Annex I. Status and Prospects of the Doha Round as of August 31, 2007
58. Trade negotiations under the Doha Round have progressed unevenly since their resumption in early 2007, with talks among trade ministers of the G4 (Brazil, the EU, India, and the U.S.) breaking down in June. In July, chairs of the agriculture and industrial goods committees circulated draft texts proposing the main elements of a possible agreement in these key areas. Early reactions to the draft on agricultural modalities, while cautious, indicate considerable narrowing of gaps separating negotiators; reactions to the modalities paper on industrial goods indicated parties still have far to go to reach consensus.
59. Although by no means assured, agreement within the parameters suggested by the chairs’ proposals in the July 2007 modalities papers would, for example:
For industrial (“non-agricultural”) tariffs:
Sharply cut developed countries’ peak tariffs. As these peak tariffs tend to be on labor-intensive products, they are of particular interest to developing countries. For the developed countries, the top rate would be cut from over 50 percent to
9 percent, and the average rate from 3.3 to near 2.3 percent.
Further cut tariffs of (non-LDC) developing countries. Many developing countries have cut tariffs unilaterally, often to well below their WTO “bound” rates. Nevertheless, for key emerging market countries, the proposed parameter would imply applied tariff rate reductions for a substantial minority of industrial tariff lines; for others, WTO bound rates would be brought more in line with presently applied rates, limiting scope for any future tariff reversals.
Eliminate agriculture export subsidies by 2013. Cotton export subsidies would be eliminated at the start of the (to be determined) Doha Round implementation period. Disciplines would be introduced on food aid and be tightened on export credits and state trading enterprises.
Sharply cut farm tariffs, particularly in developed countries. Those rates now above 75 percent would be cut by about 7/10 and rates from 50 to 75 percent cut by nearly 2/3. (Developing countries bound tariffs would be cut by 2/3 of the amount required of developed countries.) Developed countries could designate as “sensitive” about 5 percent of tariff lines (and developing countries a somewhat higher proportion), allowing shallower cuts in those tariffs. Developing countries would in addition be allowed to designate certain “special” products for differential treatment.
Developed countries’ scope to compensate farmers for lower tariffs by raising domestic farm subsidies would be sharply curtailed, although current and planned adjustments in the major developed country members have already reduced some actual subsidy payments towards these limits. Special provisions for cotton would, however, appear to require substantial cuts in actual U.S. domestic cotton support.
Developed countries would (and developing countries would be encouraged to) provide duty-free, quota-free treatment (DFQF) of imports from least-developed countries on at least 97 percent (and preferably all) tariff lines.
60. Whether agreement can be reached in this “landing area” is not yet clear, and may depend in part on progress in areas such as rules, services, and trade facilitation. Should agreement on “modalities” be reached, several months would be needed to clarify and specify details.
61. This will be a challenging task, but other recent multilateral trade rounds have shown that persistence can pay off. The Uruguay Round (1986-94) remains longer to date than the Doha Round, begun in 2001. The former was itself complex, introducing multilateral rules on services, creating the first comprehensive multilateral rules for agriculture, erecting a powerful dispute settlement mechanism, and setting up a new international organization—in addition to bringing further progress on the issues dealt with in earlier multilateral trade rounds. The Doha Round has proven similarly complex, both because of the breadth of issues being covered and because of the number of countries (and variety of interests) actively participating in the negotiations. Underlying this complexity are diverging views on what the Doha Round’s development emphasis should mean in practice.
62. Many observers point to relatively weak private sector engagement, including in developed countries, as another factor behind the pace of negotiations. Such support has been important to highlighting the potential benefits of past Rounds, benefits which—despite outweighing losses in other areas—are often too diffuse to garner political support. However, prospective gains to business from a Doha Round seem to be at least as great as in previous multilateral rounds. Perhaps reflecting frustration with the pace of multilateral negotiations, much of the attention of business has centered on regional trade agreements (RTAs).
