1 Trade Facilitation and Economic Growth: The New Agenda John S. Wilson, Lead Economist The World Bank Australian National University Canberra, Australia August 9, 2006

2 Overview Trade Facilitation in Context Trade Facilitation in Context Economic Growth and Driving ForcesEconomic Growth and Driving Forces Why Barriers and Trade Costs Matter Why Barriers and Trade Costs Matter Policy Tools and Action Ahead Policy Tools and Action Ahead WTO, APEC, and Development AgendaWTO, APEC, and Development Agenda

3 Growth – across regions (World Bank – Global Economic Prospects Report) Real GDP growth, Real GDP growth,

4 Decomposition of GDP growth (Average % per annum) Productivity is accelerating……..

5 Other developing China Other high- income United States Merchandise exports ($billion) World trade as a driving force……..

6 So Why Focus on Trade Facilitation? So Why Focus on Trade Facilitation? Trade Facilitation Trade GDP growth Human Development

7 Trade Costs – NTB’s are a Threat Slow global growth……. Slow global growth……. Block business productivity, regional integration, and efficient networks Block business productivity, regional integration, and efficient networks Help to ensure continued poverty, monopoly power, corruption, and world insecurity Help to ensure continued poverty, monopoly power, corruption, and world insecurity

8 Simple Statistic Time Required for Exports (by Region) “Trading on Time” (2006)

9 Costs and Benefits of Reform? Results for trade and GDP gains: Results for trade and GDP gains: APEC: 1% (ICs) 2% (LDCs) shock to import prices yields 3.3% increase in exportsAPEC: 1% (ICs) 2% (LDCs) shock to import prices yields 3.3% increase in exports UNCTAD: 1% cost reduction yields $3.3 billion in Asia.UNCTAD: 1% cost reduction yields $3.3 billion in Asia. One day delay before shipping reduces trade by 1% (country distancing from trade partners by 85 km) Freund, et. al, 2006.One day delay before shipping reduces trade by 1% (country distancing from trade partners by 85 km) Freund, et. al, 2006.

10 Wilson, Mann, Otsuki (2004) Building on APEC Trade Ministers Report with Canada in 2002 Building on APEC Trade Ministers Report with Canada in 2002 Evaluate reform in the following: 1. Port Logistics (air and sea) 2. Customs Environment 3. Regulatory Environment 4. E-business usage (proxy for services infrastructures) Creating Country-Specific Indicators Consistency-- Country-specific information on a consistent basis from multiple sources for each indicatorConsistency-- Country-specific information on a consistent basis from multiple sources for each indicator

11 Raising Capacity Half-way to Global Average $377 billion trade gain Source: Wilson, Mann and Otsuki (2004)

12 What About Welfare Gains and Aid Effectiveness? How effective is trade-related lending (infrastructure, trade development, and trade policy) in lowering trade costs? How effective is trade-related lending (infrastructure, trade development, and trade policy) in lowering trade costs? APEC members receive on average ( ) TF aid totaling: APEC members receive on average ( ) TF aid totaling: $5.3bn including China (35% world total)$5.3bn including China (35% world total) APEC members contributed on average ( ) TF aid totaling $8.6bn (56% world total) APEC members contributed on average ( ) TF aid totaling $8.6bn (56% world total) OECD-DAC data OECD-DAC data

13 Ivanic, Mann & Wilson (forthcoming) Preliminary results: Preliminary results: Global welfare increase of $25 billion with targeted “aid for trade facilitation.”Global welfare increase of $25 billion with targeted “aid for trade facilitation.” Aid cuts trade costs overall by 0.3% -- but some regions much more.Aid cuts trade costs overall by 0.3% -- but some regions much more. More ahead….regional distribution of gains, which type of aid more effective?More ahead….regional distribution of gains, which type of aid more effective?

14 Conclusions……. Evidence indicates trade gains are driven by raising capacity and reform in several areas……but country priorities differ. Evidence indicates trade gains are driven by raising capacity and reform in several areas……but country priorities differ. Collective action to raise lower barriers can increase trade……but domestic reform critical. Collective action to raise lower barriers can increase trade……but domestic reform critical. Concrete analysis needed to clarify priorities for action ahead. Concrete analysis needed to clarify priorities for action ahead.

15 Trade Policy Agenda Doha Question mark Doha Question mark WTO Agreement a good small step WTO Agreement a good small step Progress on a plurilateral basis? Progress on a plurilateral basis? Wither Regionalism -- APEC? Wither Regionalism -- APEC? Good tool for reform Good tool for reform Busan Business Agenda (2005) -- Further 5 percent cut in trade costs by 2010? Busan Business Agenda (2005) -- Further 5 percent cut in trade costs by 2010? Need clarity on concrete and achievable agenda. Need clarity on concrete and achievable agenda.

16 Development Agenda This is a most important agenda This is a most important agenda Aid Effectiveness – what works and why? Aid Effectiveness – what works and why? Targeted or comprehensive frameworkTargeted or comprehensive framework Soft or hard infrastructureSoft or hard infrastructure

17 Thank You John S. Wilson Lead Economist The World Bank The World Bank