The combination of an increasing trade imbalance, concerns about deindustrialization after several years of booming commodity prices, and rising imports of intermediate inputs and capital goods over the last decade has triggered new restrictive trade measures that have been gaining ground in Indonesia.
... See More + The Indonesian government is concerned about the impacts that an increased reliance on imported inputs may have on domestic jobs and value added. In addition to use of imported intermediates by firms involved in global production networks, firms use these intermediates for various reasons, including value, variety, and quality. Drawing on the findings of recent research, this note examines the characteristics of firms that rely on imported intermediates, and the role of these foreign intermediates on product quality upgrading and product diversification in Indonesia during 1998-2009. After a careful examination of sector, and firm-level data from Indonesian manufacturing, analysis uncovered three important findings: first, that users of imported inputs in Indonesia are exceptional performers. These firms grow faster in terms of output, value added and employment; they are more productive; and they pay higher wages. Second, both the use and the availability of imported inputs have contributed to improved product quality in Indonesian manufacturing. Third, firms' product diversification processes have been boosted by lower tariffs on inputs and by increased usage of imported versions. In light of these results, this note argues that facilitating imports of intermediate inputs is crucial to the performance of the most dynamic firms and that these intermediate imports diversify the Indonesian manufacturing sector while helping firms climb up the value chain.
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This paper aims at assessing the impact of migration on export performance and more particularly the effect of African migrants on African trade.
... See More + Relying on a new data set on international bilateral migration recently released by the World Bank spanning from 1980 to 2010, the authors estimate a gravity model that deals satisfactorily with endogeneity. The results first indicate that the pro-trade effect of migration is higher for African countries, a finding that can be partly explained by the substitution between migrants and institutions (the existence of migrant networks compensating for weak contract enforcement, for instance). This positive association is particularly important for the exports of differentiated products, suggesting that migrants also play an important role in reducing information costs. Moreover, focusing on intra-African trade, the pro-trade effect of African migrants is larger when migrants are established in a more geographically and ethnically distant country. All these findings highlight the ability of African migrants to help overcome some of the main barriers to African trade: the weakness of institutions, information costs, cultural differences, and lack of trust.
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Policy Research Working Paper WPS6739 JAN 01, 2014
Ehrhart, Helene; Le Goff, Maelan; Rocher?, Emmanuel; Singh, Raju Jan
The demand for accountability in aid-for-trade is increasing but monitoring has focused on case studies and impressionistic narratives. The paper reviews recent evidence from a wide range of studies, recognizing that a multiplicity of approaches is needed to learn what works and what does not.
... See More + The review concludes that there is some support for the emphasis on reducing trade costs through investments in hard infrastructure (like ports and roads) and soft infrastructure (like customs). But failure to implement complementary reform -- especially the introduction of competition in transport services -- may erode the benefits of these investments. Direct support to exporters does seem to lead to diversification across products and destinations, but it is not yet clear that these benefits are durable. In general, it is difficult to rely on cross-country studies to direct aid-for-trade. More rigorous impact evaluation is an underutilized alternative, but situations of clinical interventions in trade are rare and adverse incentives (because of agency problems) and costs (because of the small size of project) are a hurdle in implementation.
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Policy Research Working Paper WPS6742 JAN 01, 2014
This paper surveys political-economic research on the variety of instruments that governments use to conduct international trade policy. It presents key insights on the relationships between instruments such as tariffs, quotas, voluntary export restraints, and other nontariff barriers, as well as the ebb and flow of the national use of temporary trade barriers such as antidumping, countervailing duties, and safeguards.
... See More + The survey examines trends in use of these trade policy instruments over recent history; and it reviews the major theoretical and empirical explanations behind, and interrelationships between, their uses. Finally, the paper highlights potential institutional impacts of the General Agreement on Tariffs and Trade (GATT) and subsequent World Trade Organization (WTO) on choice of policy instruments, as well as how multilateral, unilateral, and preferential tariff liberalization may introduce political-economic shocks and affect incentives over time for how governments rely on different instruments.
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Policy Research Working Paper WPS6757 JAN 01, 2014
The paper analyzes the relationship between country size and the use of imported intermediate inputs by firms in 76 developing countries. Recent evidence indicates that the use of imported inputs can have a large, positive effect on productivity and growth, thus motivating a better understanding of the determinants of foreign inputs.
... See More + The results confirm that, as is the case with exports, use of imported intermediate inputs is much higher at the extensive and intensive margins in small relative to large countries. The results for imported inputs are comparable in magnitude with those for exports.
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Policy Research Working Paper WPS6758 JAN 01, 2014
The trade facilitation agenda represents an important opportunity for countries to not only realize economic development and poverty reduction goals, but also deepen regional integration.