63. A Doha Round conclusion anchored in the agriculture and industrial product modalities proposed in July 2007 and supplemented by agreement on other parts of the Doha agenda would provide a boost to the global economy and provide particular benefits to developing countries. Progress has proven highly uneven over the course of the negotiations, but an early conclusion is needed to assure these benefits are realized and to ease mounting protectionist pressures while promoting multilateralism. Staffs of the World Bank and International Monetary Fund will remain vigorously engaged in support for the Round.
Annex II. World Bank and IMF Activities on Aid for Trade
The World Bank’s Trade Program
64. The World Bank Group has a wide range of instruments and expertise to provide aid for trade to developing countries. The ability to bring together a range of experts, a whole of economy perspective, and financing is a key comparative advantage of the Bank in contributing to the aid for trade agenda.
65. World Bank lending is an important vehicle for mainstreaming the trade and investment agenda in country policy dialogues. World Bank trade-related lending has increased substantially in recent years. Using its own, narrow definition (see Box 1) with amounts estimated project by project by task managers, rather than the much broader OECD/WTO estimates, Bank lending—concessional and nonconcessional—has grown from about $400 million in total commitments in fiscal year 2000 to about $1.6 billion in 2006 and 2007. This represents about 10 percent of total Bank lending. Nonconcessional lending accounted for about 70 percent of total World Bank lending over this period. Loans involved 42 countries, plus 3 multi-country loans, with the majority of lending going to Europe and Central Asia and Africa. Projects approved by the Board in fiscal year 2007 cover a wide range of areas directed at boosting trade, including communications, transportation, regulation and standards, finance, power, rural development and export promotion.
66. Bank trade-related technical assistance has also increased over the past five years, from 21 projects in fiscal year 2003 to 37 projects in fiscal year 2007.46 In fiscal year 2007, the Bank undertook 37 technical assistance projects including trade, involving 21 countries, plus an additional 5 regional/multi-country events. Most projects were undertaken in Africa and East Asia and the Pacific, followed by the Middle East and North Africa. The Bank also provides a range of trade-related training, covering for example, WTO accession, policy reforms and WTO negotiating options, standards and food trade, export diversification and services. In fiscal year 2007, the Bank conducted 34 activities for around 2550 participants. Of these, 15 were country-based and 19 were regional/global activities. Country activities were held in 14 countries, the vast majority of which were low-income or lower-middle income countries.47 The number of participant training days has remained relatively stable over the last 5 years, and the number of participants per training activity has increased, reflecting the fact that the Bank is undertaking more in-depth, focused and customized events.
67. The Bank also provides an increasing amount of analytical and advisory services. For example, in Mauritius, Bank analysis provided input into subsequent major trade reforms, later supported with Bank lending.48 Similarly, the Bank supported both Peru and Tunisia with analyses and lending in their efforts to enhance export competitiveness. Growth and competitiveness reports have been produced for Pakistan, Bangladesh and India (focused on agriculture), and analytical reports on services and rules of origin in preferential trade agreements for East Asia. Regional studies have also featured trade integration.49 Trade-related economic and sector work continues to expand, with 66 studies in FY2007 in more than 41 countries (plus an additional 9 regional studies). Most of this work was for Africa, followed by Europe and Central Asia and East Asia and the Pacific Analytic work includes Diagnostic Trade Integration Studies (DTIS), Trade and Competitiveness Reports, regional trade studies, and more narrowly focused policy notes. Business environment diagnostics, such as Enterprise Surveys in developing countries, also provide important insights on business and trade impediments. Banks analytical work has played an important role in informing policy reform and project design (Box A1).
Aid for Trade: from Analysis to Action
The November 2005 Kenya DTIS identified Kenya’s poor quality of transport and trade facilitation as a major constraint to export competitiveness. Improving land and sea routes along the Northern Corridor which links the port of Mombasa with Nairobi, inland Kenya as well as Uganda, Northern Democratic Republic of Congo, and Rwanda would enhance not only Kenya’s trade competitiveness but also have significant benefits for neighboring countries. This analysis was a key input into the design of the US$200 million East Africa Trade and Transport Facilitation Project. The project aims to enhance transport and logistics efficiency along key corridors by reducing non tariff barriers and uncertainty of transit time, and provides both investment to enhance infrastructure at the ports of Mombasa and Dar-es-Salaam as well as institutional support for strengthening the Northern Corridor Transit Agreement between Kenya and the Great Lakes countries.
