1. 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

2. The Trade Agenda has Changed
2





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

3. Trade/GDP and South-South trade
3
Total trade as a percentage share of GDP
Percentage share as indicated
Imports from the South as % of total world imports
South-South imports as % of total South imports
40%
60%
35%
30%
25%
20%
40%
Low and middle-income countries
15%
10%
All countries
5%
20%
0%
1985
1988
1991
1994
1997
2000
2003
2006
1990
1993
1996
1999
2002
2005
2008

4. Trend decoupling—starting in early
90s
10
8
6
World Growth 1965 - 2011
High Income
High Income Trend
Developing Countries
Developing Countries Trend
4
2
-2
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
0
-4
• Sustained high growth levels associated with expanding trade
• World trade has grown twice as fast as global GDP

5. 5
Services trade: expanding, but big
differences across developing
countries
Average annual growth rate between 2000 and 2008
25%
Services
Other Commercial
Other Business
20%
15%
10%
5%
0%
Latin America
Africa
MENA
East Asia
ECA
South Asia

6. Services matter for Caribbean countriess
80
Caribbean Countries
Services/GDP
70
60
Middle Income Countries Services/GDP
50
40
Low Income Countries Services/GDP
30
20
Caribbean Countries Service Exports/GDP
10
LIC SXs/GDP
0
MIC SXs/GDP
Source: World Development Indicators
6

7. Trade Openness: Volatility & Risk of
Shocks
7
Trade / GDP ratio
80%
BRICs
70%
Developing
countries
60%
High Income
50%
Lower Income
40%
Lower Middle
Income
30%
Upper Middle Inc.
20%
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Source: World Bank

8. Commodity price increases and
volatility

9. Drivers: Trade Liberalization
9
0
10
20
30
40
50
MFN Applied Tariff Rates versus GDP per Capita
0
Source: Mattoo and
Neagu, 2011
2000
4000
GDP per capita(US dollars)
1980s
2000s
1990s
6000
8000

10. Integration of China/East/South Asia:
Quadrupling of effective global labor supply
(index, 1980 = 100)
400
Global Labor supply
Export-Weighted Labor
Force by Region1
1000
350
300
Working-age population
Total labor force
Export-weighted labor force¹
800
Advanced economies
East Asia
250
South Asia
200
600
Central and Eastern
Europe and CIS
Other developing
countries
150
400
100
200
50
0
1980
1National
85
90
95
2000
05
labor forces scaled by export-to-GDP ratios.
0
1980
85
90
95
2000
05
10

11. Drivers: Technology (FDI, ICT, global supply
chains)
12
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, an
d 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

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
20




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

18. • Address
market failures
- SEZs
- Enabling
domestic
policy
•Logistics
services
•Customs &
border
management
•Trade Finance
- IFC: Short-term
products
(GTFP, GTLP)
- MIGA: longer
term insurance
• Prodevelopment
institutional
environment
- Analysis for
advocacy (WTO;
agricultural
policy; climate
change)
•Regional
integration of
markets (SouthSouth
cooperation)
•Regulatory
reform &
cooperationNTMs, services
• Labor markets
MANAGING SHOCKS & PROMOTING
INCLUSION
• Trade in
services digitized
- movement of
suppliers
•Transit corridors;
regional trade
facilitation
MARKET ACCESS & TRADE COOPERATION
• Trade policy
- traditional
policies
- firm
competitivene
ss
TRADE FACILITATION, LOGISTICS & TRADE FINANCE
TRADE COMPETITIVENSS & DIVERSIFICATION
21
World Bank Group Trade Strategy:
Four Priority Areas of Focus
• Safety nets
• Skills
• Gender
• Lagging
regions
• Food prices

19. 24
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
TRADE OUTCOMES ANALYSIS
Growth and share
(Intensive margin)
Diversification
(Extensive margin)
Quality & sophistication
(Quality margin)
Entry & survival
(Sustainability margin)
Channels
Entry costs
Factor and transaction cost
Technology and efficiency
COMPETITIVENESS DIAGNOSTICS
Supply side factors
Market access
Incentive
framework
Factor
conditions
Backbone/business
services
Trade/investment
promotion
infrastructure
SEZs

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
32

23. Regulatory assessments in services
Step 1
• Mapping regulations
• Horizontal regulations affecting a wide range of sectors
• Specific regulations affecting a sector, subsector, or an
activity
• Assessing regulation-making process:
transparency, necessity, and non-discrimination
• Assessing institutional arrangements in light of international
best practices
Step 2
• Assessing the impact of regulations in market
structure, prices, quality, and access through econometrics
tools
Step 3
• Assessing alternative regulations
• Proposing new institutional arrangements, if any
• Assessing feasibility of alternatives regulations and
institutional arrangements
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. 35
Trade Facilitation/Logistics &
Finance
(and trade-related infrastructure)

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

27. Logistics costs key factor for
SMEs
LAC Logistics Costs: % of Total Value of Firm Sales
45
42
40
35
12.7
30
25
18
15
7.31
11.36
29.4
18
6.28
20
18
10.63
11
10
5
6.9
0
Less than US$ 5 M
US$ 5 M to US$ 50 M US$ 50 M to US$ 500 M
Inventory Management &Warehousing
More than US$ 500 M
Transport &Distribution
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
TOP 10 COUNTRIES
UPPER MIDDLE INCOME
Country
South Africa
China
Turkey
Malaysia
Bulgaria
Thailand
Chile
Tunisia
Brazil
Mexico
TOP 10 COUNTRIES
TOP 10 COUNTRIES
LOWER MIDDLE INCOME
LOW INCOME
LPI Rank
Country
LPI Rank
Country
LPI Rank
23
26
27
29
36
38
39
41
45
47
India
Morocco
Philippines
Vietnam
Egypt, Arab Rep.
Indonesia
Yemen, Rep.
Ukraine
Pakistan
Guatemala
46
50
52
53
57
59
63
66
71
74
Benin
Malawi
Madagascar
Niger
Tanzania
Guinea-Bissau
Togo
Central African Republic
Cambodia
Zimbabwe
67
73
84
87
88
94
97
98
101
103
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. http://www.worldbank.org/trade
Thank you