How to ensure the poor benefit from global trade

This week the World Bank Group, the largest multilateral provider of aid for trade, is participating in the World Trade Organization’s 5^th Aid for Trade Global Review. Every two years, the Global Review brings together participants in global trade from all over the world, including trade ministers, the heads of international development institutions, the private sector and civil society. We will be focused on the role of trade in helping achieve the Bank Group’s Twin Goals: ending poverty and boosting shared prosperity.

The role of trade in ending poverty is the subject of a new WTO-World Bank Group publication being launched on 30 June, the first day of the Review.  The report argues that to achieve the end of poverty by 2030, more needs to be done to connect the nearly one billion people who remain in extreme poverty to trade opportunities. On 30 June the report will be availableonline, along with further details about the agenda it sets out for maximizing the gains of trade for the poorest.

A critical part of this effort, and the theme of this year’s Aid for Trade meeting, is the importance of reducing the costs of trade. The Bank Group is publishing new analysis at the review, using a database we have developed with UNESCAP, which illustrates how the costs of getting goods to overseas markets are significantly higher for developing countries. For example, low income countries face costs that are on average three times higher than for advanced economies. Landlocked countries and small islands also face particularly high trade costs. The reasons vary, but include poor road networks, weak logistics, inadequate port facilities, antiquated customs procedures, corruption at border crossings, and outdated legal and regulatory structures. Lowering these trade costs makes firms in developing countries more competitive, allowing them to benefit more from trade opportunities. Implementing the Trade Facilitation Agreement will help, and will be an important focus for us at the Review, but the greatest impact will be achieved by comprehensive strategies to tackle these wide-ranging sources of trade costs.
In Geneva we will be sharing our experience and analysis on a number of elements of this effort to lower trade costs.

For example, we are focused on connecting entrepreneurs to markets by taking advantage of digital trade opportunities and addressing the so-called ‘digital deltas’—the barriers that particularly impede online trade in developing countries. Our goal is to open the highly promising field of digital trade to entrepreneurs in these countries. Creating opportunities and lowering costs gets into issues such as the ability of small businesses to access electronic payment systems, and for entrepreneurs to avoid the high costs that occur when monopolies control Internet access.

We are working to help countries comply with agricultural standards, supporting the facilitation of safer trade in food products. As a founding partner of the Standards and Trade Development Facility, we will be sharing at a panel discussion our experience helping countries become more competitive in agricultural trade by building their capacity to comply with international standards. Nearly two-thirds of the world’s poor are agriculture producers, and food demand is expected to increase 70 percent by 2050. So one of our key goals is lowering trade costs while helping producers meet rising demand for their products and produce and meet sanitary and phytosanitary (SPS) standards.

We will be joining other founding partners in the Enhanced Integrated Framework, a program focused on building Least Developed Countries’ capacity to trade, to launch a new phase of the program. Through this partnership, the Bank Group helps LDCs design and implement strategies to make the most of trade opportunities. Our work with LDCs has grown rapidly: we are now providing over $1.1 billion in support on trade for LDCs, up from $540 million in 2009.

Along with these areas, Bank Group colleagues will be joining our partners in discussions on implementing the Trade Facilitation Agreement; reducing trade costs in the cotton value chain; empowering women though trade; seeking ways to eliminate Non-Tariff Measures;  facilitating trade in South Asia; helping landlocked countries; and the role of trade in disaster relief and recovery.  Finally, we will take have ample opportunities to discuss issues of concern with our clients.

This is an exciting time for the Bank Group to be engaged in linking trade with our goals for sustainable growth, poverty eradication, and boosting shared prosperity. The gathering in Geneva is a key inflection point in our joint efforts going forward.

This article is published in collaboration with The World Bank’s The Trade Post Blog. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Anabel Gonzalez, a Costa Rican and US national, has been Senior Director of the World Bank Group Global Practice on Trade and Competitiveness since July 1, 2014

Image: A vendor hands change back to a customer. REUTERS/Desmond Boylan.