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How can G20 trade policies benefit developing countries?

Michele Ruta's picture
Cambodia garment factory (Chhor Sokunthea / World Bank)


A key topic for the G20 this year is what can be done to boost inclusiveness in the global economy. Ministers and officials, with advice from the World Bank Group and others, have been looking into what policies they can adopt to maximize the development prospects of lower income countries outside the G20 (what the Turkish Presidency has termed “low-income developing countries” -LIDCs). A critical area of action is in trade – an area where G20 countries have asked the Bank Group to survey the current situation and provide recommendations.

In our work, we found that the value of LIDC imports and exports has increased substantially over the last decade, but it still represents only between 3 and 4% of world trade (Figure 1). The share of LIDC exports in the global services market is similarly low and has remained stagnant during the last 3 decades. Although there are some exceptions – Vietnam and the Philippines – LIDCs are poorly integrated into global value chains (GVCs) – they constitute only 3% of world imports in parts and components.

G20 countries are the main trading partners of LIDCs. Around 70% of imports of LIDCs come from the G20 and around 80% of LIDC exports are directed to the G20. Trade costs between LIDCs and any G20 country, however, are systematically higher than the trade costs between G20 countries or other non-LIDCs and any G20 country (Figure 2).


Naturally, many domestic factors that inhibit the productive capacity of LIDCs contribute to the low connectivity of LIDCs to GVCs and world trade more generally. However, trade policies of G20 members can help low-income developing countries integrate in the world economy. In our analysis for the G20 we reviewed key G20 trade policies and how they could be improved to benefit LIDCs.

Exploring the nexus between trade policy and disaster response

Selina Jackson's picture
 Nugroho Nurdikiawan Sunjoyo/World Bank


Strong trade connectivity can help disaster response and recovery by ensuring that humanitarian relief goods and services get to where they are needed when disaster strikes.  Trade policy measures, however, can sometimes have adverse effects.  Research led by the World Bank highlights that a common complaint of the humanitarian community is that customs procedures can delay disaster response, leaving life-saving goods stuck at borders.  Other measures such as standards conformity procedures, certification processes for medicines, and work permits for humanitarian professionals can slow the delivery of needed relief items.  Border closures can exacerbate situations already marked by human tragedy and unlock   full-scale economic crises. 
 
This nexus between trade policy and humanitarian response was discussed at an event organized jointly by the International Federation of the Red Cross and Red Crescent Societies (IFRC), the World Bank Group and World Trade Organization at the 5th Global Review of Aid for Trade on June 30 in Geneva.  Among the steps suggested to address concerns were rigorous disaster planning; better coordination between humanitarian actors, implementation of the WTO's Trade Facilitation Agreement and better recognition of the role of services.  

Women traders in Africa’s Great Lakes

Cecile Fruman's picture


On the northern tip of Lake Kivu, where eastern Democratic Republic of Congo (DRC) meets Rwanda, the pedestrian border crossing connecting the lush town of Gisenyi, Rwanda and the frenetic city of Goma in the DRC is called ‘’Petite Barrière’’. The name is misleading: the ‘’barrière’’ is in fact large and crowded, and features one of the highest daily flows of traders in Africa; between 20,000 and 30,000 traders cross it every day. For them, as for many others in the region, cross-border trade is a critical source of income.

Making Trade More Inclusive

Anabel Gonzalez's picture

Also available in: Français

Photo Credit: Arne Hoel, World Bank Group

This week, I will be joining a panel of women in trade at the World Trade Organization’s Public Forum in Geneva, Switzerland. Along with Lilianne Ploumen, Trade Minister from the Netherlands; Yuejiao Zhang of China’s International Trade and Economic Arbitration Commission; former United States Trade Representative Susan Schwab; and Amina Mohamed, Kenya’s Cabinet Secretary for Foreign Affairs; we will be discussing how to make trade work more inclusively. For me, the focus will be how to make trade work more inclusively for the poor living in developing countries.

Investigating the forces that drive local food prices

Stephanie Fangyu Liu's picture

What influences fluctuations in local food prices? Is it domestic drivers like weather and harvest cycles? Or external forces like world prices?
 
