Aid for Trade: Aid for Trade: Mainstreaming TradeMainstreaming Trade

Richard NewfarmerRichard Newfarmer

Special Representative to the WTO Special Representative to the WTO and UNand UN

World BankWorld Bank

GenevaGeneva

WTO Aid for Trade MeetingWTO Aid for Trade Meeting

November 19, 2007November 19, 2007

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Source: Bank staff calculations based on data from World Economic Outlook

Should trade receive greater attention in national Should trade receive greater attention in national development strategies? …Yes, in most countriesdevelopment strategies? …Yes, in most countries

Average ratio of exports / GDPAverage ratio of exports / GDP

LDCs [N=37]LDCs [N=37]

MICs [N=44]MICs [N=44]

High Performing 13High Performing 13 [N=13][N=13]

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

LDCs’ share of the global market is stagnant, and LDCs’ share of the global market is stagnant, and competitiveness has laggedcompetitiveness has lagged

Total share in world exports of goodsTotal share in world exports of goods

LDCs [N=37]LDCs [N=37]MICs [N=44]MICs [N=44]

High Performing 13High Performing 13 [N=13][N=13]

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.

Improving competitiveness goes beyond trade ministry… Improving competitiveness goes beyond trade ministry… and includes trade-related institutionsand includes trade-related institutions

0

10

20

30

40

50

Average time to export Average time to import

LDC (N=41)MIC (N=64)HP13 (N=13)

Source: Bank staff calculations based on data from Doing Business Report 2006.

DaysDaysAverage Days to Export and Import Average Days to Export and Import

in 2005in 2005

MICsMICs

LDCsLDCs

HPsHPs

$0

$10

$20

$30

$40

$50LDC (N=43)MIC (N=69)HP13 (N=13)

Source: Bank staff calculations based on data from WDI.

USDUSDInternet Price in Internet Price in

2005 (USD per 2005 (USD per month)month)

LDCsLDCs

MICsMICs HPsHPs

Improving competitiveness goes beyond trade ministry… Improving competitiveness goes beyond trade ministry… and includes trade-related institutions... And and includes trade-related institutions... And infrastructure infrastructure

0

20

40

60

80LDC (N=20)MIC (N=37)HP13 (N=13)

Source: Bank staff calculations based on the latest data available from Enterprise Surveys.

DaysDaysAverage Number of Electrical Average Number of Electrical

Outrages (days)Outrages (days)

Improving competitiveness goes beyond trade ministry… Improving competitiveness goes beyond trade ministry… and includes trade-related institutions... And and includes trade-related institutions... And infrastructureinfrastructure

Ways to make trade more central to development Ways to make trade more central to development strategies?strategies?

Country awareness that Country awareness that competitiveness matterscompetitiveness matters – for growth and poverty – for growth and poverty reductionreduction Importance of openness – to drive productivity growthImportance of openness – to drive productivity growth

• ExportsExports provide wider markets and economies of scale provide wider markets and economies of scale• ImportsImports provide lower cost inputs, embodied technology and competition provide lower cost inputs, embodied technology and competition• Movement of Movement of peoplepeople provides access to greater skills provides access to greater skills• Easing restrictions on Easing restrictions on financial flowsfinancial flows can lead to increases in investment can lead to increases in investment

and in technologyand in technology Investors, including domestic ones, have a choice of location…Investors, including domestic ones, have a choice of location…

Governments have to develop their own strategies and integrate into national Governments have to develop their own strategies and integrate into national development programsdevelopment programs Some country-specific combination of liberalization + complementary policiesSome country-specific combination of liberalization + complementary policies

Competitiveness requires that the whole economic cabinet be involved -- and Competitiveness requires that the whole economic cabinet be involved -- and eventually private sector and civil society involvementeventually private sector and civil society involvement

Three elements to improve competitiveness… Three elements to improve competitiveness…

Improving Improving incentivesincentives to private investors to move resources to to private investors to move resources to more productive activities… tariffs, taxes, business regulationsmore productive activities… tariffs, taxes, business regulations

Up-grading Up-grading services industries: services industries: telecoms, air transport, ports, telecoms, air transport, ports, energyenergy

0

10

20

30

40

50

60

70

80

90

100

Mauritius Shanghai India Prague

Index of connection costs

Three elements to improve competitiveness… Three elements to improve competitiveness…

Improving Improving incentivesincentives to private investors to move resources to to private investors to move resources to more productive activitiesmore productive activities

Up-grading Up-grading services industries: services industries: telecoms, air transport, ports, telecoms, air transport, ports, energyenergy

Adopting Adopting pro-active policiespro-active policies to help firms and labor adjust to help firms and labor adjust

Government Program (June Government Program (June 2006)2006)

Development Policy Loan Development Policy Loan $30 m.$30 m.

(Conditionality is govt (Conditionality is govt program)program)

Investment LendingInvestment LendingTechnical AssistanceTechnical Assistance

Co-financing: French Agency Co-financing: French Agency for Development $30 m.for Development $30 m.

Aid for TradeAid for Trade

ReportReport

• Improving competitiveness is central to achieving highImproving competitiveness is central to achieving high and sustained growth rates – and has to be made a and sustained growth rates – and has to be made a

pillar of national development strategies pillar of national development strategies

• Aid for trade can help, but country ownership of the Aid for trade can help, but country ownership of the competitiveness agenda is critical successcompetitiveness agenda is critical success

• The role of the Bank and donors role is to support The role of the Bank and donors role is to support government programs with diagnosis and finance. government programs with diagnosis and finance.

Key lessons from experience in aid for trade ….Key lessons from experience in aid for trade ….

ReferencesReferences

Brenton and Newfarmer (2007) “Watching more than the Discovery Channel: Brenton and Newfarmer (2007) “Watching more than the Discovery Channel: Export Cycles and Diversification in Development,” World Bank Policy Export Cycles and Diversification in Development,” World Bank Policy Research Working Paper 4343.Research Working Paper 4343.

World Bank World Bank Mauritius– From Preferences to Global Competitiveness Mauritius– From Preferences to Global Competitiveness Report Report of the Aid for Trade Mission, April 2006.of the Aid for Trade Mission, April 2006.

World Bank/IMF “Aid for Trade: Harnessing the Global Economy for World Bank/IMF “Aid for Trade: Harnessing the Global Economy for Economic Development” Paper prepared for the Development Committee, Economic Development” Paper prepared for the Development Committee, October 2007October 2007

Aid for Trade: Aid for Trade: Mainstreaming TradeMainstreaming Trade

Richard NewfarmerRichard Newfarmer

Special Representative to the WTO Special Representative to the WTO and UNand UN

World BankWorld Bank

GenevaGeneva

WTO Aid for Trade MeetingWTO Aid for Trade Meeting

November 19, 2007November 19, 2007