... See More + The improvement or creation of trade corridors and the harmonization of requirements across national borders facilitate transit and significantly improve regional market integration. The trust fund (TF) for trade facilitation for regional integration in Central America was designed to support the region in improving its trade facilitation environment. It was financed by the trade facilitation facility, a multi-donor TF that helps developing countries improve competitiveness through concrete improvements in trade facilitation systems and reducing trade costs. It assisted in the implementation of the technical needs and policy recommendations that emerged from focused analytical work and from the complementary agenda of the Dominican Republic and Central American Free Trade Agreement (DR-CAFTA) and the Bank's aid-for-trade strategy. The TF program foresaw four components: (i) development of performance indicators and benchmarking framework to measure progress on trade facilitation; (ii) establishment of foundations to move towards single window merchandise clearing; (iii) strengthening and standardization of quality and phyto-sanitary controls; and (iv) improving the trading capacity of small market participants. In addition, the TF promoted regional dialogue and consensus on issues related to trade facilitation.
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This note is a background study to assess policy options to improve competitiveness of Kenya's manufacturing sector, with a specific focus on exports.
... See More + The focus is on export performance in the manufacturing sector overall and drawing on analysis of four specific manufacturing sectors - apparel, wood furniture, chemicals, and agriculture industries-which are used as examples from which to generalize about wider competitiveness issues in Kenya's manufacturing sector. Kenya's Vision 2030 aspires to achieve middle income status by 2030, which will require sustaining an annual average Gross Domestic Product (GDP) growth rate of 10 percent. Restarting the export sector growth engine will be imperative to achieve these targets. In particular, manufacturing exports will be critical because of their impact on growth, employment and economy-wide linkages. Kenya's manufacturing sector exhibits several strengths. Its global share in exports increased over the last 20 years, and it enjoys a strong position with regard to exports to the regional EAC market, particularly in some high value sectors like chemicals and pharmaceuticals. This background note aims to provide the new Government with policy focus and tools to tackle the constraints keeping Kenya from reaching its potential in manufacturing export competitiveness. This note has a specific focus on export performance; it also looks more broadly at the manufacturing sector, including domestic production and sales, where such data is available. As a result, it uses a mix of analytical approaches in the study.
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It is argued that compared with large countries, small countries rely more on trade and therefore they are more likely to adopt liberal trading policies.
... See More + The present paper extends this idea beyond the conventional trade openness measures by analyzing the relationship between country size and the number of documents required to export and import, a measure of trade facilitation. Three important results follow. First, trade facilitation does improve as country size becomes smaller; that is, small countries perform better than large countries in terms of trade facilitation. Second, the relationship between country size and trade facilitation is nonlinear, much stronger for the relatively small than the large countries. Third, contrary to what existing studies might suggest, the relationship between country size and trade facilitation does not appear to be driven by the fact that small countries trade more as a proportion of their gross domestic product than the large countries.
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Policy Research Working Paper WPS6692 NOV 01, 2013
Recent years have seen a surge in economic integration agreements (EIAs) and the development of non-tariff measures (NTMs). As a consequence, a growing number of EIAs include provisions on NTMs.
... See More + However, little attention has been given in the literature to the effects of NTM liberalization in the context of EIAs. In this paper, we focus on provisions for technical regulations and analyze whether the North-South harmonization of technical barriers affects international trade. Using a gravity equation, it tests whether, as a result of the deep integration associated with standards provisions included in the EIA, the Southern partners' trade expands with the North, but at the expense of their trade with non-bloc Southern partners. Empirical results provide strong support for this conjecture. Moreover, harmonization on the basis of regional standards negatively impacts the exports of developing countries to the North.
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Policy Research Working Paper WPS6710 NOV 01, 2013
This paper uses a theoretically grounded model of international trade to estimate the cross-border tradability of services. The resulting indices cover up to 99 countries and ten sectors.
... See More + The results show that information and communications technology capital and legal institutions are particularly important determinants of a country's ability to successfully export services. The tradability indices are strongly correlated with outcome indicators, such as trade shares of individual countries. In addition, they are strongly correlated with important inputs, including country productivity and size, factor endowments, trade costs, and regulatory measures. In particular, the results suggest that a more restrictive regulatory environment significantly reduces the international tradability of services.
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Policy Research Working Paper WPS6712 NOV 01, 2013
Entering and successfully surviving in export markets is a costly process for firms. The process involves learning about the existence of foreign demand, "discovering" production costs of exportable goods, building up reputation, succeeding in product branding to reduce competitive pressures and to be constantly upgrading quality standards to better serve demanding international clients, and remaining competitive vis-à-vis other players in the global marketplace.