The April 2006 Pakistan Growth and Competitiveness Study analyzed the key cross-cutting business environment barriers that hinder investment, productivity growth, and export competitiveness. Value-chain analyses were undertaken for shrimp, marble tiles, powdered milk, auto radiators, and textiles. Feedback from the Government was very positive and, the Government made a number of policy changes based on the recommendations of the report in the FY07 budget (such as reduction of tariffs on multi-axle trucks to encourage renewal of Pakistan’s truck fleet and removal of domestic content requirements in the auto industry).
The government of Indonesia is using the findings from the 2005 Trade and Competitive Study to refine its negotiating position in the Doha Round, and, in line with the study’s findings, has requested assistance with improving the technical and human capabilities in the trade ministry. The Bank is helping the Ministry to put in place a capacity enhancement project that will improve coordination by strengthening the decision-making and policy formulation process.Source: Bank staff
68. The World Bank has also developed a number of generalized products to assist developing countries in benchmarking their trade performance, making the case for trade reform, and estimating the impact of those reforms. These include, for example, the World Bank/UNCTAD World Integrated Trade System (WITS) data platform (which helps governments analyze trade-related distortions and simulate the economic effects of reforms), the Bank’s Customs Modernization Handbook (which provides a practical, comprehensive guide on reforming customs administrations in developing countries), and IFC’s Doing Business (which provides measures of business regulations and their enforcement, including related to trading across borders, across 175 economies). Other IFC activities related to trade are in Box A2.
Examples of IFC Activities Related to Trade
Global Trade Finance Program (GTFP) of $1 billion facilitates trade to underserved clients and markets by providing partial or full guarantees for individual trade transactions, covering the payment risk of local banks. Trade infrastructure. Investments in transportation (including ports, roads, rail) and warehousing account for 6.1 percent of IFC’s FY06 committed portfolio. Specialized investments and advisory work related to export-oriented industrial zones and e-commerce export marketing has also been provided.
Agricultural trade companies. A growing part of IFC’s agribusiness portfolio consists of transactions with integrators and traders, enabling IFC to reach a large number of ultimate beneficiaries in an efficient manner and at a competitive cost. Such key clients are major players in the commodity sector, interacting directly with farmers and producers.
Exporting companies. IFC invests regularly in businesses that are engaged in substantial trade (e.g., in the general manufacturing, agribusiness, and oil, gas and mining sectors), strengthening the trade potential of countries. These sectors make up about 20 percent of the FY06 IFC portfolio.
South-South investments. As part of the strategic priority ‘Build Long-Term Partnerships with Emerging Players in Developing Countries’ IFC places a lot of importance on supporting South-South investments. These investments often promote trade, either directly or through the transfer of knowledge and expertise Advisory services related to trade. FIAS’ core advisory services include advice on import/export policies and procedures (customs), and advice on investment promotion strategies and tools. Other advisory activities also support trade; for example, an SME advisory program in South Asia has facilitated improvements in cross-border trade between Bangladesh and North-East India, and has promoted new trading links for SMEs in the garment industry.Source: IFC staff
69. The Bank’s research program provides information needed for better policy formulation at national, regional and multilateral levels. A key focus is on the trade and complementary policies needed to reduce poverty. Major areas of study since 2006 include the design of agricultural trade policies, the impact of transport and transactions costs on export competitiveness, the impact of trade and FDI on productivity growth, the consequences of services trade liberalization and implementation practices, migration (brain drain, temporary migration programs and linkages between migration, trade and FDI), and the impact on developing countries of liberalization programs, global reforms, and the competitive effects of large emerging markets.50
70. Some key findings from this research are: market access, rather than subsidies, is the dominant source of potential gains from agricultural trade reform in the WTO; unilateral and WTO reforms have been much more important than regional arrangements in liberalizing developing country trade; gains from opening to trade are significantly larger in a more flexible economy—without excessive regulations on business entry and labor; FDI increases productivity through knowledge transfer to input supplying firms; migration can contribute to poverty reduction, although brain drain and brain waste may reduce these gains; services trade reform has enormous potential for developing countries; infrastructure upgrades and increasing the transparency of trade policy can expand intra-regional trade; and complementary policies, including aid for trade, are needed to maximize the poverty-reducing potential of trade reform.
