The recent crisis dramatically illustrated how trade can be a powerful channel through which major external shocks are transmitted to countries, both negative and positive, as the resurgence in trade has been very robust and been a central feature of the global economic recovery.
Trade, in fact, is a powerful engine for economic growth and opportunity. Over the past three decades, world trade grew twice as fast as global GDP. But even though many countries have benefited greatly from global integration, the gains have been distributed unequally, both between countries and within them. In order to improve the inclusiveness of trade, and to promote its impacts on reducing poverty and inequality, the World Bank Group (WBG) has prepared its first Trade Strategy to guide its work over the next decade. Endorsed this week by the Board of Executive Directors, following a six-month public consultation process last year, the Strategy focuses on four pillars:
- Trade competitiveness and diversification to support countries in developing policy environments conducive to nurturing private sector development, job creation and sustainable poverty reduction. Exported electronics from Malaysia and Singapore, car parts and assembly from Morocco and Central and Eastern Europe, wine from South Africa, salmon from Chile or fresh asparagus from Peru, are all good examples.
- Trade facilitation, transport logistics and trade finance to reduce the costs of moving goods internationally in terms of time, money and reliability. WBG research shows that regional corridors with limited competition in road transport services face higher prices (e.g. West Africa) than those where there is more competition (e.g. Southern Africa).
- Support for market access and international trade cooperation to create larger integrated markets for goods and services. South-South trade arrangements, in particular, now account for more than 50 percent of all new preferential trade agreements.
- Managing external shocks and promoting greater inclusion to make globalization more beneficial to poor households and lagging regions. Recent WBG analysis, for instance, finds that three-quarters of informal-sector traders, almost all of which are women, in the Great Lakes region of Africa, are heavily dependent on trade to feed their families. The problem is that growth in this trade is being hampered by inefficiencies at border crossings and limited access to finance.
Leveraging Trade for Development and Inclusive Growth: The World Bank Group Trade Strategy, 2011 – 2021 builds on the types of support the WBG has already started to provide in response to developments in the global trading system that have emerged in recent years. From programs once focused narrowly on trade liberalization, the WBG has moved its support towards greater efforts at promoting export diversification; lowering transport and other trade-related costs; improving access to trade finance; and, focusing more on the poverty implications of greater openness to trade.
But trade does not take place in a policy vacuum. As an essential driver of economic growth, it must be better integrated into national development strategies and associated Bank programs. To this end, the WBG will work with its client countries and development partners in a more coordinated and effective way to ensure the gains from trade are maximized and its benefits more equally shared.