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Advances in Development Economics

Why it’s important to “Think Equal” when it comes to trade facilitation

Submitted by Jose Guilherme Reis, co-authors: Elisa Gamberoni on Thu, 01/12/2012 - 17:19

Gender equality can not only spur country competitiveness, but taking this aspect into account in trade related interventions can help obtain better outcomes. Often times, however, it can be difficult for practitioners to understand how to apply gender into their trade work.

There is indeed a gap between the literature and the type of trade interventions that are becoming increasingly important in the World Bank portfolio. The majority of the literature has focused on the relationship between gender equality as outcome and trade liberalization policies (measured usually by tariffs or openness to trade). While this type of liberalization and the exposure to the global environment is still a key area for support, there is only

Are Services the Trade of the Future?

Submitted by Sebastian Saez, co-authors: Stephanie Chen on Tue, 12/06/2011 - 11:27


You see trade in services happening all around us. Medical tourism is an increasingly popular option, as patients seek affordable medical treatment in countries such as Costa Rica and Thailand. American students are choosing to earn their undergraduate degrees in Europe and Asia rather than staying close to home. More companies are finding their survival depends on business process outsourcing in developing countries. This growing phenomenon of trade in services has become the most salient characteristic of globalization.

Just a few decades ago, services such as tourism, distribution and communication were considered in the economic literature to be stagnant sectors or of little economic relevance. But now, they are a key determinant of overall countries competitiveness. Many of the costs that determine the competitiveness of domestic industries are associated with the availability and reliability of services. Moreover, trade in services is growing faster than trade in goods. The share of developing countries in exports of world services increased from 11 percent in 1990 to 21 percent in 2008.

In fact, the topic of trade in services has become a subject of recent debate among economists – between those who believe manufacturing will continue to prevail and those who side with services as the future of trade.

Reliable Supply Chains: The Answer to Country Development and Growth

Submitted by Alina Mustra on Fri, 10/14/2011 - 13:51

In today’s interconnected world economy, efficient, reliable and cost-effective supply chains have become necessities in global trade. Trading in a timely manner with minimal transaction costs allows a country to expand to overseas markets and improve its overall economic competitiveness. For many countries, however, identifying bottlenecks along a supply chain and then determining which logistics procedures and infrastructure to upgrade can be a challenging feat.


These concerns were at the forefront of a World Bank workshop held in Seoul, Korea this week that examined trade and transport facilitation assessments and explained some of the practical implemental guidelines. The World Bank workshop was part of the Asia Pacific Facilitation Forum (APTFF) annual conference, which attracted more than 200 policymakers and private sector representatives from 25 countries across Central Asia, East Asia, South Asia and Southeast Asia.


The workshop focused on two World Bank trade facilitation tools: the Logistics Performance Index (LPI), a global benchmarking indicator, and the Trade and Transport Facilitation Assessment (TTFA), a country-level diagnostic tool for logistics performance.

Economic Integration: A Quasi-Common Economy Approach

Submitted by Otaviano Canuto on Wed, 09/14/2011 - 10:11

Photo: © Dana Smillie / World BankEurope and Asia provide two different models of integration and growth. The former relied on political willpower to create a unified common market; the latter based its integration on a buildup of regional trade, investments, and production networks—eschewing a formal link-up in political or monetary terms. Interestingly, although economic integration has occurred along different lines, both regions have attained high internal trade intensity. Against this background, is it possible to say that one model of regional integration is more effective than the other? Is de jure integration better than de facto cooperation?

The case of East Asia would suggest not. In comparison with its neighbors to the west, Asia can be said to have a quasi-common economy (QCE). As such, the region has a high level of physical integration, minimal barriers to intraregional trade, interlinked and interdependent production structure, and no formal or centralized body for coordination of the entire region’s economic policies. The rise of the Asian QCE was neither abrupt, nor was it micro-planned. Rather, factors such as advantageous geography, high infrastructure investment, technological diffusion, an export-led growth model, and economic openness led to the development of the region’s QCE.

This begs the question: Is there a way other regions can reap the benefits of integration, in the absence of supranational governance? In the newest edition of the Economic Premise series, Manu Sharma and I argue that such integration is indeed possible, and perhaps preferable, for other regions of the world, most notably Latin America. But does the shoe fit?

Who SEZ One Size Fits All?

Submitted by Otaviano Canuto on Wed, 09/07/2011 - 11:17

(Photo: Wiki Commons User: merlion444)From Singapore to Shenzhen, Special Economic Zones—SEZs for short—have helped underpin the rapid export-oriented growth of East Asia. In an effort to replicate these sleepy-fishing-village-turn-thriving-metropolis success stories, many countries in the developing world have created economic zones of their own—and their growth has been dramatic. In 1986 the International Labor Organization’s SEZ database reported 176 zones in 47 countries; twenty years later in 2006, there were more than 3,500 zones in 130 countries.

Various policy objectives have motivated the creation—and exponential expansion—of SEZs around the world. Generally, governments have created these zones to attract foreign direct investment, to alleviate large-scale unemployment, to support wider economic reform strategies, or to experiment with the application of new policies. The model has been extremely successful in many countries—in the Dominican Republic, for example, it allowed for the creation of more than 100,000 manufacturing jobs. However, such successes have not been universal or without controversy in the past, nor are they guaranteed in the future. In a post-crisis world with a changing macroeconomic and regulatory environment, new challenges have emerged, and some of the principles underlying traditional economic zones are no longer sustainable.

Gender and Trade

Submitted by Otaviano Canuto on Wed, 07/27/2011 - 10:29

Gender inequality and discrimination can affect many areas of life, from a women’s access to basic health services to her prospects for education and future earnings. Accordingly, in order to overcome these disparities, development practitioners have begun to collect gender-disaggregated data and address gender elements in the design and implementation of aid programs. By “gender-informing” projects, development institutions, such as the World Bank, can better overcome discrimination, avoid aggravating existing inequalities, and enhance human capital for the future.