71. The Bank has also conducted comprehensive analyses of the regional preferential trade agreements (PTAs) that are reshaping the world trading system,51 and is providing technical assistance to countries negotiating PTAs in an effort to improve their design and help governments use them to promote domestic reforms. For example, the Bank has maintained a dialogue with the EU on the design of Economic Partnership Agreements (EPAs), particularly with respect to restrictive rules origin and sequencing of tariff reductions. We have also provided assistance to the Eastern and Southern Africa group and the Caribbean group in their EPA negotiations, as well as to the Central Americans and Andean countries as they negotiated FTAs with the US. The Bank is also assisting Morocco and Tunisia on the prospects for deeper regional integration, in particular in the context of the European Neighborhood Policy.
72. A further important strand of the Bank’s trade-related work is related to standards. Given the critical role that trade in agricultural products has in catalyzing rural growth and poverty reduction, the Bank: (1) raises developing country awareness about evolving public and private standards; (2) identifies priorities for investment, regulatory reform, and other measures to attain compliance; (3) identifies and disseminates ‘good practices’, (4) supports inter-donor coordination for capacity building; and (5) provides technical and financial assistance at the country level. The Bank lent around $175 million for standards and quality management for agricultural products between 1996 and 2006, across 38 projects (Box A3).
Bank Activities on Agri-food Standards
With more trade over long distances, and increasing emphasis on higher-value items such as fruit, vegetables, fish and fish products, meat and dairy products, assured compliance with sanitary and phytosanitary (SPS) standards has become a fundamental requirement for competitive success in international trade. Developing countries often struggle to deal effectively with SPS standards.
Bank work on SPS management takes a variety of forms. A 2005 study, Food safety and agricultural health standards, challenges, and opportunities for developing country exports, influenced the development paradigm on the subject, moving from an emphasis on ‘standards as barriers’ to consideration of both challenges and opportunities, the catalytic role of standards, and the positive capacity building agenda.
At the country level, SPS capacity assessments, stakeholder consultations and action plans are being undertaken in 14 countries — in East and Southeast Asia (China, Vietnam and Lao PDR), South Asia (Bangladesh, India and Pakistan), Eastern Europe (Armenia and Moldova), and Africa (Kenya, Tanzania, Rwanda, Niger, Uganda and Zambia). Examples of other projects include: agricultural diversification in the Philippines; agricultural competitiveness in Kazakhstan, Burkina Faso, and Zambia; EU accession support for Croatia, Bosnia and Romania; food safety in China, and livestock competitiveness and food safety in Vietnam; and supply chain interventions in Bosnia and Northeastern Brazil.
To address concerns that standards may ‘crowd out’ smallholder farmers from lucrative domestic and international supply chains, the Bank is also exploring good practices to strengthen smallholder compliance with standards in supply chains in Kenya, Uganda, Zambia, and Ghana. Other analytical work is covering the implications of food retail modernization for agricultural trade. Additionally, e-learning events raise awareness and facilitate dialogue among policy-makers, technical specialists, and the private sector in developing countries.
