for Trade Harnessing
the Global Economy for Development Oct 2007
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Three elements to improve competitiveness

• Improving incentives to private investors to move
  resources to more productive activities tariffs,
  taxes, business regulations
• Up-grading services industries telecoms, air
  transport, ports, energy

13
Three elements to improve competitiveness

• Improving incentives to private investors to move
  resources to more productive activities
• Up-grading services industries telecoms, air
  transport, ports, energy
• Adopting pro-active policies to help firms and
  labor adjust

Government Program (June 2006)
Investment Lending
Technical Assistance
Development Policy Loan 30 m. (Conditionality
is govt program)
Co-financing French Agency for Development 30
m.
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Key lessons from experience in aid for trade .

• Improving competitiveness is central to
  achieving high and sustained growth rates and
  has to be made a pillar of national development
  strategies
• Aid for trade can help, but country ownership
  of the competitiveness agenda is critical
  success
• The role of the Bank and donors role is to
  support government programs with diagnosis and
  finance.

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References

• Brenton and Newfarmer (2007) Watching more than
  the Discovery Channel Export Cycles and
  Diversification in Development, World Bank
  Policy Research Working Paper 4343.
• World Bank Mauritius From Preferences to Global
  Competitiveness Report of the Aid for Trade
  Mission, April 2006.
• World Bank/IMF Aid for Trade Harnessing the
  Global Economy for Economic Development Paper
  prepared for the Development Committee, October
  2007

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Aid for Trade Mainstreaming Trade

• Richard Newfarmer
• Special Representative to the WTO and UN
• World Bank
• Geneva

WTO Aid for Trade Meeting November 19, 2007