Summary of key points in “Leveraging Trade for Development: World Bank Role”
14 March 2001 (at www.worldbank.org/springmeetings/)
A new World Bank paper, for discussion by ministers in Washington DC at the Bank/Fund Spring Meetings on 30 April, pledges increased World Bank work on trade. The Bank “is intensifying its trade-related activities at all three levels-global, regional, and national”. The paper claims that: “the Bank’s role is unique. It is capable of integrating the complex multilateral and sectoral trade policy issues with economic growth and poverty reduction objectives. The Bank’s advantage is that it can combine trade policy analysis with significant sectoral expertise into a comprehensive view of how globalization can promote development” (p.14). This briefing aims to summarise the Bank’s arguments and actions in the trade area.
The Bank’s paper recognises problems with the Uruguay Round trade regime – for example the delays in industrial countries’ liberalising their textiles and clothing import restrictions, and issues around the trade-related intellectual property regime (p.4).
The paper emphasises that “developing countries now constitute a sizable majority of WTO membership and have a particular stake in a strong, nondiscriminatory multilateral system of rules. Progress on important issues such as liberalization in agriculture and services is only likely to occur as part of multilateral negotiations. Small countries, often with limited bargaining power vis a vis larger trading partners, can derive protection from the system of global rules” (p.6).
The paper discusses the “increasing complexity” of national policy-change in this area. “Many [developing countries] have reduced border barriers – tariffs, nontariff barriers and customs inefficiencies. This has exposed a huge new agenda in all regions of ‘behind the border’ issues: trade in services, standards and technical regulations and investment policies as well as sectoral issues in finance, transportation and telecommunications; policies in those areas have to be sound to take advantage of the opportunities that globalization presents” (p.9).
Whilst noting the advice of leading economists such as Danny Rodrik that “openness is part of a development strategy: it does not substitute for it”, the Bank describes a range of ways in which it is working to bring all countries into the international trade system. “Our instruments are analysis, advocacy, and advice. … Our priorities are on five areas: market access for merchandise trade, trade in services, intellectual property, product standards, and preparation for WTO accession.” (p.16).
The paper notes that the WTO looks to the Bank to provide analysis on trade integration policies, as it is presently doing for the WTO 2000 project on developing countries and the next round of trade negotiations.
World Bank Group planned activities on trade
- Global Economic Prospects 2001 and 2002: Reports aim to be “agenda setting, positioning developing countries for a new round, and calling world attention to market access and trade-related development issues”
- Handbooks on Trade Policy and Negotiations: Preparing developing countries for a new round with handbooks on comprehensive WTO issues and on agriculture. The handbooks contain computer software tools for evaluating market access conditions and negotiating options.
- Policy Studies: Insight into opportunities and potential anti-development bias in services, TRIPS, and standards, aimed at influencing WTO discussions in coming years, joint study (with IMF) for G8 summit on market access for developing countries.
- World Bank Policy Research Report on Globalization due to be released this summer.
2) training and advice
- Capacity building for accession to the WTO: More informed decisions on WTO accession, better development outcomes, and more enduring agreements among clients
- Trade policy training programs through World Bank Institute.
- Advice on foreign direct investment policy regimes through the Bank Group’s Foreign Investment Advisory Service
- Advice and dialogue on the architecture of regional trade agreements, including through policy research and regional studies
- Advice and support for low-income countries for PRSPs: Integrated Framework studies that identify key constraints to integrating into the world economy (for about 10 countries in 2001/2002)
- Advice and support for trade policy reform through Bank Economic and Sector Work and program lending.
3) credits, and investment loans
- Sectoral advice and support in investment policies, regulatory reform and standards and services. Economic and sector studies and loans in the areas of finance, transport, telecommunications, trade facilitation and business services.
- International Task Force on Commodity Risk Management in Developing Countries. This aims to find ways for commodity risk management markets to become accessible to consumers and small businesses in developing countries.
Country-level: the Integrated Framework
“The Bank will have to weave country activities to promote trade integration into the whole cloth of the Bank’s country assistance strategy for each country. For low-income countries, trade policy is increasingly important to many governments’ Poverty Reduction Strategies. Because much analytical and capacity-building work remains to be undertaken, donors have agreed to adopt an Integrated Framework for the Least Developed Countries. The purpose is to analyze options for trade-led integration, determine the relative payoff to trade-related reform, and work with local counterparts to design appropriate policy reform packages that both promote growth and protect the poor during the reform transition as options the government might consider in preparing its poverty reduction strategy papers (PRSPs). The process starts with analysis: how trade might fit into national development strategies, followed by assistance in the design and financing of projects (drawing on cross-country experience)” (p.21).
