Trade liberalization, the trade agenda and developing countries

1
Trade liberalization, the trade agenda and
developing countries

• Uri Dadush
• Director
• International Trade Department
• World Bank

Bretton Woods Committee Multilateral
Roundtable Washington, February 2007
2
Main messages

• Developing countries are integrating and growing
  rapidly- reflecting in part improved policies
• But trade and non-trade barriers to their
  integration remain significant
• Doha deal along current lines would be a step
  forward
• PTAs can help development but this depends on
  their design and implementation

3
Developing countries have been growing fast and
not just in China and India
Real GDP annual percent change
Forecast
Developing
Developing ex. China India
2008
Source World Bank
4
Countries with rising trade shares in GDP grew
1.5 times faster

Av annual growth, 1980-99
5
Developing countries policies have improved
percent
1980s
2002-2004
Source World Bank
6
Developing countries are moving to center stage
of the globalization process, spurred by
increased exports
Exports from developing and developed
countries,1980, 2005, 2030
US2001 trln.
27 trln
High-income countries
Developing countries
45
32
22
Source World Bank simulations with Linkage model.
7
and no longer simply in goods
Growth rate of exports of business services
1994-2003
Source Data from IMF Balance of Payment
Statistics Business services are defined as
Total services minus Transportation, Travel, and
Government Services.
8
With more liberal FDI national laws, even in
developing countries
National regulatory changes in FDI laws
More Liberal to FDI
Less Liberal to FDI
Source UNCTAD- WDR 2006

• In 2005, Asia and Africa were the leading regions
  in terms of introducing further sectoral
  liberalization

9
And FDI flows to/from developing countries have
accelerated
FDI flows to Developing countries
FDI flows from Developing countries
Source UNCTAD
10
Developing countries still face important
obstacles

• Protection is high in areas of their export
  interest, particularly in agriculture
• South-South trade barriers remain high
• Services remain highly protected
• Major behind the border constraints remain

11
Rich countries provide high degrees of support to
their farmers
Farm support in OECD countries
Percentage of farm receipts
Source OECD PSE/CSE database 2006
12
Developing countries pay most of their foreign
tariffs to developing countries
Share of tariffs paid on manufactured exports
(including processed foods)
percent
Industrial Countries
Developing countries
Source GTAP 6, 2001 data
13
Key services markets still highly protected
Openness to competition

• Financial services

Telecoms
Source Mattoo and al, 2001 1990-99 data
14

Major behind the border constraints remain
Average number of days to clear customs for sea
cargo
Source International Exhibition Logistics
Associates, based on a sample of countries in
each region (http//www.icla.org),
Each day of delay reduces export volumes by 1
percent on average Source Djankov, Freund, and
Pham 2006
15
A Doha deal along current lines represents a
significant step forward

• Already on the table
• Large cuts in agricultural and industrial tariffs
• Lock-in trade-distorting agricultural subsidies
• Total removal of agricultural export subsidies
• Large increase in aid for trade to address
  supply-side constraints
• Trade facilitation
• Failure has costs
• Weaker WTO proliferation of PTAs
• Surging protectionism?
• Litigation replaces negotiation

16
PTAs number has increased
Total in force
Number of New Agreements
Cumulative in force
Source World Bank, 2005
17
The development impact of PTAs depends on design
and implementation

• Design
• Low external tariff barriers
• Nonrestrictive rules of origin
• Wide coverage with few exclusions Liberalization
  of services
• Facilitating trade at borders
• Appropriate rules
• Implementation
• Real, not paper PTAs
• PTAs to promote and reinforce domestic reform
  agenda

18
Unilateral liberalization is the main driver
Source of tariff reductions, 1983-2003
Source Martin and Ng, 2004
19
Thank you!