Indeed, adopting a gender-informed perspective can improve the effectiveness of many initiatives—not least of all those aimed at promoting trade. Unveiled this summer, the World Bank’s new trade strategy, Leveraging Trade for Development and Inclusive Growth, focuses on enhancing trade competitiveness and encouraging greater diversification in the sector (among other goals). Crucial to achieving these aims—as argued by the authors of the most recent Economic Premise—is to analyze the gender components of value chains, sectors, and labor markets in an effort to design and implement the most gender-informed initiatives.

As highlighted in “Gender-Informing Aid for Trade: Entry Points and Initial Lessons Learned from the World Bank,” Elisa Gamberoni and Jose Guilherme Reis show that “gender-informing” projects in the trade sector can have remarkable effects.

Diversify, Diversify, Diversify

Submitted by Otaviano Canuto on Wed, 06/22/2011 - 09:03

The global economic crisis uncovered many of the vulnerabilities of an increasingly integrated world. So much so, that even though we are now well on the path to recovery, many questions persist regarding the future risks of economic integration and openness.

There are reasons for a broad reassessment of economic integration. A crisis that started in the industrial world suddenly spread to developing countries that had nothing to do with the casino-like financial practices taking place in the world’s financial centers. Spreading rapidly through financial and trade channels, the crisis brought about a sudden collapse of capital flows and a freeze in trade credit lines. The blow was so severe that the world experienced the largest drop in global trade volumes since World War II, with world trade of goods falling by 23 percent in 2009.

Now trade is growing again. In 2010, trade volumes increased robustly by 20 percent. But this doesn’t mean we can just put all the drama behind us and move on as if nothing happened. On the contrary, it is now time for countries to learn lessons from the crisis, and make sure they are in better shape to counteract external shocks in the future.

Globalization and economic integration do create vulnerabilities. But not all open economies are equally exposed. As a new World Bank study shows, openness is not the whole problem; rather, troubles ensue when exports are concentrated in very few products and markets. As Managing Openness: Trade and Outward-Oriented Growth after the Crisis indicates, export diversification reduces the vulnerability of countries to global shocks by moderating the impacts of market volatility.

Remittances Rebound but Pressures Persist

Submitted by Otaviano Canuto on Wed, 05/25/2011 - 09:23

Remittances, or the money migrant workers send home to their countries of origin, are finally recovering to pre-crisis levels. In 2010, remittance flows to developing countries reached $325 billion, and they are poised to continue growing sustainably through 2013, according to the World Bank’s latest Outlook for Remittance Flows 2011-13.


This is very good news for developing countries. For many of them, money sent by their migrant workers living abroad is a very important source of external financing –sometimes even higher than the revenues obtained from oil exports or tourism. Thanks to the money being made in the U.S. by their relatives, millions of Mexican families can put food at their tables, just as Indians and Filipinos benefit the same way from the remittances sent from rich and oil producing countries in the Middle East.


But there is no time to be complacent. Individuals dependent on remittances are not out of the woods yet. For example, remittance flows to Latin America and the Caribbean, as well as to Eastern Europe and Central Asia, remained almost flat in 2010 because of the economic troubles in the U.S. and Western Europe. And although these flows started growing again in the first quarter of 2011, threats to the recovery remain.

The Day After Tomorrow: A Different Kind of Trade

Submitted by Otaviano Canuto, co-authors: Marcelo Giugale on Wed, 05/04/2011 - 08:34

Over the past three decades, global trade grew almost twice as fast as global gross domestic product (GDP). The massive process of commercial integration was made possible by technological revolutions in transport (like containerized shipping) and communications technologies, and by a dramatic decline in import tariffs. This allowed many developing countries to implement export-led growth strategies that lifted hundreds of millions of people out of poverty. Some succeeded in sought-after manufacture markets and, more recently, even in services.


But the 2008–09 crisis showed the volatile side of integration. In two years, the volume of world trade fell by a third. International production networks carried along country-to-country contagion at staggering speed. Naturally, calls for government intervention have multiplied. The question is: what kind of intervention will that be? The probability of going back to pre-globalization, import-substituting industrial policy is not high, but is not negligible either—concern for unemployment may still trigger protectionism, especially amongst rich nations.

The Cost of Financial Reform for Emerging Markets

Submitted by Otaviano Canuto on Wed, 04/27/2011 - 09:21

In the aftermath of the global economic crisis, financial market regulators have proposed a myriad of reforms to better govern the banking sector and to enhance its resilience to future shocks. In fact, in September 2010, a number of measures were agreed upon by the Basel Committee on Banking Supervision, an international forum designed to foster cooperation and develop standards on banking supervisory matters. The cornerstone of these reforms—collectively known as “Basel III”—is a commitment to stronger capital and liquidity requirements, which will ensure that banks are better able to absorb losses in the future. Other significant measures include reforms to improve supervision, risk management, governance, transparency, and disclosure in the financial sector.

As I argued in a recent article, “Reviving a Policy Marriage,” such a harmonization of financial supervision and macroeconomic management can be the key to happy cyclical endings in the long-term. However, concerns have been raised that the costs of moving to higher capital ratios may lead banks to raise their interest rates and reduce lending in the short-term, which can pose financing problems for emerging markets that are dependent on global banking flows.

In the most recent edition of the World Bank’s Economic Premise series, authors Swati Ghosh, Naotaka Sugawara, and Juan Zalduendo examine the short-term impacts of the regulatory changes proposed under Basel III on emerging markets.