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Global Integration, Economic Development and the World Bank Group Trade Strategy

Global Integration, Economic Development and the World Bank Group Trade Strategy. Bernard Hoekman, Director, International Trade Department, World Bank Caribbean Growth Forum, Kingston, Jamaica, June 19, 2011. The Trade Agenda has Changed.

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Global Integration, Economic Development and the World Bank Group Trade Strategy

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  1. Global Integration, Economic Developmentand the World Bank Group Trade Strategy Bernard Hoekman, Director, International Trade Department, World Bank Caribbean Growth Forum, Kingston, Jamaica, June 19, 2011

  2. The Trade Agenda has Changed • Globalization has led to deep inter-linkages among countries and increased vulnerability to shocks • Developing countries are new drivers of global trade (“multi-polarity”)—BRIICS • Tariffs often no longer a binding constraint to trade • Trade increasingly involves global value chains and intra-firm transactions → FDI-trade-labor market/skills linkages • Higher demand for natural resources/commodities and potential for services trade offer new opportunities to developing countries – but also challenges

  3. Trade/GDP and South-South trade

  4. Trend decoupling—starting in early 90s • Sustained high growth levels associated with expanding trade • World trade has grown twice as fast as global GDP

  5. Services trade: expanding, but big differences across developing countries

  6. Services matter for Caribbean countriess Caribbean Countries Services/GDP Source: World Development Indicators 6

  7. Trade Openness: Volatility & Risk of Shocks 7

  8. Commodity price increases and volatility

  9. Drivers: Trade Liberalization Source: Mattoo and Neagu, 2011

  10. Integration of China/East/South Asia: Quadrupling of effective global labor supply (index, 1980 = 100) Export-Weighted Labor Force by Region1 Global Labor supply 10 1National labor forces scaled by export-to-GDP ratios.

  11. Drivers: Technology (FDI, ICT, global supply chains) Imports of parts etc. as a share of exports: 33% for developing countries • Big differences: • Argentina and Brazil: 15% • China and Mexico: > 30% Source: Canuto, Dutz, and Reis (2010)

  12. FDI: Rise of emerging-market multinationals Total cross-border M&A deals by firms from advanced and emerging economies, 1997–2010

  13. Increase in South-South FDI flows Cross-border M&A investment to low income countries, 1997–2010

  14. Changing political economy and policies • Growing export sectors push to reduce input costs • Greater focus on efficiency of producer services • Interest in minimizing tariffs on intermediates • Supply chains: restricting trade = raising costs throughout the chain • Trade and FDI are increasingly complementary • Source of technology and know-how; connect to supply chains • Focus on “behind-the-border” issues: investment; IPRs • Rise of China and other large emerging economies • “Threat effect” but also source of demand and capital • Move to North-South, East-West, South-South PTAs • E.g., Mexico: 59 PTAs; Chile: 43.

  15. Trade policy since 2008

  16. Rising importance of non-tariff measures Have recently been seeing a rise in the use of NTMs but number of new measures during 2009-2011 stable; little year-to-year variation Do not have information on average number of new NTMs in the pre-2008 period Generally NTMs are applied to all trade, not bilaterally 18

  17. Implication: A More Complex Trade Agenda • Competition is fiercer—more opportunities but also faster displacement of firms/farms/workers • Many countries still highly dependent on relatively few exports and markets: diversification critical to sustain higher growth • Productivity growth critical to avoid “middle income trap” • Constraints to trade-driven productivity growth lie “behind-the-border” – skills; logistics, (trade) finance, services inputs • Infrastructure • Policies—especially for services, public and private • Need to manage shocks—and limit volatility

  18. World Bank Group Trade Strategy: Four Priority Areas of Focus

  19. Trade Competitiveness and Diversification

  20. How to link constraints to exports? Trade Competitiveness Diagnostic • In-depth analysis of trade data – aggregate and firm-level – generates hypotheses about obstacles to export performance • Allows for – premised on – comparisons to other countries • Firm-level data allows to directly connect to detailed transactions customs data • Combined with qualitative information can help to reject or to identify constraints • Exporters have to be productive—link to broader competitiveness agenda 25

  21. Link outcomes to factors that affect firms capacities and productivity Market access Supply side factors Trade/investment promotion infrastructure SEZs Factor conditions Incentive framework Backbone/business services

  22. Services export competitiveness • Assist policy makers to improve their understanding of the size, scope and potential of services exports as well as prevailing obstacles • Address the following questions: • Assess role of services as inputs in the traded sector • Determinants of services trade performance • Relative importance of determinants across services • Impact of policies as constraint and potential drivers 32

  23. Regulatory assessments in services 33

  24. Services Knowledge Platforms • Mechanism to bring stakeholders together: • To generate information on options for regulatory reforms to integrate services markets; • Learn from experiences elsewhere; and • Focal point for effective implementation/monitoring • Demand-driven and action oriented • Ongoing pilots and activities in Europe (CEFTA) and East and Southern Africa (EAC; COMESA)

  25. Trade Facilitation/Logistics & Finance (and trade-related infrastructure)

  26. Logistics is a driver of competitiveness 30 OECD LAC 25 20 Productivity losses (%) 15 10 5 0 Merchandise losses: Logistics costs as share of market value Levels of Inventory Share of primary goods that do not arrive at market Sources: World Bank, Guasch (2008)

  27. Logistics costs key factor for SMEs LAC Logistics Costs: % of Total Value of Firm Sales Fuente: Centro Logístico de Latinoamérica, Bogot, Colombia. Benchmarking 2007: Estado de la Logística en America Latina Anexo, María Rey Logistics Summit 2008

  28. Logistics Performance Index, 2012 Bahamas 80 Dominican Rep. 85 Jamaica 124 Haiti: 153

  29. Improve connectivity • In part an infrastructure agenda • Major factor underpinning improvement in LPI indicators over time • But policies are critical as well … • Border management • Transport services competition • …. as is cooperation and coordination, especially landlocked and small island states and regions • Regional ports and hubs • Transshipment and regular feeder services

  30. Thank you http://www.worldbank.org/trade

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