A new joint study by the World Bank and the WTO highlights the major role played by trade in reducing poverty but notes that further measures are needed to support developing countries’ use of trade as a tool for growth. The study was presented at an online event on 24 January, with the participation of three ministers from developing countries. “Trade can support a faster recovery from the COVID-19 pandemic, but only if we ensure that everyone can fully participate and benefit from trade,” said Director-General Ngozi Okonjo-Iweala in her opening remarks.
Entitled “The Role of Trade in Developing Countries' Road to Recovery”, the study looks into how international trade can help developing countries recover from the COVID-19 pandemic, strengthen economic resilience to future global shocks, reduce poverty, mitigate carbon emissions and adapt to climate change.
An estimated 100 million people have been pushed into extreme poverty because of the COVID-19 pandemic, note World Bank Group President David Malpass and WTO DG Okonjo-Iweala, in a joint foreword to the study. The current growth of trade is uneven, with women and other vulnerable groups lagging behind. While keeping trade open and global value chains functioning is helping to drive economic recovery, boosting developing countries' capacity to trade will be essential to distribute the gains from trade more widely and to support a transition to a green economy, the study stresses.
“While recovering from the COVID-19 pandemic is a big challenge, it also provides an opportunity for policymakers to find creative and innovative solutions,” DG Okonjo-Iweala stressed. “The policy note offers a clear and concise resource to support a recovery that is more resilient, more equitable and inclusive across countries and communities, and more supportive of the low-carbon and just transition.”
Mari Pangestu, Managing Director, at the World Bank said in her opening remarks:
“As we emerge from the economic crisis, we have an opportunity to reshape the global economy into a greener, more resilient, and inclusive system — and trade can be a powerful tool for achieving this goal, with the right policies.”
Participants in the event emphasized the need to address developing countries' economic and trade vulnerabilities in order to help them play a bigger part in international trade and rebound from the COVID-19 crisis. In addition to economic diversification and trade reforms, the speakers underlined the necessity to accelerate developing countries' access to COVID-19 vaccines, trade finance and digital technologies. They also discussed the importance of reducing trade distortions, lowering trade costs, minimising non-tariff barriers and increasing cooperation on trade issues that are critical for health and food security.
Tipu Munshi, Minister of Commerce of Bangladesh, noted the key contribution of trade to Bangladesh's economy. “In addition to creating jobs and generating income, trade also facilitates supply and availability of medical supplies, personal protective equipment and vaccines to combat the pandemic,” he stressed.
“Global trade has been a central feature in addressing the pandemic and in supporting economic recovery. WTO agreements provide the framework for responsible policymaking,” Colombia's Minister of Commerce, Industry and Tourism, María Ximena Lombana Villalba, said. “Even in the most challenging times, members generally abided by the multilateral rules. The principles of global trade were respected and members showed self-restraint. … Although the trade system has faults and flaws, it has provided the elements to deal with this unique challenge.” The minister also highlighted the importance of strengthening international cooperation on subsidies to level the playing field between developed and developing countries and to minimize the potentially negative impacts of subsidies on developing countries' competitiveness and on environmental sustainability.
“Trade plays a significant role in the growth and development of countries through its linkages with all sectors of the economy,” said Betty C. Maina, Cabinet Secretary at Kenya's Ministry of Industrialization, Trade and Enterprise Development. “Trade supports agriculture, manufacturing and services industries by creating markets through which goods and services get to the consumer. It therefore provides a channel through which the effects of economic growth are realized by many players in the economy.” Ms Maina also underscored the importance of attracting investment, including through public-private partnerships, to help improve Africa's infrastructure, to enhance its digital connectivity and to increase trade.
The discussions stressed the importance of implementing measures to strengthen and diversify developing countries' participation in global value chains and highlighted the essential role the WTO can play in this regard. Research shows that firms that participate in global value chains tend to be more resilient and to recover sooner from external shocks.
The benefits of implementing the WTO's Trade Facilitation Agreement for easing the flow of goods and services across borders was also discussed. More trade in green technologies can support developing countries' transition to a low-carbon economy, speakers stressed. Resources could also be mobilized through the WTO-led Aid-for-Trade initiative to finance technical assistance and capacity-building activities for carbon measurement techniques and traceability, the report notes.
Deputy Director-General Anabel González, who moderated the event, welcomed the fact that the WTO's cooperation with the World Bank “is going from strength to strength”.
“It is very important for the WTO and the World Bank to work together,” said Indermit Gill, Vice President of Equitable Growth, Finance and Institutions at the World Bank. “The WTO cares the most about trade and the World Bank cares the most about poverty and the link between the two is strong. … Trade and poverty reduction are two sides of the same coin. The coin itself is actually economic growth.”
Please read the full report here.