The Bank’s analytical and operational work in these areas is increasingly being undertaken in partnership with other organizations. For example, the Bank is a member of the Standards and Trade Development Facility (STDF), which brings together the WTO, Food and Agricultural Organization, International Office of Epizootics (OIE), World Health Organization, and the International Plant Protection Convention (IPPC) to finance and coordinate SPS capacity building. The Bank is also a core member of the Trade and Standards Practitioners Network, and has been involved in joint country work with other multilateral (i.e. UNIDO; FAO) and bilateral (i.e. USAID, EU) agencies.Source: World Bank staff
73. Beyond facilitation of compliance with trade norms, Bank SPS-related activities in the animal sphere interact with other major international public goods that the Bank wishes to support. For example, the rapid rise in consumption of animal-origin foods in developing countries since the early 1980s (from one third of the world’s annual meat production to almost two thirds presently) has been mirrored by both growing pressure for safer trade in animal products and the adoption of standards and risk-mitigation measures more adapted to the needs and realities of developing countries and growing trade among developing countries. The Bank is actively engaged in supporting the World Animal Health Organization (International Office of Epizootics) in the assessment of needs for new institutional development in this area. In addition, the rising incidence of international transmission of animal diseases is drawing increased attention to the setting and monitoring of sanitary standards for trade in animal products. Where international transmission of public health risks are also involved, as in Highly Pathogenic Avian Influenza, the Bank has been extensively involved in project activity that includes elements of facilitating compliance with animal health regulations and standards, and reducing the risks of trade. For example, the Bank has invested US$344 million since 2005 under the Global Program for Avian Influenza (GPAI) and the Avian and Human Influenza Facility (AHIF); this presently involves 42 projects around the developing world, with a further 19 projects worth $64 million in the pipeline.
74. The Bank also provides significant assistance on transport and trade facilitation, including multi-country projects, such as the WAEMU/UEMOA (West African Economic and Monetary Union) facilitation initiative. Finally, since 2001, the Bank has been working with global partners to promote a pro-development WTO round. Bank staff have analyzed the possible benefits of global trade reform in three issues of Global Economic Prospects, have conducted research into effects of specific policy options, and have undertaken detailed work on trade liberalization and poverty and other issues (including services liberalization, preference erosion, and problems of net food importing countries). The Bank has also been actively assisting developing countries negotiators in trade facilitation (Box A4).
The Trade Facilitation Negotiations... Low cost (it turns out) for Large Benefits
Trade Facilitation is the main area where new disciplines in the Doha agreement may require governments to invest in legal and regulatory reforms of institutions. Many Geneva negotiators were reluctant to agree to new disciplines until they had a clear understanding of the cost implications - and some assurance of finance. To assist low-income developing countries in the negotiations, the World Bank, the IMF and other partners helped link trade negotiators with their own customs and other experts in capitals, so that countries with small Geneva delegations would be able to negotiate disciplines on key institutions more effectively.
The project involved creating a Trade Facilitation Negotiation Support Guide to provide practical advice on support mechanisms in member capitals, and a series of national workshops to demonstrate the utility of capital-based support groups to Geneva negotiators. Workshops were conducted in Jamaica, Uganda, Sri Lanka, Benin and Peru and results were shared with all WTO Members. Second, the project researched the potential costs to inform developing countries and alert the donor community about potential resource requirements. A team of experienced customs and trade facilitation specialists drawn from the Bank, the IMF and the WCO undertook a study of six representative countries to identify gaps between current systems and the measures currently under negotiation in the WTO. A comprehensive report was presented to WTO members in December 2006. Since most countries have on-going technical assistance programs the additional costs of implementing the WTO accords was found to be relatively low. However, much work beyond these reforms was necessary to actually create more expeditious and effective trade—an aid for trade investment that would have a higher pay-out. Finally, the project created a self-assessment tool to assist WTO Members establish their own priorities for reform and technical assistance. The tool is now being used as the basis for several national and regional workshops conducted throughout the world by the WTO Secretariat with the assistance of the Bank, IMF, UNCTAD, OECD and WCO. All components of the Bank’s Support Project were conducted in partnership with the IMF, WCO, OECD, and UNCTAD in close cooperation with the WTO Secretariat.Source: World Bank staff
75. The IMF has continued its active support for trade-related reforms and adjustment to other trade policy changes through technical assistance, financial support, and policy advice.
