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Aid for Trade: Mainstreaming Trade

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. Should trade receive greater attention in national development strategies? …Yes, in most countries. Average ratio of exports / GDP.

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Aid for Trade: Mainstreaming Trade

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  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 [N=13] MICs [N=44] LDCs [N=37] 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 [N=13] MICs [N=44] LDCs [N=37] 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. Index of connection costs 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

  9. Aid for Trade Report 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.

  10. 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.

  11. 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

  12. 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

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