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Trade Facilitation and Economic Growth: The New Agenda

Trade Facilitation and Economic Growth: The New Agenda. John S. Wilson, Lead Economist The World Bank Australian National University Canberra, Australia August 9, 2006. Overview. Trade Facilitation in Context Economic Growth and Driving Forces Why Barriers and Trade Costs Matter

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Trade Facilitation and Economic Growth: The New Agenda

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  1. Trade Facilitation and Economic Growth: The New Agenda John S. Wilson, Lead Economist The World Bank Australian National University Canberra, Australia August 9, 2006

  2. Overview • Trade Facilitation in Context • Economic Growth and Driving Forces • Why Barriers and Trade Costs Matter • Policy Tools and Action Ahead • WTO, APEC, and Development Agenda

  3. Growth – across regions(World Bank – Global Economic Prospects Report) • Real GDP growth, 2003-2006

  4. Productivity is accelerating…….. Decomposition of GDP growth 2005-2015 (Average % per annum)

  5. World trade as a driving force…….. Merchandise exports ($billion) Other developing China Other high-income United States

  6. Trade Facilitation Trade GDP growth Human Development So Why Focus on Trade Facilitation?

  7. Trade Costs – NTB’s are a Threat • Slow global growth……. • Block business productivity, regional integration, and efficient networks • Help to ensure continued poverty, monopoly power, corruption, and world insecurity

  8. Simple Statistic Time Required for Exports (by Region) “Trading on Time” (2006)

  9. Costs and Benefits of Reform? • Results for trade and GDP gains: • APEC: 1% (ICs) 2% (LDCs) shock to import prices yields 3.3% increase in exports • UNCTAD: 1% cost reduction yields $3.3 billion in Asia. • One day delay before shipping reduces trade by 1% (country distancing from trade partners by 85 km) Freund, et. al, 2006.

  10. Wilson, Mann, Otsuki (2004) • Building on APEC Trade Ministers Report with Canada in 2002 Evaluate reform in the following: 1. Port Logistics (air and sea) 2. Customs Environment 3. Regulatory Environment 4. E-business usage (proxy for services infrastructures) Creating Country-Specific Indicators • Consistency-- Country-specific information on a consistent basis from multiple sources for each indicator

  11. Raising Capacity Half-way to Global Average $377 billion trade gain Source: Wilson, Mann and Otsuki (2004)

  12. What About Welfare Gains and Aid Effectiveness? • How effective is trade-related lending (infrastructure, trade development, and trade policy) in lowering trade costs? • APEC members receive on average (1995-2004) TF aid totaling: • $5.3bn including China (35% world total) • APEC members contributed on average (1995-2004) TF aid totaling $8.6bn (56% world total) • OECD-DAC data

  13. Ivanic, Mann & Wilson (forthcoming) • Preliminary results: • Global welfare increase of $25 billion with targeted “aid for trade facilitation.” • Aid cuts trade costs overall by 0.3% -- but some regions much more. • More ahead….regional distribution of gains, which type of aid more effective?

  14. Conclusions……. • Evidence indicates trade gains are driven by raising capacity and reform in several areas……but country priorities differ. • Collective action to raise lower barriers can increase trade……but domestic reform critical. • Concrete analysis needed to clarify priorities for action ahead.

  15. Trade Policy Agenda • Doha Question mark • WTO Agreement a good small step • Progress on a plurilateral basis? • Wither Regionalism -- APEC? • Good tool for reform • Busan Business Agenda (2005) --Further 5 percent cut in trade costs by 2010? • Need clarity on concrete and achievable agenda.

  16. Development Agenda • This is a most important agenda • Aid Effectiveness – what works and why? • Targeted or comprehensive framework • Soft or hard infrastructure

  17. Thank You John S. Wilson Lead Economist The World Bank jswilson@worldbank.org http://econ.worldbank.org/projects/trade_costs

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