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.
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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.
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Policy Research Working Paper WPS8609 OCT 10, 2018
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.
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The Eliminating Barriers to Sustainable and Inclusive Growth in Sri Lanka Program supports the attainment of the GoSL’s Vision 2025 through the provision of analytical and advisory services to identify and implement a wide range of priority reforms necessary to unleash the trade and competitiveness potential for inclusive and sustainable growth in Sri Lanka.
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Recent literature has shown evidence of positive contributions of export promotion agencies around the world in raising exports, through the intensive and extensive margins of trade.
... See More + The number of export promotion agencies has increased substantially over the past two decades, and most of them focus on assisting exporters in understanding and finding markets for their products. This paper describes the characteristics of export promotion agencies around the world, using a novel database from the World Bank, in collaboration with the International Trade Center in Geneva, covering 2005-10. In addition, it presents a short summary of the literature on the impacts of export promotion agencies.
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Policy Research Working Paper WPS8470 JUN 07, 2018
Vargas Da Cruz,Marcio Jose; Lederman,Daniel; Zoratto,Laura De CastroDisclosed
The empirical case for trade as an engine of growth has now been established on solid empirical grounds. There has been a protracted controversy in the literature on the econometrics of trade and growth.
... See More + Nonetheless, most recent estimates suggest that a major episode of liberalization provides a permanent boost in growth on the order of 1 to 2 percent. Concomitantly, and largely on practical grounds, most low- and middle-income countries, with very few exceptions, have substantially lowered their trade barriers, eliminating the most egregious forms of trade protection (tariff peaks, quantitative restrictions, and other command-and-control instruments). Yet, by all accounts, trade costs remain high. Using an approach that consists of inverting the gravity equation and inferring trade costs from the relative size of external versus internal trade, Arvis and others (2013) and Novy (2013) show that trade costs have failed to fall as much for low-income countries as they have for others, reinforcing their economic ‘remoteness.’ Several multilateral initiatives have been set up to help low- and middle-income countries low-income ones, to integrate better in world trade. For instance, the Aid-for-Trade initiative was launched in 2005 to help low-income countries to cope with their Uruguay Round commitments, which were, in turn, expected to improve their ability to draw benefits from World Trade Organization (WTO) membership. More recently, the Trade Facilitation Agreement (TFA) signed in December 2013 in Bali and entered into force in February 2017, was designed to help low and middle-income countries to focus on reducing non-tariff barriers (NTBs) to trade such as border delays, cumbersome regulations, and so on. The TFA is expected to focus governments’ attention on the various aspects of trade facilitation, including some that go beyond the written mandate of the TFA. Some of those aspects are technical issues of border management, such as reducing delays, computerizing customs transactions, and streamlining verification and payment procedures. Some others are more genuinely economic, such as streamlining NTBs and improving regulatory design through cost-benefit analysis. This volume discusses some of the analytical methods that can be used to accompany this process. Chapter two discusses the broad economic rationale for improving the design of NTMs. Chapter three illustrates the main forms of quantifying NTMs and their effects, including inventory approaches, price-based approaches, and quantity-based approaches. It also proposes a new analytical and measurable concept of regulatory distance to help in guiding deep integration efforts at the regional level. Chapter four discusses the effects of NTMs on household expenditures, poverty, and firm competitiveness. Chapter five illustrates how analysis of NTMs can be used to inform policy advice. Chapter six concludes.
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Argentina needs to lift and stabilize economic growth to create more and better jobs while reigniting productivity to bring income closer to that of more advanced economies.
... See More + Integration into global markets provides opportunities to unleash the country’s growth and higher productivity potential by creating conditions and incentives for markets to function better and resources to be used more efficiently. In addition, further integration into the world economy can help deliver inclusive growth, as consumers will gain from the availability of foreign goods and services, greater variety, and prices that are more competitive, while small and medium enterprises (SMEs) can have more opportunities to expand their activities. The government has taken steps to restructure and strengthen its institutions for investment promotion and competition policy.
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Report 125115 JUN 01, 2018
Martinez Licetti,Martha; Iootty De Paiva Dias,MarianaEnglishDisclosed
The administration of President Mauricio Macri in Argentina faces an economy that is poorly connected with the world economy. Argentina needs to lift and stabilize economic growth to create more and better jobs while reigniting productivity to bring income closer to that of more advanced economies.
... See More + Integration into global markets provides opportunities to unleash the country’s growth and higher productivity potential by creating conditions and incentives for markets to function better and resources to be used more efficiently. In addition, further integration into the world economy can help deliver inclusive growth, as consumers will gain from the availability of foreign goods and services, greater variety, and prices that are more competitive, while small and medium enterprises (SMEs) can have more opportunities to expand their activities.
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Argentina needs to lift and stabilize economic growth to create more and better jobs while reigniting productivity to bring income closer to that of more advanced economies.
... See More + Integration into global markets provides opportunities to unleash the country’s growth and higher productivity potential by creating conditions and incentives for markets to function better and resources to be used more efficiently. In addition, further integration into the world economy can help deliver inclusive growth, as consumers will gain from the availability of foreign goods and services, greater variety, and prices that are more competitive, while small and medium enterprises (SMEs) can have more opportunities to expand their activities. The government has taken steps to restructure and strengthen its institutions for investment promotion and competition policy.
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The National Strategy for Development of Statistics Implementation Support Project aims to improve the capacity of the Bangladesh Bureau of Statistics (BBS) to produce quality core statistics and make them accessible in a timely manner to policy makers and the public.