The Integrated Framework, established in 1996, aims to increase the effectiveness of trade-related technical assistance to the least developed countries. Participating agencies include the WTO, the IMF, the International Trade Center, UNDP, UNCTAD, and the World Bank. By the summer of 2000, 40 least
developed countries had completed a “needs assessment” for technical assistance in trade, the first step of the IF process. However, “an independent review of the IF, completed in June 2000, highlighted the lack of clear priorities in the program, weak administration, and shortfall in donor resources. The IF has since been redefined to “ensure better integration of trade with national development strategies”. In early 2001, a pilot program was agreed upon, and many bilateral donors decided to support the program by contributing to a trust fund for the Framework. A series of “trade integration studies” are being carried out to analyze trade obstacles and prioritize technical assistance requirements, to be completed by November 2001. These could become important building blocks for governments to consider as they formulate their poverty reduction strategies and country development strategies. The Bank is taking the leadership in this process (p. 22).
Intellectual property rights
On intellectual property rights the paper notes that “developing countries need help to develop forms of intellectual property rights that protect assets…specific needs in areas such as pharmaceuticals…recognise the rights of farmers cultivating traditional varieties” (p15, para 49). The paper emphasises the importance of considering development needs when implementing and managing intellectual property rights. “Appropriate management of intellectual property rights should strike a balance between the need to spur innovation in knowledge intensive industries and the need to facilitate technology trnsfer to developing countries – especially in medical and agricultural research.”(p.16).
Regional trade agreements
The paper analyses regional agreements and sets out the Bank’s plans for helping help developing countries programme, design and implement such agreements. It claims that inorder for this to be possible, the dialogue on regional arrangements needs to be deepened and regional studies conducted. “Regional arrangements are becoming increasingly important for trade policymakers in the developing world. The Bank is focusing on analyzing their effects, on helping governments to shape arrangements so that they expand trade and become steppingstones to more effective multilateral participation, and on advising prospective members about costs and benefits. Understanding the effects of the largest arrangements, such as the proposed Free Trade Arrangement of the Americas and the European Union agreements, is especially important.” The Bank does not have formal standing in these negotiations “…only by virtue of its expertise and analysis will it be invited to participate. Nonetheless, its potential role could be very important” (p.19).
New analytical tools
The Bank also aims to produce general analytic tools and templates to help countries “analyse the trade, growth and distributional consequences of trade policies on the economy”(p15, para 48). It is writing hand books “that will cover key issues relevant for regional and multi-lateral negotiations, and practical tools to analyze offers by trading partners”(p15, para 46). Training activites are also being provided “to ensure that studies get translated into greater knowledge and enhanced technical capacity amongst … clients”(p15, para 46). The paper argues that:
“since segments of the poor may be hurt by trade liberalization in the short run, determining the incidence of the tariff structure and the implications of this incidence-for the poor, for employment, for regions, and so forth-is important for incorporating the poor into subsequent growth as well as for mobilizing support for reform. Further efforts are needed to analyze the gainers and losers in the transition process and adjust the policies, wherever possible, to take into account the political economy of income redistribution. One example is three studies for Vietnam focusing on the impact of liberalization of sugar and petroleum, and of trade more broadly, on low-income groups. The Bank intends to deepen its knowledge and provide policymakers with analytical tools needed to answer some key questions. The first building block is the PRSP handbook on trade now under preparation jointly with the IMF; the second will be new modeling tools to accompany the handbook; the third will be to help governments build these into their poverty reduction strategies” (p.23).
“The Bank’s objective is to help developing countries use the system of multilateral rules to expand their trade and development. In particular, the Bank is focusing intensively on the barriers facing least developed countries (LDCs) in using trade to promote development. These barriers matter. For example, if the United States, the European Union (EU), Canada, and Japan were to give free access to the least developed countries, net exports of LDCs would increase by about 11 percent, and non-oil exports from Africa would expand by 14 percent. Beyond the issue of access for least developed countries, the Bank is working on global issues that affect all developing countries: trade in services, standards, transport, and intellectual property as well as foreign direct investment.” (p.iii).
Selected links to independent analysis on trade issues
The Death of Development? The Converging Policy Agendas of the World Bank and the World Trade Organization, Lisa Jordan, Bank Information Centre: www.bicusa.org/publications/deathdev
Articles on regionalisms and alernatives gathered by the Transnational Institute: www.tni.org/quebec/analysis/analysis.htm
Essays from Focus on the Global South: www.focusweb.org/publications/Books/why%20reform.htm
Portal site with materials on trade: www.WTOwatch.org