... See More + This paper argues that tourism can help alleviate some of these costs by providing a relatively inexpensive platform for cost-discovery and by acting as a low-cost "in-house" trade fair, accessible to all domestic producers. The analysis combines product-level data on world and Nepal's exports (both for goods that are related and unrelated to tourism) with Nepalese data on tourist inflows and expenditures and macro indicators on relative prices. For tourism-related goods, the analysis reveals a positive association between tourist inflows from given destinations and their expenditures, with future merchandise exports to those destinations. Instead, for goods a priori unrelated to tourism, the data reveal no connection between tourism flows and future exports. The results suggest spillovers from tourism into merchandise export performance and diversification and would imply that there are gains from cooperation between tourism and export promotion agencies.
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Policy Research Working Paper WPS6669 OCT 01, 2013
This paper proposes the first evaluation using micro-level data of the gains from the consistency of activities with a local comparative advantage.
... See More + Using firm-level data from Chinese customs over the 2000-6 period, the study investigates the relationship between the export performance of firms and how their products relate to local comparative advantage. The key indicator measures the density of the links between a product and the local product space. Hence, it combines information on the intrinsic relatedness of a good with information on the local pattern of specialization. The results indicate that exports grow faster for goods that have denser links with those currently produced in the firm's locality. The density of links between products seems to yield export-enhancing spillovers. However, this positive effect of product relatedness on export performance is mainly limited to ordinary trade activities and domestic firms. It is also stronger for more productive firms, suggesting that spillover diffusion may be hindered by insufficient absorptive capacity.
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Policy Research Working Paper WPS6676 OCT 01, 2013
Cambodia has achieved impressive growth in Gross Domestic Product (GDP) over the past two decades, sustained despite the world financial crisis, and has significantly reduced poverty.
... See More + World Bank policy studies have found that countries that experience growth in labor-intensive sectors are more likely to reduce poverty. Labor intensive sectors not only provide employment, but also often hire workers from the lower end of the wage distribution scale. This note shows that this has been the case in the apparel industry in Cambodia, where, after the end of the multi-fibre agreement in 2004, exports market share has increased as well as total employment, although wage premiums have decreased and upgrading has been limited. Improvements in working conditions did not increase the incidence of plant closure, and provided a clear benefit to employees. Nevertheless, gains can only be sustained if accompanied by productivity increases, allowing for better conditions, including wage premiums and other benefits.
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This paper examines trade policies in Peru and Argentina since the reforms of the 1990s. Peru provides a valuable example of sustaining reform.
... See More + Leaders have used negotiations and other international instruments to disseminate among Peruvians a positive vision of Peru in the international economy and to extend the application of World Trade Organization-based governance principles. Peru has introduced few new restrictions and all of them have been through World Trade Organization-sanctioned policy instruments. Argentina, by contrast, has introduced multiple restrictions, through procedures that eschew World Trade Organization governance principles. Moreover, leaders there have returned trade politics to the dependencia philosophy that sees the international economy as an exploitive environment. The paper brings out the weakness of international obligations to limit Argentina's return to import substitution and the pains at which Peru has gone to maintain the management of its economy within the same rules that Argentina has so easily violated.
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Policy Research Working Paper WPS6610 SEP 01, 2013
Baracat, Elias A.; Finger, J. Michael; Thorne, Raul Leon; Nogues, Julio J.
More than 350 Regional Trade Agreements (RTAs) are currently in force and more than one-half of global trade is carried out under preferential terms.
... See More + A strong set of results based indicators can help to illuminate the costs and benefits of policy initiatives and, thus, inform the broader public dialogue on complementary reforms. The following discussion takes stock of the monitoring practices in Africa with respect to regional trade initiatives and evaluates the need for further indicator development. The assessment thereby focuses on the downstream outcomes of existing trade commitments and the measurement of how regional trade policies affect ordinary traders, producers, and consumers. This spotlight on impact-monitoring for the general population also helps to establish whether decision makers have the necessary tools at hand to evaluate the linkages between regional trade arrangements and poverty reduction. This paper is divided into following sections: section one gives background and motivation for the analysis; section two briefly discusses integration monitoring systems and related indicators in general; section three presents an overview of regional trade indicators that are currently used by policy-makers in sub-Saharan Africa; section four surveys the respective monitoring practices in other regions of the world; and section five provides suggestions for indicator development in Africa based on the practices and gaps identified in the earlier parts of the report.
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Working Paper (Numbered Series) 81085 SEP 01, 2013
This report explores the role of trade facilitation and logistics in driving export and ultimately national competitiveness. It posits that this area of trade consists of three interrelated pillars: (i) transport infrastructure and logistics services; (ii) regulatory procedures for exports and imports; and (iii) supply chain organization.
... See More + Transport infrastructure and logistics services relate to the physical aspects of trade flows. Logistics services include a variety of services, the most important of which are transportation, storage and consolidation. This summary is organized into nine sections. After the introduction, section two presents the conceptual framework for this study. The economic context under which trade facilitation is discussed is outlined in section three. It describes Vietnam's evolving structure of trade and competitiveness. The country's trade logistics is part of this structure and this is germane to understanding the key issues and solutions proposed. This is followed by discussion of the three pillars of trade facilitation in sections four to six and then section seven presents the institutional framework underpinning these pillars. Section eight then pulls together the diverse roles of government, such as setting policies, acting as regulator, and being the facilitator working in collaboration with key stakeholders. The conclusion, section nine, suggests a set of recommendations.
