AID FOR TRADE AND LDCS

John S. Wilson, Lead Economist, World Bank December 13, 2010

Context: International Trade

2

World trade has grown twice as fast as global domestic product Trade: impact on health, education, technology, etc. Expanding trade raises welfare and growth for everyone (rich and poor)

Complex Policy Agenda

4

Many constraints to trade and competitiveness lie behind the border high-cost services inputs supply-chain bottlenecks Domestic policy
Trade facilitation cutting costs high on agenda

Trade Costs and Benefits?

Harrison and Rodriguez-Clare (2010) Growth is more likely achieved through increase exposure to trade than interventions that limit trade (i.e., tariffs or domestic content requirements). Freund and Rocha (2010) A one day reduction in transit delays in Africa increases exports by 7 percent.

World Bank Group and Trade

7

MULTIDIMENSIONAL AND CROSS-CUTTING

Technical Assistance and Capacity Building WBI South-South knowledge transfer programs Investment climate advisory services, Trade Facilitation Facility

Financing, Loans and Credits

IDA least developed (grants), focusing on export competitiveness and trade facilitation (IBRD) IFC investments and trade finance facilities
Participation in the Aid for Trade initiative and Enhanced Integrated Framework, New public private partnership on trade World Trade Indicators, World Integrated Trade Solution (WITS), TBT Database, Trade Facilitation Indicators Working papers, reports, books, flagship reports

Global Programs and Partnerships

Data, Indicators, Tools and Research

World Bank Trade Lending

FY 2003-2010 IDA and IBRD commitments

Why Aid for Trade Matters

9

Support trade as engine of growth especially in least developed countries

Enhance

diversification

Can help lower global trade costs more critical given fragile and changed global demand; higher financing costs Fight protectionism and support for global and regional trade agenda

Aid for Trade LDC vs. Non-LDC ODA Disbursements (USD Millions)
10

16,000 14,000

12,000
10,000 8,000 6,000 4,000 2,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 Total AFT to LDC Total AFT to Non-LDC

Source: OECD CRS 2010.

Where the money goes

11

Trade policy and regulation (US$ 481 million): Negotiations, implementation of trade agreements; mainstream trade policy, standards, customs, regulatory reform.
Production Capacity (US$ 9,339 million): Business development, business climate, access to trade finance, and trade promotion. Economic Infrastructure (US$ 12,465 million): Improvement of infrastructure for transport, storage, communications and energy. Source: OECD 2010

Is Aid for Trade Effective?

12

World Bank research

Examine rate of return on investment Inform priorities G-20 $1 invested in trade policy & regulatory reform = $697 trade.

Aid Types & Rates of Return

Aid $ Spent (USD millions) 2007
12,000 10,000 8,000 10,466

Return on Increase in Aid $ (USD)*

697
700 600 500 400 300

6,000
4,000

200 2,000 117 0 100 0

Total A4T

Trade policy and regulation

Trade policy and regulation

All A4TF

*Based on estimates in Helble, Mann, Wilson (2009)

Does supply match priorities?

Aid also appears to match country demand. Portugal Wilson (2010) and Ferro Wilson (2010)

Aid disbursements - fitted va lues

Aid appears to go where firms say they have most problems.

Firm Percetions vs. Aid Disbursements

Percentage of Firms that identified area as an obstacle Trade Rule of Law Infrastructure Access to Finance Stability Labor Business

Moving Ahead
15

Need to know much more about aid effectiveness

Country

specific, sector specific, monitoring over time

Especially critical for LDCs

Build on G-20 Working Group on Development

Unique opportunity with UN LDC IV Conference

Aid Effectiveness Partnership for Trade

16

1.

Expand knowledge exchange and learning with new partnerships for LDCs. Meet expanding need for monitoring and evaluation of aid for trade success in LDCs anchored in systematic data collection and research. Foundation to support trade success of LDC Program of Action.

2.

3.

Thank you
John S. Wilson Lead Economist World Bank
http://econ.worldbank.org/projects/trade_costs http://econ.worldbank.org/staff/jwilson