This briefing critically analyses the World Bank’s increasing role in trade capacity building. In its role as capacity builder, the Bank has enormous influence over the hearts and minds of trade policy makers and the way in which trade is mainstreamed into national development plans. The initial experience of the Integrated Framework programme shows that there is reason for concern.

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Executive Summary

The World Bank is being forced to distance itself from the “political incorrectness” of imposing liberal trade reforms via loan conditionality; increasingly, the more common route to influence trade policy is via trade-related capacity building (TRCB). The latter strategy coincides both with the Bank’s re-positioning as a provider of development knowledge (the ‘Knowledge Bank’) and the pivotal role which TRCB has been set up to play in keeping the trade liberalization bicycle moving forward to the next round of multilateral trade talks in Mexico in 2003.

After a certain hiatus, the Bank is rapidly increasing the amount of resources it dedicates to this area. Already, the Bank is involved in a myriad of trade-related research and training activities at the national, regional and global levels. This briefing examines in detail the role of the Bank in the Integrated Framework for technical assistance to the least developed countries (IF). After a failed first attempt, this initiative, designed to coordinate the TRCB activities of the multilateral agencies and donors, has been revamped and is now touted as laying “at the heart” of efforts to use trade as a means to reduce poverty.

The Bank brings considerable ideological and institutional baggage to the TRCB agenda. In the face of mounting evidence to the contrary, including research within its own walls, the Bank refuses to abandon its dogmatic contention that openness leads to growth and poverty reduction. Furthermore, despite foisting ‘good governance’ and the need to encourage a diversity of opinions on developing countries, it continues to fund only those partners which share its views on trade; ‘off-message’ views are quashed by external affairs “thought police” before seeing the light of day in the policy department.

The Bank’s role in the IF has drawn considerable criticism, stemming from fears that the Bank is essentially cannibalising other agencies. Both in the selection of countries participating in the IF and in the evaluation of the pilot scheme, the Bank is charged with having disproportionate influence. Its coordination of the diagnostic studies which provide the basis for the remaining phases of the IF, has been criticized for having taken a “cookie-cutter approach” which, in advocating a set of aggressive trade liberalization measures, has failed to learn from other agencies and sectors in-country.

There are two reasons why the Bank’s increasing role in TRCB should be checked. First, is the risk of upstream conditionality. With its size, reach and resources, the Bank’s role in coordinating TRCB will result in an intellectual straitjacket being thrown over the entire trade policy process – from the choice of research areas and how that research is conducted through to the shape of trade-related institutions and the training of trade negotiators themselves. Secondly, the Bank’s lead role in mainstreaming trade into PRSPs via the IF offers the opportunity to lock the trade liberalization agenda into national development plans of the most vulnerable countries. UNDP (2001) has already voiced concerns that in Cambodia “the IF on trade and poverty undermines (rather than supports) key PRSP principles”.

This briefing recommends that the Bank refocus itself on its mandated role of providing loans or grants to fund initiatives identified in TRCB assessments. Instead of funding Bank-led TRCB coordination from Washington and Geneva, donors should increase support for coordination at the national level. This would involve supporting a diversity of non-Bank agencies to provide capacity building expertise, including UNCTAD and UNDP, as well as regional organizations and private sector, academic, intergovernmental and non-governmental organizations.

Developing countries urgently need to better coordinate their activities and seize the initiative on trade capacity building. There must be no quid pro quo, that is TRCB funding must not be allowed to be linked to concessions in negotiations; donor attempts to earmark TRCB funds for initiatives which fulfil their own trade objectives must be rejected; and resources must be committed to shaping the design and implementation of the TRCB agenda in-country rather than leaving it to the status quo of the World Bank and the donor community.

Civil society organizations need to increase their role in TRCB activities such as the IF. Priorities are to ensure an independent, multi-sectoral evaluation of the IF in the short term and establishing accountability criteria for capacity building more broadly. National development goals developed according to transparent and participatory principles should direct the IF, and not the other way around. Ultimately, it will be up to the development community to prevent the Bank from cornering the market on trade capacity building.

Comments

This was a very useful summary, and I agree with much of it. I think that you should be at least as worried about donor efforts as by the WB. At least the WB (like UNCTAD) is trying to impose its view of a ‘good’ trade policy for the developing country (even if some of us may disagree about how good it is). A donor is partly doing that, but may be partly trying to impose a policy that is ‘good’ for the donor.

I agree that this has to include how to bend, if not break, the rules, and there the problem is the increasing aid given by or in association with the WTO. It can’t be expected to offer advice on this (as it would admit).

I think that it is important to recognise that the competent developing countries know what is happening, and know when to use and when to ignore help (As the Jamaican ambassador to the WTO has said: If you don’t wish to cross the street, or are not ready to do so, you may ultimately regret it if you choose to cross simply because you are offered a pair of shoes to undertake the journey.)

I actually worry more that trade is never mentioned in PRSPs, or is treated as an afterthought than that the WB is influencing it. I would be surprised if you could really find ‘many in the trade field’ welcoming the WB: it doesn’t really adapt its approach to negotiations. When it calculates ‘gains’ from WTO liberalisation, it confuses effects of a country liberalising itself (which it can do without the WTO, and if it is not doing, has presumably chosen not to do) with those from getting access to others. It doesn’t contribute to defining negotiating positions.

Sheila Page, Overseas Development Institute