... See More + There are five components to the project, the first component being improving the coordination and management of statistical activities. Enhanced coordination (subcomponent A.1) will help reduce redundancies and ensure that data collected by other agencies are in line with international standards. The activities under subcomponent A.2 aim to ensure sustainable improvements in the management functions of the BBS. The Finance, Administration, and Management Information System Wing of the BBS will take the lead for Component A and coordinate with the other Wings as necessary. The second component is the developing human resources and ICT infrastructure to produce and manage data. The project will strengthen the role of the Statistical Staff Training Institute of the BBS and develop a training policy to deliver systematic, rather than ad hoc, training for BBS staff (subcomponent B.1). As highlighted in the NSDS, improvements in ICT (subcomponent B.2) are central to strengthen the functioning of local offices, improve quality in data collection, and for data sharing efforts through the website. The third component is the improving the coverage and quality of core statistics required for policy making. This component aims to improve the design, implementation, and information generated by high priority, core statistical operations identified in the NSDS. The core statistical operations that are expected to be improved include national accounts, price statistics, labor and industry statistics, social statistics, and agricultural statistics. The fourth component is the promoting and strengthening access to and the use of official statistics. It is important, to make users aware of statistics, both in terms of what is available and its use. To enable this, it is critical to produce statistics of good quality, release them on time, and with proper explanations of methods and procedures ‐ metadata. Such activities will be supported by this component. The Computer Wing of the BBS will take the lead for Component D and coordinate with the other Wings as necessary. Finally, the fifth component is the project management.
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Trade policies can affect the development of the higher education and tertiary health services sectors in Indonesia. While they are not the only policies that matter, international experience shows that increased openness to foreign service providers can help upgrade domestic health sectors, particularly tertiary healthcare services.
... See More + That is why Indonesia’s less open and more restrictive policies relatively to Malaysia, Singapore and Thailand are a source of concern. Access of foreign providers, both businesses and skilled practitioners is constrained which ranks Indonesia against regional comparators on the basis of the Services trade restrictiveness index (STRI). Increased openness to foreign investments and professionals could help improve the quality of the domestic health systems in Indonesia, particularly hospital services.
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In this note, the authors benchmark the tertiary education system of Indonesia against others in ASEAN. They examine how trade policies affect the development of the higher education sectors in Indonesia.
... See More + These are not the only policies that matter, but international experience shows that increased openness to foreign service providers can help upgrade the domestic tertiary education sector. Indonesia has a less open and more restrictive policies relative to Malaysia, Singapore and Thailand. Access of foreign providers, both institutions and skilled practitioners, is constrained which ranks Indonesia against regional comparators on the basis of the Services Trade Restrictiveness Index (STRI). The authors review suggests seven trade policy changes that Indonesia could undertake to improve the quality of its higher education system. These changes aim to remove restrictions that have not yielded any clear benefits to the domestic system while have hindered the exposure of Indonesia’s higher education to international practices and competition.
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This report examines how Nepal could move away from a remittance-driven growth model by reforming its trade policies to increase competitiveness.
... See More + In Nepal, remittances are a key source of income of foreign exchange. They help alleviate financial constraints of households, lifting many out of poverty. However, from a macroeconomic perspective, remittances also contribute to large trade deficits, and to an appreciation of the real exchange rate (World Bank, 2016). Remittances put upward pressure on the prices of non tradable goods, and with a nominal exchange rate that is pegged to the Indian rupee, the result is an appreciation of the real exchange rate. In turn, the appreciation of the real exchange rate favors imports, and biases against exports by making domestic goods uncompetitive. This report proposes several trade policy reforms aimed at increasing competitiveness to break this vicious cycle. The report examines the extent to which Nepal has been tapping into its trade potentials, the underlying obstacles that it faces, and the type of policy reforms that could turn trade and investment into a vehicle for growth. Five key messages emerge from the analysis. First, Nepalese exporters remain small, and struggle with increasing their shipments once they enter a new market, rather than with the fixed cost associated with entering. This is essentially due to severe supply-side constraints that affect their trade and production costs. Second, Nepalese firms under utilize existing trade agreements and granted trade preferences. Third, diversification opportunities lie in fast-growing economies in East Asia and the Pacific. Efforts regarding connectivity, trade facilitation and export intelligence could help firms get to those markets. Fourth, to reduce the anti-export bias of its trade policy infrastructure, Nepal needs to simplify its tariff code, reduce tariffs on crucial intermediates, and embrace deeper integration, starting with more openness to services and investment. Fifth, trade reforms in Nepal are welfare enhancing on average, and pro-poor. The report is structured in two sections. The first one identifies unexploited trade potentials and assesses the extent to which Nepalese firms have been profiting from regional integration initiatives, and from granted trade preferences.The second section examines alternative scenarios for tariff reforms that would substantially improve the import-to-export environment, taking the fiscal restriction very seriously. It analyzes avenues to simplify its tariff code and reduce its anti-export bias and estimates the fiscal revenue cost. Section III considers fully exploiting trade potentials. The first part of the section uses a gravity-founded framework to identify potentials, and identifies whether under performance is explained due to challenges to diversify or challenges to increase shipments in existing destinations. It looks at patterns of trade and trade commentaries by region and trading bloc. Then, it assesses the extent to which Nepal benefits and uses existing trade agreements and trade preferences. Finally, it looks at how Nepal can benefit from moving to deeper integration schemes, particularly by further integrating with respect to investments and services trade. Section IV looks at improving the import-to-export environment. The first part of the section presents international evidence on the importance of trade policy reforms for competitiveness. Then, it carefully estimates the trade and tax impact of five alternative tariff reforms and presents a proposal for medium- and short-term changes, as well as alternatives to recouping potential tariff revenue losses.
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