Global trade growth slowed in 2018 amid a weakening of economic growth in China and the Euro Area and rising trade protectionism. The volume of trade grew by 3.8 percent, down from 5.4 percent in 2017, but has shown signs of reviving in the first quarter of 2019.
... See More + However, the U.S. tariff increases implemented in early May and China’s response might change the outlook. Trade policy developments are mixed. Restrictive trade measures imposed during 2018 affected 3.8 percent of world merchandise trade, nearly three times the share affected in any of the years since the global financial crisis of 2009. Tit-for-tat tariffs between the United States and China alone affected 2.0 percent of world merchandise trade in 2018. Ongoing trade tensions affected importers in United States and China significantly. While trade fell in targeted products, prices at the border did not change as compared with non-targeted products. Even though trade in stickier inputs tends to be relatively resilient in the short term, if trade tensions are not resolved, existing global value chains are likely to be disrupted in the longer term. It is in the long-term interest of industrial and developing countries for trade tensions to be resolved through a multilateral approach and World Trade Organization reforms.
See Less -
This paper characterizes the trade-off between the income gains and the inequality costs of trade using survey data for 54 developing countries.
... See More + Tariff data on agricultural and manufacturing goods are combined with household survey data on detailed income and expenditure patterns to estimate the first-order effects of the elimination of import tariffs on household welfare. The paper assesses how these welfare effects vary across the distribution by estimating impacts on the consumption of traded goods, wage income, farm and non-farm family enterprise income, and government transfers. For each country, the income gains and the inequality costs of trade liberalization are quantified and the trade-offs between them are assessed using an Atkinson social welfare index. The analysis finds average income gains from import tariff liberalization in 45 countries and average income losses in nine countries. Across countries in the sample, the gains from trade are 1.9 percent of real household expenditure on average. We find overwhelming evidence of a trade-off between the income gains (losses) and the inequality costs (gains), which arise because trade tends to exacerbate income inequality: 45 countries face a trade-off, while only nine do not. The income gains typically more than offset the increase in inequality. In the majority of developing countries, the prevailing tariff structure thus induces sizable welfare losses.
See Less -
Policy Research Working Paper WPS8825 APR 22, 2019
This is a statement by Mr. Mukhisa Kituyi, Secretary-General of United Nations Conference on Trade and Development (UNCTAD) at the ninety-ninth meeting of the Development Committee held on April 13, 2019.
... See More + He states that the world economy carries a much heavier burden of corporate and public debt than when the crisis hit. He discussed on following topics: poor gross domestic product (GDP) performance is not due to trade frictions; stock market swings, not fundamentals; policy déjà vu: freer trade and more liquidity for stock markets; a dangerous mix: over-indebtedness and inequality; and reclaiming multilateralism for a global green new deal.
See Less -
The Arab Republic of Egypt is yet to meet its exports potential, which has been historically hampered by several domestic market distortions and multiple barriers, resulting in weak export performance and modest regional and global integration.
... See More + Although the liberalization of the exchange rate in November 2016 was a necessary step to correct the exchange rate misalignment and ease the ensuing shortages in foreign currency, it has not been sufficient to guarantee a notable improvement in export performance. This paper analyzes Egypt's exports along three dimensions that are key for export performance and future growth: (i) composition and relatedness of exported products; (ii) geographic and product concentration; and (iii) relatedness to globally traded products. The analysis suggests that Egypt continues to specialize in traditional areas of comparative advantage and limited value-added or is expanding toward products for which global demand is declining. The paper uses a gravity model to predict bilateral trade flows based on the economic size, geographic distance, and other relevant characteristics that should typically contribute to facilitated trade and identify specific sectors and markets for which Egypt seems to have an untapped potential. To understand this underperformance, the paper investigates the key impediments to meeting the export potential. It explores some of the important supply and demand side factors and assesses the role of trade policy measures (tariffs and non-tariffs barriers) in impeding export growth. The analysis reveals that despite significant liberalization efforts, Egypt remains among the group of developing countries that have the highest frequency index and coverage ratio of non-tariff measures. Policy recommendations include a call to improve external competitiveness by fostering and diversifying domestic production and complement these efforts by engaging in trade facilitation reforms to remove the non-tariffs barriers to trade, notably, the administrative, technical, and sanitary barriers to trade. These are all necessary for the country to capitalize on its competitive gains from the currency depreciation and to improve the degree of Egypt's integration into global markets.
See Less -
Policy Research Working Paper WPS8809 APR 09, 2019
This paper presents a structural general equilibrium model to analyze the effects on trade, welfare, and gross domestic product of common transport infrastructure.
