trade facilitation and economic growth: the new agenda
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Trade Facilitation and Trade Facilitation and Economic Growth: The Economic Growth: The
New Agenda New Agenda
John S. Wilson, Lead EconomistJohn S. Wilson, Lead EconomistThe World BankThe World Bank
Australian National UniversityAustralian National University
Canberra, AustraliaCanberra, AustraliaAugust 9, 2006August 9, 2006
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OverviewOverview Trade Facilitation in ContextTrade Facilitation in Context
• Economic Growth and Driving ForcesEconomic Growth and Driving Forces
Why Barriers and Trade Costs MatterWhy Barriers and Trade Costs Matter
Policy Tools and Action AheadPolicy Tools and Action Ahead• WTO, APEC, and Development AgendaWTO, APEC, and Development Agenda
33
Growth – across regionsGrowth – across regions(World Bank – Global Economic Prospects Report)(World Bank – Global Economic Prospects Report)
•Real GDP growth, 2003-2006Real GDP growth, 2003-2006
8.1 7.9
6.1
5.2
3.6
2.1
8.3
6.87.2
4.94.5
5.8
7.8
6.9
5.34.8 4.6 4.54.6
6.4
5.2 5.4
4.7
3.9
0
1
2
3
4
5
6
7
8
9
EAP SA ECA MENA SSA LAC
Per
cent
2003 2004 2005e 2006f
44
-1
0
1
2
3
4
5
6
7
High-incomecountries
East Asiaand Pacific
Europe andCentral Asia
LatinAmerica and
theCaribbean
Middle Eastand North
Africa
South Asia Sub-SaharanAfrica
Per
cent
Labor Capital Productivity
Decomposition of GDP growth 2005-2015Decomposition of GDP growth 2005-2015 (Average % per annum)
Productivity is accelerating……..Productivity is accelerating……..
55
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
1997 2000 2003 2006 2009 2012 2015
Other developing
China
Other high-income
United States
Merchandise exports ($billion)
World trade as a driving force……..World trade as a driving force……..
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So Why Focus on Trade Facilitation?So Why Focus on Trade Facilitation?
Trade Facilitation Trade
GDP growthHuman Development
77
Trade Costs – NTB’s are a ThreatTrade Costs – NTB’s are a Threat
Slow global growth…….Slow global growth…….
Block business productivity, regional Block business productivity, regional integration, and efficient networksintegration, and efficient networks
Help to ensure continued poverty, Help to ensure continued poverty, monopoly power, corruption, and monopoly power, corruption, and world insecurityworld insecurity
88
Simple Statistic Simple Statistic Time Required for Exports (by Region)Time Required for Exports (by Region)
Required Time for Exports (Days)
166 6 10
24 175
116
93
66
49 44 4329
0
20
40
60
80
100
120
140
Africa ECA EAP MENA SA LAC DevelopedCountries
Min.
Max.
“Trading on Time” (2006)
99
Costs and Benefits of Reform?Costs and Benefits of Reform?
Results for trade and GDP gains:Results for trade and GDP gains:• APEC: 1% (ICs) 2% (LDCs) shock to APEC: 1% (ICs) 2% (LDCs) shock to
import prices yields 3.3% increase in import prices yields 3.3% increase in exports exports
• UNCTAD: 1% cost reduction yields $3.3 UNCTAD: 1% cost reduction yields $3.3 billion in Asia. billion in Asia.
• One day delay before shipping reduces One day delay before shipping reduces trade by 1% (country distancing from trade by 1% (country distancing from trade partners by 85 km) Freund, et. al, trade partners by 85 km) Freund, et. al, 2006.2006.
1010
Wilson, Mann, Otsuki (2004)Wilson, Mann, Otsuki (2004)
Building on APEC Trade Ministers Report Building on APEC Trade Ministers Report with Canada in 2002with Canada in 2002
Evaluate reform in the following:Evaluate reform in the following:1. Port Logistics (air and sea)1. Port Logistics (air and sea)
2. Customs Environment2. Customs Environment
3. Regulatory Environment3. Regulatory Environment
4. E-business usage (proxy for services infrastructures)4. E-business usage (proxy for services infrastructures)
Creating Country-Specific IndicatorsCreating Country-Specific Indicators• Consistency-- Country-specific information on a consistent Consistency-- Country-specific information on a consistent
basis from multiple sources for each indicator basis from multiple sources for each indicator
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Raising Capacity Half-way to Raising Capacity Half-way to Global AverageGlobal Average
$377 billion trade gain$377 billion trade gain
Sources of Trade Expansion Information Technology
41%
Regulatory Harmnization
10%
Customs Environment
9%
Port Efficiency
28%
Source: Wilson, Mann and Otsuki (2004)
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What About Welfare Gains and What About Welfare Gains and Aid Effectiveness?Aid Effectiveness?
How effective is trade-related lending How effective is trade-related lending (infrastructure, trade development, and trade (infrastructure, trade development, and trade policy) in lowering trade costs?policy) in lowering trade costs?
APEC members receive on average (1995-2004) APEC members receive on average (1995-2004) TF aid totaling:TF aid totaling:
• $5.3bn including China (35% world total)$5.3bn including China (35% world total)
APEC members contributed on average (1995-APEC members contributed on average (1995-2004) TF aid totaling $8.6bn (56% world total)2004) TF aid totaling $8.6bn (56% world total)
OECD-DAC dataOECD-DAC data
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Ivanic, Mann & Wilson Ivanic, Mann & Wilson (forthcoming)(forthcoming)
Preliminary resultsPreliminary results::
• Global welfare increase of $25 billion Global welfare increase of $25 billion with targeted “aid for trade facilitation.”with targeted “aid for trade facilitation.”
• Aid cuts trade costs overall by 0.3% -- Aid cuts trade costs overall by 0.3% -- but some regions much more.but some regions much more.
• More ahead….regional distribution of More ahead….regional distribution of gains, which type of aid more effective?gains, which type of aid more effective?
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Conclusions…….Conclusions…….
Evidence indicates trade gains are driven Evidence indicates trade gains are driven by raising capacity and reform in several by raising capacity and reform in several areas……but country priorities differ.areas……but country priorities differ.
Collective action to raise lower barriers can Collective action to raise lower barriers can increase trade……but domestic reform increase trade……but domestic reform critical.critical.
Concrete analysis needed to clarify Concrete analysis needed to clarify priorities for action ahead.priorities for action ahead.
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Trade Policy AgendaTrade Policy Agenda
Doha Question mark Doha Question mark WTO Agreement a good small stepWTO Agreement a good small step Progress on a plurilateral basis?Progress on a plurilateral basis?
Wither Regionalism -- APEC?Wither Regionalism -- APEC? Good tool for reformGood tool for reform Busan Business Agenda (2005) --Busan Business Agenda (2005) -- Further 5 Further 5
percent cut in trade costs by 2010?percent cut in trade costs by 2010? Need clarity on concrete and achievable Need clarity on concrete and achievable
agenda.agenda.
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Development AgendaDevelopment Agenda
This is a most important agendaThis is a most important agenda
Aid Effectiveness – what works and Aid Effectiveness – what works and why?why?• Targeted or comprehensive frameworkTargeted or comprehensive framework• Soft or hard infrastructureSoft or hard infrastructure
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Thank YouThank You
John S. WilsonJohn S. Wilson
Lead EconomistLead Economist
The World BankThe World Bank
jswilson@worldbank.orgjswilson@worldbank.orghttp://econ.worldbank.org/projects/trade_costs
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