The World Bank has come out with a Trade Strategy Report for the first time, which was released on 16 June. Although trade has been an important component of the economic growth agenda and country assistance strategies included trade or trade-related activities, no formal strategy with the main focus on trade has been prepared in the past.
With the changing global economic landscape where developing economies have become global economic leaders, the World Bank group has acknowledged the need for such a strategy.
The trade strategy is intended to inform and guide the World Bank group’s programmes on international trade in the coming decade and lays out priority areas for lending, technical assistance and policy advice for the World Bank in the trade area and also provides a framework for monitoring and evaluation of results and for improving internal and external coordination in the delivery of trade programmes and assistance.
Quoting statistics, the report points out that these new drivers of global trade account for a steadily increasing share of the total global trade. Between 2000 and 2009, their exports rose by 80% compared to only 40% for the world as a whole and new market opportunities have been created by the rapid rise in South-South trade.
China, which is today the world’s largest exporter, is predicted by the bank to be the world’s largest economy in GDP terms by a significant margin in 2020 and India is projected to be the third largest after the US.
China’s growth together with the rapid growth in emerging economies such as India and Brazil will come with opportunities and threats to the other developing countries. Opportunities will be in the form of opportunities for diversification and likely prospects for sustained higher prices for natural resource based exports, but the threats will be in the form of competition for the others and pressure on firms in other developing countries to improve productivity and reduce costs and the greater difficulty in attracting FDI.
The bank, having identified the changes in the structure of global production such as the expansion of global value chains, expansion of trade in services and that since of late the international trade and investment policy agenda is moving outside the traditional domain of trade ministries to areas covering many other government agencies, has prepared the strategy report keeping in mind the new dynamics and the need to adjust to changing times.
The strategy is intended to guide the bank group programmes on international trade for the coming decade and lays out strategic directions and priority areas for lending, technical assistance and policy advice and provides a framework for monitoring and evaluation of results achieved and for managing internal and external coordination.
The strategy identifies four priorities:
nEnhancing trade competitiveness and diversification of developing country exports
nReducing trade costs through support for trade facilitation, transport logistics and trade finance
nSupporting expanded market access and international trade cooperation
nManaging shocks and making the gains from trade more inclusive
The trade strategy is expected to be implemented through region specific work programmes and activities by central units. The South Asia strategy highlights the significant potential gains from regional integration and aims at regional cooperation in trade and backbone services (water, electricity and transport).
The report states that most of the priority areas of the strategy are directly relevant to the needs of the small states – improving competitiveness, identifying policy options to help overcome distance and geography related barriers to trade by leveraging opportunities for trade in service suppliers (natural persons) support for regional integration and cooperation to capture economies of scale in the provision of public services to support trade improving access to trade finance and analysis of the design and potential impacts of trade agreements.
Experts praised the new strategy, but cautioned on the need to implement it early as delays might weaken its credibility.
(Manel de Silva holds an Honours Degree in Political Science from the University of Ceylon, Peradeniya and has engaged in professional training in Commercial Diplomacy at ITC and GATT. She has served as a trade diplomat in several Sri Lankan Missions overseas and was the first female Head of the Department of Commerce as Director General of Commerce.)