... See More + Specifically, the model builds on the framework by Caliendo and Parro (2015) -- a Ricardian model with sectoral linkages, trade in intermediate goods and sectoral heterogeneity -- to allow for changes in trade costs due to improvements in transportation infrastructure, financed through domestic taxation, connecting multiple countries. The model highlights the trade impact of infrastructure investments through cross-border input-output linkages. This framework is then used to quantify the impact of the Belt and Road Initiative. Using new estimates on the effects on trade costs of transport infrastructure related to the initiative based on Geographic Information System analysis, the model shows that gross domestic product will increase by up to 3.4 percent for participating countries and by up to 2.9 percent for the world. Because trade gains are not commensurate with projected investments, some countries may experience a negative welfare effect due to the high cost of the infrastructure. The analysis also finds strong complementarity between infrastructure investment and trade policy reforms.
See Less -
Policy Research Working Paper WPS8801 APR 01, 2019
De Soyres,Francois Michel Marie Raphael; Mulabdic,Alen; Ruta,MicheleDisclosed
Agriculture forms the backbone of Pakistan’s economy. Despite the fact that the share of agriculture in the GDP has declined over the years, the sector continues to play an important role in the socio-economic structure of the country.
... See More + About 60 percent of the population lives in rural areas of Pakistan, the majority of which is dependent on agricultural activities for their livelihood. Yield growth for most crops and livestock products in Pakistan has stagnated and become more variable in recent years. Furthermore, sizable gaps persist between achievable and realized productivity in most crops, and diversification and a move to higher value-added agricultural commodities has been limited, predominantly in the crops sector.
See Less -
There are significant value chain linkages between India and Bangladesh, particularly in the textile and apparel sector. India specializes in the upstream segment, supplying such intermediate inputs as silk, cotton, yarn, and fabrics to Bangladesh.
... See More + Bangladesh specializes in the downstream final apparel segment, exporting worldwide as well as to India. Tariffs and nontariff barriers in both countries inhibit the growth of value chain linkages. In addition, subsidies and other industrial policies in India distort incentives away from the natural pattern of specialization. The results of a new survey of textile and clothing firms in both countries corroborate these findings. Reforms in trade policy (including rules of origin), trade facilitation, trade-related standards, and institutions could help both countries better take advantage of value chain linkages.
See Less -
Policy Research Working Paper WPS8731 FEB 07, 2019
Around the world, trade has played a critical role in reducing poverty. Some of the most successful countries in East Asia, Europe, and North America owe much of their success to strong trade relations with their neighbors.
... See More + However, South Asian countries have yet to reap the benefits of proximity. Intraregional trade accounts for a little more than 5 percent of South Asia’s total trade, compared with 50 percent in East Asia and the Pacific and 22 percent in Sub-Saharan Africa.The World Bank’s recent report, A Glass Half Full: The Promise of Regional Trade in South Asia, clearly illustrates the gaps between current and potential trade in South Asia.The force of gravity—the degree of trade attraction between countries—is also manifest in high levels of informal trade. Informal trade has been estimated at 50 percent of formal trade in South Asia, aggregating assessments of various studies covering the 1993 to 2005 period.The large gaps between actual and potential trade arise because South Asian trade regimes discriminate against each other. This can be shown through an index of trade restrictiveness. Based on global trade data, such an index generates an implicit tariff that measures a country’s tariff and non-tariff barriers on imports. In India, Pakistan, and Sri Lanka, the index is two to nine times higher for imports from South Asia than from the rest of the world.Moreover, although the average burden of non-tariff measures may not appear high, it is high for specific product and market combinations in South Asia. It varies from over 75 percent to over 2,000 percent. Sri Lanka consistently appears on the list of product-market combinations with the highest trade restrictiveness index in the region. Barriers that have held back trade and investment within South Asia include tariffs and para tariffs, real and perceived non-tariff barriers, connectivity costs as manifested in the cost of air travel, and the broader trust deficit.
See Less -
In recent years there has been an intensification of the long-running debate on the effects of trade integration. This debate has focused largely on the impact of trade in advanced economies, which has risked diverting attention away from the impact of trade on people's lives in developing countries and especially the extreme poor.
... See More + This volume brings together new research, using a range of different analytical approaches, that examines how the extreme poor have fared following trade liberalization in various developing countries and regions and the challenges that poor people face in benefitting from trade. Trade has been recognized as an engine for inclusive economic growth and poverty reduction in the 2030 Agenda for Sustainable Development. The 2015 joint WTO-World Bank publication, The Role of Trade in Ending Poverty strengthened the evidence that trade has played a critical role in poverty reduction and that the further integration of developing countries into an open global economy will be essential for achieving the goal of ending extreme poverty by 2030.
See Less -
Taking Stock: An update on Vietnam's recent economic developments, December 2018. Special focus: Facilitating Trade by Streamlining and Improving the Transparency of Non-Tariff Measures.
... See More +See Less -
Taking Stock: An update on Vietnam's recent economic developments, December 2018. Special focus: Facilitating Trade by Streamlining and Improving the Transparency of Non-Tariff Measures.
