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AID FOR TRADE AND LDCS

John S. Wilson, Lead Economist, World BankDecember 13, 2010

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Context: International Trade2

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)

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Complex Policy Agenda4

Many constraints to trade and competitiveness

lie behind the border

high-cost services inputs

supply-chain bottlenecks

Domestic policy

Trade facilitationcutting costs high on

agenda

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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 Africaincreases exports by 7 percent.

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World Bank Group and Trade7

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 IDAleast developed (grants), focusing on export

competitiveness and trade facilitation (IBRD)

IFC investments and trade finance facilities

Global Programs and Partnerships Participation in the Aid for Trade initiative and Enhanced

Integrated Framework, New publicprivate partnership on

trade

Data, Indicators, Tools and Research

World Trade Indicators, World Integrated Trade Solution(WITS), TBT Database, Trade Facilitation Indicators

Working papers, reports, books, flagship reports

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FY 2003-2010 IDA and IBRD commitments

World Bank Trade Lending

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Why Aid for Trade Matters

Support trade as engine of growthespecially inleast developed countries

Enhance diversification

Can help lower global trade costsmore criticalgiven fragile and changed global demand; higherfinancing costs

Fight protectionism and support for global andregional trade agenda

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10

Source: OECD CRS 2010.

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2000 2001 2002 2003 2004 2005 2006 2007 2008

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

Total AFT to LDC Total AFT to Non-LDC

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Where the money goes

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

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Is Aid for Trade Effective?

World Bank research

Examine rate of return on investment

Inform prioritiesG-20

$1 invested in trade policy & regulatory reform =

$697 trade.

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Aid Types & Rates of Return

Return on Increase in Aid $ (USD)*Aid $ Spent (USD millions) 2007

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

0

2,000

4,000

6,000

8,000

10,000

12,000

Total A4T Trade policy andregulation

10,466

117

0

100

200

300

400

500

600

700

Trade policy andregulation

All A4TF

697

5

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Aid appears to go

where firms say they

have most problems.

Aid also appears to

match country demand.

Portugal Wilson (2010)and Ferro Wilson

(2010)

Does supply match priorities?

Percentage of Firms that identified area as an obstacle

Trade Stability

Rule of Law Labor

Infrastructure Business

Access to Finance

Firm Percetions vs. Aid Disbursements

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Moving Ahead

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

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Aid Effectiveness Partnership for Trade

1. Expand knowledge exchange and learning with new

partnerships for LDCs.

2. Meet expanding need for monitoring and evaluation

of aid for trade success in LDCs anchored in

systematic data collection and research.

3. Foundation to support trade success of LDC Program

of Action.

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Thank you

John S. Wilson

Lead Economist

World Bank

http://econ.worldbank.org/projects/trade_costshttp://econ.worldbank.org/staff/jwilson