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Other Poverty Study 79235 JUL 15, 2013
Pham, Duc Minh; Mishra, Deepak; Cheong, Kee-Cheok; Arnold, John; Trinh, Anh Minh; Ngo, Ngoc Huyen Thi; Nguyen, Phuong Hien ThiVietnamese
This report explores the role of trade facilitation and logistics in driving export and ultimately national competitiveness. It posits that this area of trade consists of three interrelated pillars: (i) transport infrastructure and logistics services; (ii) regulatory procedures for exports and imports; and (iii) supply chain organization.
... See More + Transport infrastructure and logistics services relate to the physical aspects of trade flows. Logistics services include a variety of services, the most important of which are transportation, storage and consolidation. This summary is organized into nine sections. After the introduction, section two presents the conceptual framework for this study. The economic context under which trade facilitation is discussed is outlined in section three. It describes Vietnam's evolving structure of trade and competitiveness. The country's trade logistics is part of this structure and this is germane to understanding the key issues and solutions proposed. This is followed by discussion of the three pillars of trade facilitation in sections four to six and then section seven presents the institutional framework underpinning these pillars. Section eight then pulls together the diverse roles of government, such as setting policies, acting as regulator, and being the facilitator working in collaboration with key stakeholders. The conclusion, section nine, suggests a set of recommendations.
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Other Poverty Study 79235 JUL 15, 2013
Pham, Duc Minh; Mishra, Deepak; Cheong, Kee-Cheok; Arnold, John; Trinh, Anh Minh; Ngo, Ngoc Huyen Thi; Nguyen, Phuong Hien ThiEnglish
At first glance, most East Asian countries are only moderately sensitive to decreasing demand from the Eurozone. However, weak demand in Europe has a strong effect on Chinese exports, which depend on intermediate goods from other East Asian countries provided through a close-knit regional supply chain, leading to considerable indirect exposure.
... See More + East Asian countries need to maintain competitiveness by moving up the value chain and undertaking reforms to improve the investment climate. They also need reforms to increase domestic demand and stimulate regional demand through deepening regional integration efforts.
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This paper proposes a new quantitative implementation of Balassa's idea that export composition and revealed comparative advantage inform the relationship between endowments in domestic factors of production and exports.
... See More + It proposes that the export composition of countries is close to a low-dimensional manifold or "Product Space" within the space of export composition, which has as many dimensions as product lines. The Product Space corresponds to a few latent endowments explaining the structure of the trade matrix. The model uses non-linear techniques to identify the product space from the 2010 export matrix of 128 countries and 61 products, and to estimate the latent factors of endowments by country. It formalizes a concept of latent comparative advantage, which has practical country specific applications, relevant for "trade competitiveness" policies. Compared with classical revealed comparative advantage, the model assesses how well countries are matching their potential implied by the latent variables, and also identifies products for which the latent advantage is not yet revealed (extensive margin). The data suggests that the degree of overlap between latent and revealed advantage is a metric of "trade competitiveness."
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Policy Research Working Paper WPS6478 JUN 01, 2013
India and Pakistan, the two largest economies in South Asia, share a common border, culture and history. Despite the benefits of proximity, the two neighbors have barely traded with each other.
... See More + In 2011, trade with Pakistan accounted for less than half a percent of India's total trade, whereas Pakistan's trade with India was 5.4 percent of its total trade. However, the recent thaw in India-Pakistan trade relations could signal a change. Pakistan has agreed to grant most favored nation status to India. India has already granted most favored nation status to Pakistan. What will be the gains from trade for the two countries? Will they be inclusive? Is most favored nation status a panacea? Should the granting of most favored nation status be accompanied by improvements in trade facilitation, infrastructure, connectivity, and logistics to reap the true benefits of trade and to promote shared prosperity? This paper attempts to answer these questions. It examines alternative scenarios on the gains from trade and it finds that what makes most favored nation status work is the trade facilitation that surrounds it. The results of the general equilibrium simulation indicate Pakistan's most favored nation status to India would generate larger benefits if it were supported by improved connectivity and trade facilitation measures. In other words, gains from trade would be small in the absence of improved connectivity and trade facilitation. The idea of trade facilitation is simple: implement measures to reduce the cost of trading across borders by improving infrastructure, institutions, services, policies, procedures, and market-oriented regulatory systems. The returns can be huge, even with modest resources and limited capacity. The dividends of trade facilitation can be shared by all.
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Policy Research Working Paper WPS6483 JUN 01, 2013