... See More +See Less -
If trade tensions between the United States and certain trading partners escalate into a full-blown trade war, what should developing countries do?
... See More + Using a global, general-equilibrium model, this paper first simulates the effects of an increase in U.S. tariffs on imports from all regions to about 30 percent (the average non-Most Favored Nation tariff currently applied to imports from Cuba and the Democratic Republic of Korea) and retaliation in kind by major trading partners—the European Union, China, Mexico, Canada, and Japan. The paper then considers four possible responses by developing countries to this trade war: (i) join the trade war; (ii) do nothing; (iii) pursue regional trade agreements (RTAs) with all regions outside the United States; and (iv) option (iii) and unilaterally liberalize tariffs on imports from the United States. The results show that joining the trade war is the worst option for developing countries (twice as bad as doing nothing), while forming RTAs with non-U.S. regions and liberalizing tariffs on U.S. imports (“turning the other cheek”) is the best. The reason is that a trade war between the United States and its major trading partners creates opportunities for developing countries to increase their exports to these markets. Liberalizing tariffs increases developing countries’ competitiveness, enabling them to capitalize on these opportunities.
See Less -
Policy Research Working Paper WPS8640 NOV 07, 2018
One reason that poor people may not capture the full benefit from participation in international markets is that the goods they produce tend to be subject to relatively high trade barriers.
... See More + This paper analyzes market access barriers faced by households in different income deciles by matching household survey data from India based on the industrial classification of their economic activity. Tariffs in international markets are higher, and nontariff measures more numerous, on goods produced by poor workers than on goods produced by rich workers. Tariffs faced by exporters are higher on goods produced in rural and more remote areas than on those in urban centers, on goods produced by informal enterprises than by formal ones, and on goods produced by women than by men. Furthermore, the global reduction in tariffs from 1996 to 2012 failed to ameliorate these differences. How did we get there? Efforts to protect poor workers across countries resulted in a coordination problem. Indeed, tariff protection in China and the United States is higher on goods produced by poor workers than on goods produced by rich workers. Therefore, if poor workers are employed in similar sectors, then each country's attempts to protect its poor workers by imposing higher tariffs and more nontariff measures on such goods will reduce the access of all poor workers to international markets, and thus limit the gains from trade.
See Less -
Policy Research Working Paper WPS8609 OCT 10, 2018
Trade has played a critical role in global poverty reduction. In harnessing the potential of trade, some of the most successful countries have developed strong trade relationships with their neighbors.
... See More + However, many South Asian countries have trade regimes that often offset the positive impact of geography and proximity. The report documents systematically the gaps between current and potential trade in South Asia and addresses important specific barriers that have held trade back. These barriers include tariffs and paratariffs, real and perceived nontariff barriers, connectivity costs, and the broader trust deficit. This policy-focused report unpacks these critical barriers to effective trade integration in South Asia through four in-depth studies that produce new, detailed, on-the-ground knowledge. Three of the studies are based on extensive stakeholder consultations. Two also rely on tailored surveys. The fourth study, on tariffs, benefits from new data on paratariffs. The report also marshals new evidence showing how trading regimes in South Asia discriminate against each other. Given the South Asian context, incremental, yet concrete steps aimed at tapping the potential of deeper integration are appropriate. The report has been drafted in this spirit. It offers precise, actionable policy recommendations that could help achieve measurable progress in key areas of trade and integration that would be to the advantage of all countries in the region.
See Less -
Trade integration can play a much larger role in boosting shared prosperity. The current focus on trade tensions threatens to obscure the great untapped benefits possible from further trade reform.
... See More + The opportunities provided by information technology and other fundamental changes in the global economy are yet to be reflected in modern areas of trade policy, such as services and electronic commerce. Greater openness in these areas would promote competition, lift productivity, and raise living standards. In many other areas, such as the rural economy, smaller enterprises, and women's economic empowerment, trade-related reforms are important particularly to foster more inclusive growth. Harnessing flexible approaches to WTO negotiations may be the key to reinvigorating global trade reform. Despite the benefits at stake — and with important exceptions such as the WTO Trade Facilitation Agreement — trade reform has lagged since the early 2000s. For much of this period, governments focused their efforts in the WTO on a single negotiating approach. Now, as groups of WTO members pursue joint initiatives in several areas, attention is turning to how other negotiating approaches — including some used effectively in the past — can be leveraged so that trade once again plays its full role in driving increased global economic prosperity. Building greater, more durable openness — this paper's focus — should be part of a broader effort to strengthen and reinvest in the global trading system. The system of global trade rules that has nurtured unprecedented economic growth across multiple generations faces tensions. Though only recently brought to the fore, those tensions are rooted in issues that have been left unresolved for too long. Governments need to promptly address outstanding questions involving, for example, the WTO dispute system and the reach of subsidy disciplines. Cooperative action to secure greater openness — an imperative in its own right — could also help to resolve these issues.
See Less -
