Developing countries have rapidly become more integrated with the world economy. In value terms, exports now account for around 30 percent of developing countries’ total GDP and much more than this in most smaller economies. These countries face challenges in responding to rapid global trade integration, both at the level of domestic policy and in international negotiating forums. Progress at multilateral trade talks is uneven and regional trade agreements, whose development consequences are unclear, are proliferating—up from 50 in 1990 to 230 today. Research-based knowledge to inform trade policymakers, negotiators, and their advisors is critical to maximize the benefits of policy reforms and participation in international negotiations.
National, Global and regional levels
The Knowledge for Change Program helps to support an ambitious research agenda on trade, as an integral part of the Bank’s work on development and poverty reduction. The research is designed to better understand the role of international trade in development and poverty reduction, and to assist developing countries in designing their trade policies and reaching beneficial trade agreements.
The Bank focuses on how national policies and trade agreements could be designed to ensure better outcomes for individual countries and the world. The Bank also contributes to the development of techniques and policy tools for analyzing the impact of trade policy reforms. Bank trade researchers collaborate extensively with research networks and institutions in developing countries as well as with international agencies and the international academic community. Building up from the country level is also essential for accurate assessment of the regional and global trade policy reforms.
National, Global and regional levels
To help developing countries use trade as part of their overall development programs, studies respond to the needs of policymakers and negotiators at the national, regional, and multilateral levels:
National trade policy design and implementation—focusing on the links from trade and trade policy to growth and poverty reduction, and the complementary reforms that could help to lower trade costs and improve competitiveness;
Regional integration—assessing how to enhance the benefits of regional agreements, and the impact of tradediscrimination on members and non-members;
The global agenda—studying the functioning of the World Trade Organization. An important motivation for research on the functioning of the global trading system is to guide the Bank’s engagement in global debates on how to make the trading system more supportive of economic development.
Across these three levels, the research spans a number of specific subjects:
The measurement and impact of barriers to trade in goods and services. These include tariffs and non-tariff measures on trade, such as product standards, agricultural support policies, and the use of instruments of contingent protection (antidumping, safeguards). Ongoing projects focus on developing global databases of trade barriers, the use of antidumping and product standards, the pattern of WTO dispute settlements across countries and products, and an overall measure of trade restrictiveness (used in the World Bank-IMF Global Monitoring Report). Studies using such databases have investigated the impact of potential Doha agreements on developing countries’ economic performance, and particularly the impact on poverty outcomes.
Trade and technology/growth. Research here investigates the relationships among trade, foreign direct investment, and technology acquisition and related spillovers, with an explicit focus on policies that are appropriate to encourage diffusion of know-how and stimulate export diversification.
Trade and poverty, including issues related to the adjustment costs and distributional effects of trade reforms in developing countries. Country studies investigate the role of “behind the border” policies in explaining why some countries have succeeded in using trade reforms as part of a growth strategy. Distributional analyses offer insights into the political economy of trade policy in both rich and poor countries.
Agriculture. Given the importance of agriculture for development and the high profile of agricultural policy on the trade negotiating agenda, researchers are analyzing the impacts of agricultural policies in both OECD and developing countries. Studies show, for example, that freeing world sugar markets would reduce poverty in Brazil, rather than merely raising incomes of the wealthy. This research also demonstrates the importance of complementary actions. For example, trade reform in Madagascar and China has been found to help some farmers move out of poverty, but simultaneously improving rural education would increase benefits significantly, by increasing workers’ productivity and mobility.
The economics of trade in services, including the examination of the impact and role of services reform on overall economic performance and trade in developing and transition countries, both through country studies and cross-country analysis. Work in this area focuses on crossborder trade, foreign direct investment, and the temporary movement of persons. It is in part motivated by the need to assess negotiating options in both regional and WTO negotiations.
The implications of preferential trade and regional integration. This work includes research on what is best done where (that is, the relative advantages of regional versus WTO-based commitments). For example, should barriers to foreign participation in services be removed on a most-favored-nation basis (to avoid trade diversion)? Or is regulatory cooperation—harmonization or mutual recognition of qualifications, technical standards, prudential regulation, and so on—more feasible on a regional basis, because of economies of scale or scope?