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Fact Sheet: Harnessing Trade for Inclusive and Sustainable Growth

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The international community must aim for a successful outcome of the Doha trade negotiations in 2008. The current high food prices provide a window of opportunity to break the impasse on agricultural trade liberalization.

Arrow Worldwide trade continues to expand, as trade restrictiveness continues to decline. 
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While trade negotiations move slowly, donors have provided support to developing countries’ efforts to reform their trade policies and to improve their competitiveness and ability to benefit from potential trade opportunities.

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Trade policy can facilitate transfer of environmentally friendly technologies by removing barriers to trade in environmental products and services.

Recent developments in international trade 
green arrowAlthough world trade growth began to decline at the end of 2007, for the year as a whole trade continued its strong growth trend: worldwide exports of merchandise reached $13.7 trillion in 2007, growing 14 percent in value. At 17 percent, developing-country export growth was down slightly from the 2006 rate of 22 percent, but continued to outpace industrial countries, which grew 13 percent.
green arrowConsiderable progress has been made in the complex Doha Round negotiations, especially in agriculture. At the same time, preferential trade agreements (PTAs) continued to proliferate in 2007, both among developing countries and between developed and developing countries. Approximately 194 still-active PTAs have been notified to the WTO; the actual number of agreements in effect is estimated at over 300.
Developments in national trade policies 

 green arrowTrade policies are generally more restrictive in developing countries than in industrial economies, due in part to lower tariffs in the latter. However, trade restrictions on agriculture are on average highest in high-income countries.
 green arrowThe level of trade restrictiveness on average is higher for countries in South Asia and Middle East and North Africa and lower for countries in East Asia and Eastern Europe and Central Asia. 
 Fig 4.1 - Change in OTRI - Small
Click graph to enlarge
 green arrowBetween 2000 and 2006, trade restrictiveness declined in all country and income groups, with largest declines in middle income developing countries, including in agriculture. By region, the greatest reductions were made in East Asia and Latin America, and the least in Sub-Saharan Africa.
Trade policy, growth and poverty 
green arrowDeveloping countries that have registered the largest declines in poverty tend to have also expanded their trade faster. The level of trade restrictiveness is generally negatively correlated with the level of development.
green arrowTrade reform alone is not sufficient to achieve inclusive growth: behind-the-border policies can also reduce trade.
green arrowDomestic supply constraints are a major reason for lack of trade growth and diversification. To be able to compete globally, producers in developing countries need access to low cost, high-quality telecommunications, transport, distribution, and other business services.
green arrowFacilitating trade by reducing administrative hurdles such as customs and tax procedures and clearance requirements will also help promote trade. 
green arrowComplementary actions – such as extension services, access to credit, and investments in infrastructure – can help move households out of subsistence production and improve their productivity, spreading the benefits of trade opportunities more widely. 
Aid for Trade 
green arrowAid for trade flows increased by some $2 billion in real terms during 2006. Total aid for trade (as defined by the OECD) during the 2002-06 period was roughly 33 percent of total sector-allocable official development assistance. 
green arrowSince the Enhanced Integrated Framework (EIF) was set up in May 2007, more than $100 million has been pledged by bilateral donors to the EIF trust fund. 
green arrowMost of the aid supports the development of economic infrastructure and productive capacity building—at 55 percent and 42 percent, respectively, during the 2002-06 period. Aid for trade policy and regulations, usually delivered through technical assistance, represents 3.4 percent of total aid. 
green arrowIraq, India, Vietnam, Afghanistan and Indonesia were the top five recipients of aid for trade in 2006, accounting for almost 30 percent of the total. Asian countries received almost half of all aid for trade ($10.6 billion on average during 2002-06). Africa follows with 30 percent ($6.5 billion). 
Trade policies, climate change and sustainable development
round bullet International technology transfer can be a significant and cost-effective component of climate change mitigation and adaptation efforts. An important first step toward the adoption of greener technologies would be to reduce trade restrictions on imports of environmental goods and services. Many such products face relatively high levels of trade restrictiveness, especially in developing countries.Fig 4.12 - Environmental goods trade - Small 
Click graph to enlarge
round bulletAll WTO Members agree that environmental goods liberalization should be geared toward improving the environment, though not much progress has been made on this front because of differing views on how to define ‘environmental goods’, a precondition for determining what goods to include for liberalization.  


Wind farm

 round bullet To date, policy response has focused on mitigating greenhouse gas emissions. Improved information about the climate system and access to more climate-resilient crops and technologies is needed. International trade in adaptation technologies has received far less attention than mitigation technologies. 
Photo credits: Ken Hurst | Dreamstime.com 



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