76. Technical assistance (TA) on trade, an important part of overall Fund TA, concentrates on tax, tariff, and customs reform. IMF TA in this area is provided through headquarters-based staff, regional TA centers and peripatetic and resident advisers. Countries receiving TA related to strategic trade reforms customs administration, which are closely linked to national development strategies, include Kenya, Liberia, Mexico and Tanzania. Some recent TA targets tax reforms to compensate for lower trade-related revenue resulting from lower tariffs—often related to the implementation of free trade and customs union agreements, or preference erosion. Recent examples include TA provided to the Maldives, Ethiopia, and several Central American economies, the latter in the context of the Central America FTA (CAFTA-DR). The IMF, along with the World Bank and other partners, has also been active in the area of trade facilitation, notably on the modernization of customs administration. Also, the Fund has worked with the World Customs Organization on issues related to the implementation of the Framework of Standards to Secure and Facilitate Global Trade, and participated in a number of joint workshops on trade facilitation with regional development banks such as the IADB.
77. Fund financial support for trade liberalization. The Fund provides financing through arrangements under its Poverty Reduction and Growth Facility, stand-by arrangements, and extended arrangements to help address the overall balance of payments need, including need resulting from adjustment to trade-related reforms and other trade policy-related shocks. Specific instruments that can be tailored specifically to trade liberalization include the Trade Integration Mechanism (TIM) and the Exogenous Shocks Facility (ESF). The TIM was established by the IMF Executive Board in April 2004 as a policy to augment access to Fund resources under existing Fund facilities so as to more directly assist member countries requiring balance of payments adjustments as a result of trade liberalization by other countries. Thus far, three countries (Bangladesh, Dominican Republic, and Madagascar) have activated this mechanism, with total approved financing amounting to SDR 141 million (about US$210 million) as of August 2007, of which SDR 55 million (about US$80 million) has been disbursed. Though it has yet to be used, the ESF, a Fund facility approved by the IMF Executive Board in early 2006, could also be used to provide concessional financing to low-income members affected by trade or other exogenous shocks.
78. Regular policy discussions and diagnostic analyses. Trade issues feature prominently in selected Article IV consultations, policy discussions surrounding Fund-supported programs, and Fund research. This includes consultations under bilateral and multilateral surveillance that cover members’ own trade reforms, multilateral trade negotiations, and trade policy spillovers from actions of other economies and the appropriate adjustment of other policies to the trade policy environment. In addition, the Fund remains involved in the EIF process in coordinating with bilateral donors and other international agencies to help least developed countries identify and implement policies and projects to facilitate their integration into the global trading system.
Agarwal, M. and J. Cutura. 2004. “Integrated Framework for Trade-Related Technical Assistance Addressing Challenges of Globalization: An Independent Evaluation of the World Bank’s Approach to Global Programs: Case Study”.
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Brenton, P. 2003. “Integrating the Least Developed Countries into the World Trading System: The Current Impact of EU Preferences under Everything but Arms,” World Bank Policy Research Working Paper 3018.
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Much of the debate in this area revolves around the policy implications of cross-country regressions that find a positive association between trade ‘openness’ (measured by proxies such as the ratio of trade to GDP) and incomes of countries. Critics argue that the direction of causality is not shown by such studies, and that these results are not informative regarding the trade policy stance that accompanies a countries openness ratio. Important econometric studies of the linkage between trade reform and the rate of economic growth include Sachs and Warner (1995) and Frankel and Romer (1999); Rodriguez and Rodrik (2001) is the seminal critique. A recent study by Wacziarg and Welch (2003) addresses a major part of the critique by showing that dates of trade liberalization do characterize breaks in investment and GDP growth rates. Specifically, for the 1950–-1998 period, countries that liberalized their trade (raising their trade-to-GDP ratio by an average of 5 percentage points) enjoyed on average 1.5 percentage points higher GDP growth compared with their pre-reform rate. Winters et al (2004) conclude, on the basis of a comprehensive literature review, that the weight of evidence points strongly in the direction that openness enhances income levels..
The others are Indonesia, Pakistan, Mauritius, Uganda, Thailand, Malaysia, Taiwan, Cambodia, Singapore, and South Korea.
One study estimates that poor infrastructure accounts for 40 percent of predicted transport costs for coastal countries and up to 60 percent for landlocked countries – see Limao and Venables (1999), while another estimates that every day a product is delayed prior to shipment reduces trade by as much as one percent—see Djankov et al (2006).