World Bank economist John Baffes and consultant Varun Kshirsagar explore these questions in their recent post on the Let’s Talk Development blog.  In a working paper that examines evidence from Tanzania’s maize market, they provide valuable insight on the issue of export bans and find that more open trade policies will have increasing relevance for Tanzania’s future.

Read more here

 

Traditional trade policy is alive and kicking

Nihal Pitigala's picture

With the growing importance of global value chains as a conduit for trade integration, much of the recent empirical analysis and other literature has focused on the impacts of non-tariff barriers, behind-the-border measures, and other transaction costs. Traditional barriers, tariffs in particular, have generally been dismissed as less disruptive to trade and, therefore, have fallen out of the policy debate. However, evidence is surfacing from developing countries that import taxes are on the rise, increasing protection, and their disruptive tendencies are often disguised. Along with the rising tendency to subsidize domestic industries, these additional taxes tend to further augment the inherent anti-export bias, which can be particularly detrimental to trade-led development strategies and policies in developing countries. 

A BIT far? Geography, Investment Agreements, and FDI

Gonzalo Varela's picture
Despite hard times at home, emerging market multinationals (EMMs) continue their impressive rise in the global marketplace. In 2014, outward foreign direct investment (FDI) by developing and emerging economies increased by 23 percent, reaching a record level of $468 billion or 35 percent of global FDI flows (UNCTAD, 2015). In little more than a decade, emerging market firms like India’s Tata Group, South Africa’s SABMiller, and China’s Haier, have established operations around the world, becoming global leaders in their respective products.

Thoughts on competition policy from Anabel Gonzalez, Senior Director of the WBG Trade and Competitiveness Global Practice

Julia Oliver's picture

Anabel Gonzalez, Senior Director of the the World Bank Group's Trade and Competitiveness Global Practice, has published a new blog post on competition policy, "From Tirole to the WBG Twin Goals: Scaling up competition policies to reduce poverty and boost shared prosperity." The piece addresses the links between competition policies, economic growth, and household welfare. It also explains how the Global Practice is scaling up support to governments on effective competition policies.

Read more here.

Better trade logistics could jump-start Africa’s light manufacturing industry

Ankur Huria's picture

Zambia-Zimbabwe border crossing. Photo - World Bank.Labor-intensive, light manufacturing industries led the economic transformation of some of the most successful developing countries in the world, including China and Vietnam. In Sub-Saharan Africa, that was simply not the case.  The region’s share of the global light manufacturing market has declined to less than one percent since China’s emergence in the 1980s. Nevertheless, a review of recent trends in exports suggests that some East African countries –Ethiopia, Kenya, Tanzania, Uganda and Zambia – are making headway in light manufacturing industries.

According to the World Bank Group’s 2011 report, “Light Manufacturing in Africa,” the global trading environment “favors Sub-Saharan Africa if it can overcome key constraints in the most promising subsectors.” Those subsectors include the manufacture of food products and beverages; apparel and the dressing and dyeing of fur; wood and wood products; luggage and the tanning and dressing of leather; and fabricated metal products. Sub-Saharan Africa enjoys low labor costs and abundant resources, as well as preferential trade access to US and EU markets for light manufactures. Despite these advantages, the competitiveness of Africa’s light manufacturing industry continues to be undermined by the costs of importing and exporting intermediate inputs of both goods and services. 

Does trade facilitation facilitate trade? Lessons from Albania

Russell Hillberry's picture

Border between Albania and Montenegro. Photo - Aleksandr Zykov / Flickr Creative CommonsTrade facilitation is at the center of the global trade policy agenda. The Trade Facilitation Agreement (TFA) – signed by World Trade Organization (WTO) Members in December 2013 and discussed last week at the WTO’s Fifth Global Review of Aid for Trade – aims to simplify and harmonize trade procedures across countries.  Improving their ability to efficiently manage trade flows is a challenging task for many developing countries, but developed countries are eager to help. The WTO indicates that between 2006 and 2011, US $1.2 billion in official development aid was spent to support trade facilitation reforms.  Even more aid was committed as a result of the TFA.

As of yet we know little about the impacts of trade facilitation efforts. Djankov, Freund, and Pham (2006), Freund and Rocha (2010), Persson (2010) and Hornok and Koren (2014) provide cross-sectional evidence on the trade impacts of administrative costs and delays.  But trade facilitation reforms have seen few rigorous impact evaluations.  

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