One example where improved market access failed to achieve significant export expansion is the limited success of efforts to provide preferential access to Sub-Saharan Africa and other poor countries. Along with the restrictiveness of rules of origin requirements, the limited capacity in public sector administration made it difficult to provide the necessary documentation to profit from these arrangements. See Brenton (2003).
See, for example, Melitz (2003) which looks at heterogeneous firms with differing levels of productivity.
Broda et al (2006) find that in developing countries, the average impact of new imported varieties is one quarter of national productivity growth.
We use the term ‘competitiveness’ here, as Krugman (1994) argued, to mean improvements in productivity. Because all countries can gain from simultaneous improvements in productivity and trade, the concept as we use it should not be interpreted to mean an ordinal ranking of countries. It is meant to capture the trade effects of policies behind the border, wider in scope that conventional definitions of “trade policy”. As Cohen (1994) and other have argued, the concept of competitiveness highlights the role of trade in raising living standards, and provides a way of benchmarking against others that can be useful for mobilizing reform. It is in that spirit that it is invoked here.
Similarly, competitiveness also needs to be seen through the lens of sustainable development. Efforts aimed at improving trade integration need to be analyzed in terms of their potential domestic and global environmental impacts. This includes trade in environmentally sensitive products—such as illegally or unsustainably harvested natural resources—as well as the impact of trade patterns on, for example, greenhouse gas emissions (as emissions related to production of items consumed in high income countries are emitted in middle income countries).
‘Trade development’ covers business development and activities aimed at improving the business climate, access to trade finance, and trade promotion in the productive sectors (agriculture, forestry, fishing, industry, mining, tourism, services), including at the institutional and enterprise level.
Major project weaknesses included inadequate needs assessments, weak project management and governance, projects that were not integrated into an overall trade strategy or development program, weak links to poverty reduction, inadequate donor coordination, and inadequate communication to, and expertise in, field missions. Ensuring country ownership of trade programs as a key to economic development remains an important challenge in designing effective aid for trade programs.
Six important donors have undertaken evaluations relatively recently: USAID, DFID, CIDA, the Netherlands, the World Bank and the IMF.
Donors involved in providing assistance for trade-related analysis or programs include the International Monetary Fund, the International Trade Commission, the United Nations Conference on Trade and Development, the United Nations Development Program, the World Bank, the World Trade Organization, the Bank for International Settlements, the Food and Agriculture Organization, the International Standards Organization, the United Nations Industrial Development Organization, the World Customs Organization, the World Intellectual Property Organization, several regional groups, and many bilateral donors. See Suwa-Eisanmann and Verdier (2007).
The Task Force recommendations focused on expanding the coverage of activities supported by IF financing and considered in the DTIS, improving the integration of trade into both donor and country planning, strengthening the management of IF activities at donor and recipient country levels, establishing effective monitoring and evaluation, and increasing the level and predictability of funding (WTO (2006b)). These recommendations were discussed in Doha Development Agenda and Aid for Trade, the September 2006 Development Committee paper.
To a degree, the outcomes of this processed differed from the original Task Force recommendations. For example, the Task Force had recommended that the WTO manage the IF Trust Fund, but in studying this recommendation it was decided that the WTO lacked the expertise to allocate funds for developmental purposes, so an independent Trust Fund Manager will be selected. The WTO will house the Secretariat of the EIF and host the Board meetings.
One area of particular concern to the Bank is how to ensure appropriate functioning of the EIF on the ground, given that its secretariat is Geneva-based and it does not have a field presence. It will be important to ensure that the new structure and division of labor in the EIF provides client countries with adequate support, allows for appropriate selection and oversight of projects, and does not create incentives for strategic behavior by agencies or clients.
In some cases, PRSs may have addressed infrastructure issues such as roads, railways or telecommunications, but not linked these to facilitating external trade. Such analysis would not have been viewed as supporting trade in this discussion of PRSs. It also may be that countries are undertaking trade-expanding measures that are not reported in PRSs.
See World Bank Investment Climate Assessments.
In response to requests from the government, both the IMF and the World Bank provided technical assistance. The IMF Fiscal Affairs Department in February 2006 provided a report on tax and expenditure policies to support a sustainable macro environment. The World Bank sent a mission in April 2006, and produced a report Mauritius: From Preferences to Global Competitiveness Report of the Aid for Trade Mission, April 26, 2006.
However, Mauritius is expected to benefit from transfers from the EU under the EU sugar protocol funds that will be used to finance accompanying measures to restructure the sugar sector.
In the paper for the Development Committee, three options were put forward: (i) to improve existing bilateral and multilateral facilities; (ii) to provide access to dedicated grant financing to facilitate regional coordination and support regional policy and regulatory reforms; and (iii) to create a dedicated fund to cover a share of the costs associated with large-scale infrastructure projects or other joint regional facilities. An appropriate balancing of the need to strengthen regional coordination and the desire to avoid the establishment of a large, dedicated fund which could distort country priorities would argue for adoption of the second alternative.
The Africa Regional Integration Department is now developing an Africa-wide Regional Integration Assistance Strategy, to identify priority regional programs; provide a framework for capacity building in key regional institutions; and serve as a platform for joint efforts with other donors. Board presentation is envisaged by mid-FY08. The East Asia and the Pacific region has also prepared a similar strategy for the Greater Mekong Sub-region (GMS). The Bank’s Legal Department has also been working on formulating guidance for staff on how to address the legal challenges arising from regional projects.
In FY06, IDA commitments for regional projects reaches $538 million, 11 percent of total IDA commitments by Africa, and FY07 Africa regional project commitments amount to $707 million, 12 percent of IDA commitments by Africa.
Projects include: the West Africa Power Pool Project to build an efficient power market in six countries; the East Africa Transport Project to reduce transport costs by 20-35 percent through improved roads; and the Southern Africa Power Market Project ($179 million) to connect the electricity grid of the Democratic Republic of Congo to that of Zambia, with the aim of eventually integrating all southern African countries into a regional energy market.
The African Development Bank has become a close partner, sharing in the development of complex infrastructure programs and co-financing most large regional investments. Other significant partners include the European Union, the Islamic Development Bank, the Development Bank of Southern Africa, DFID, AfD, USAID, Germany, Japan and Nordic countries.
Several regional organizations have approached the World Bank to request assistance to strengthen regional coordination of trade issues. While the Bank is hampered by a lack of a grant instrument to provide financing to regional bodies, it undertook several regional diagnostic studies in FY06 and FY07, including reviews of implementation of customs unions and analyses of gaps in regional infrastructure, and is currently analyzing the major impediments for improving the business climate in the Common Market for Eastern and Southern Africa (COMESA) that should be addressed at the regional level.
The emphasis remains on power, transport corridors, trade facilitation and support for telecommunications. Additional assistance is also anticipated for environmental protection, management of shared natural resources, regional initiatives to raise agricultural productivity, combating migratory diseases and capacity development.
These include country ownership of proposed programs, alignment of donors to country strategies, harmonization of donor programs to provide collective assistance with common procedures and effective division of labor, and managing for results. See www.oecd.org/documentprint/0,3455.
Note that these figures may under-estimate trade projects due to potential miscoding by task managers.
These were: low income countries - Bangladesh, Kenya, Madagascar, Senegal, Vietnam; lower middle income countries - Cameroon, China, Egypt, Indonesia, Iraq, Morocco; upper middle income countries -Russian Federation, Uruguay; and one high income country - Saudi Arabia.
See Mauritius -- From Preferences to Global Competitiveness: Report of the Aid for Trade Mission, World Bank, April 2006.
In Africa, for example, “Africa’s Silk Road: China and India’s New Economic Frontier” shed light on the growth impact of China and India’s trade and investment in Africa. In Latin America, “Natural Resources: Neither Curse nor Destiny” analyzed ways natural resources could promote development and economic diversification based on experiences from around the world.
For example, “Services Trade and Development: the Experience of Zambia” analyzed the regulations dealing with market failures and suggested new proactive policies to widen the access of firms, farms, and consumers to services.