1	World Bank Trade related Assistance in the Caribbean Region Salomon SAMEN, Ph.D World Bank Institute Seminar on Trade related Assistance in the Caribbean region Castries, Saint Lucia June 16, 2009
2	Outline Why Trade Integration into regional and global markets is a priority in the Caribbean region: Basic facts and Explanation How the World Bank (WB) provides TRTA? Where does the WB fit on Aid for Trade ? What is the WB doing in the Caribbean ?
3	PART I Why Trade Integration into regional and global markets is a priority in the Caribbean region: Basic facts and Explanation
4	Progress on Growth and Human Development, but not enough The Caribbean has made good progress in terms of robust growth and improved human development outcomes over the past two decades but its integration into the world economy is now declining.
5	Source: World Bank. World Development Indicators.
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7	Caribbean countries are generally very open economies. Trade as a percentage of GDP averaged 111% for the region over the period.
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10	Intra-regional trade is very limited and skewed toward few countries and products
11	Trinidad and Tobago has long been the dominant intra-regional exporter, with 85% of total exports. Barbados was the second largest exporter with only 6% of total exports, followed by Guyana with 4%. The OECS countries as a group account for about 5% of the value of intra-regional exports.
12	For the past three decades the Caribbean has pursued an external trade policy anchored on preferential access to the European and North American markets, but preference is eroding.
13	THE REGION’S COMPETITIVENESS IS WEAK AND EXPORT CONCENTRATION IS RELATIVELY HIGH
14	While the Caribbean countries export performance has been strong compared with the world, it has been relatively weak compared with other developing countries
15	Doing Business: selected indicators Caribbean and comparable developing countries
16	The analysis of the region’s export structure shows increased concentration of products In 1997 the top 20 Caribbean products accounted for 51% of total exports In 2006, the top 20 Caribbean products now account for 70% of total exports Export concentration varies from one country to another (90% in Bahamas, 85% in St. Kitts and Nevis, 94% in Surinam, and 87% in Trinidad and Tobago for the top 5 exports)
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18	"Binding constraints to competitiveness include" Binding constraints to competitiveness include: labor market rigidities (relat. high wages, skills shortages and mismatch), tariff dispersion (in Bahamas 50% of tariff lines are over 50%), trade costs (freight and insurance is 10% of import cost in Caribbean and 6% in comparators). The small size of the Caribbean economies also limits the region’s competitiveness.
19	Estimated costs of producing and exporting sugar in Guyana and Belize, the lowest cost producers in the Caribbean, are 50 to 60 percent higher than one of the higher cost free market exporters.
20	Basic Explanation: NATIONAL and Regional TRADE POLICIES REMAIN WEAK AND HAVE HAD MIXED OUTCOMES There has been significant tariff reduction and tariff alignment in the Caribbean. Average applied MFN tariffs fell from over 20 percent in 1996 to just below 10 percent in 2005. Still, there is some tariff dispersion, with average tariffs on 10 percent of goods over 20 percent. While many Caribbean countries (most notably Trinidad and Tobago, Dominica Republic and Jamaica) have undertaken policy measures to improve their trade policy, important weaknesses remain in five major areas: measures affecting imports; measures affecting exports; investment incentives; competition policy; and trade policy formulation and implementation.
21	"Customs procedures and administration are..." Customs procedures and administration are weak in most Caribbean countries. The legal framework for businesses including taxation is weak in many Caribbean countries. A comprehensive competition policy does not exist in most of the Caribbean countries. National institutions in charge of trade policy formulation and implementation are weak. Trade policies have thus had limited outcomes.
22	Challenges and Opportunities: A NEW GLOBAL AND REGIONAL TRADE ENVIRONMENT IS EMERGING WITH CRITICAL CHALLENGES TO THE CARIBBEAN COUNTRIES WHICH FACE LARGE FISCAL AND EXTERNAL IMBALANCES, HIGH LEVEL OF UNEMPLOYMENT, AND MAJOR STRUCTURAL CONSTRAINTS… The Caribbean is in the process of redefining its relations with its main trading partners, including the European Union and the United States, through the recently signed EPA and exploring the possibility of moving from preferential to reciprocal arrangements with the United States. At the same time, the region is also redesigning the process of regional trade integration with the ongoing implementation of the Caribbean Single Market Economy (CSME).
23	"Global trade liberalization is also..." Global trade liberalization is also being done in a context of high unemployment in the Caribbean region. The current evolving trade environment is also constrained by structural weaknesses, most notably the poor level and quality of infrastructure of the region. Because of infrastructure, institutional and political constraints, intra-regional integration has been slow. The implementation of the common external tariff (CET), the cornerstone of the Caribbean Single Market (CSM), originally scheduled for 1981 has been delayed. In sum, trade liberalization in the Caribbean is being implemented in a fragile macroeconomic and structural environment. Trade liberalization (and more specifically the EPA process) should pay more attention to these constraints, which go beyond trade issues per se and cover a large range of issues, such as macroeconomic imbalances, small economic size, infrastructure deficiencies, and economic vulnerability of the Caribbean.
24	… YET THE NEW TRADE ENVIRONMENT OFFERS OPPORTUNITIES TO THE CARIBBEAN The new trade environment offers opportunities to the Caribbean to reposition itself as a growing and competitive region. Trade liberalization under the EPA may have significant economic and social gains for the Caribbean region.
25	BUT A TRADE STRATEGY FOR GROWTH AND ENHANCED COMPETITIVENESS IS CURRENTLY MISSING Seizing the new trade opportunities would require designing a full-fledged trade and growth strategy. Unfortunately, there has not been a clearly designed competitiveness strategy, which would enable the region to reap the benefits of global trade integration. More importantly, a common trade policy in relation to non-CARICOM countries does not effectively exist. This trade strategy should focus on three key elements: (i) addressing the issue of high trade costs which undermine the region’s competitiveness; (ii) providing priority to the services sector which has proven to be a sector with important potential; and (iii) developing and strengthening the incentive regimes (tariff reforms and investment code) to attract private sector.
26	Part II How World Bank provides Trade Technical Assistance in Practice
27	Assessing WB support for trade 1987-2000 2006 report: http://www.worldbank.org/ieg/trade/ No formal trade strategy within the WB The Bank’s objectives were relevant but the strategy was too narrow in terms of its focus on what matters for trade and growth. It underestimated the complexity of complementary policies and the political constraints in undertaking them and understudied/anticipated the role of external factors. Consequently the Bank was too optimistic about trade’s ultimate benefits. The Bank often had more success in meeting immediate objectives than in improving long-term export performance or diversifying exports (in Africa)
28	1987-2000 Bank assistance on trade achieved better results when linked to prior ESW, low conditionality and good institutional frameworks. Unsatisfactory outcomes were associated most frequently with poor project design, unrealistic assumptions, weak ownership and unstable macro environments. Poverty and distributional outcomes, and associated political economy dynamics received too little attention.
29	Assessing WB support for trade 2001-2004 WB took an advocacy role on trade and development issues, which has generally been perceived positively Research led by the WB has been found to be innovative and contributing positively. However there are gaps. Research on export strategy policies Study of complementary reforms to trade Study of impacts on poverty
30	2001-2004 But the Bank’s advocacy strategy was not nuanced enough initially to distinguish between different groups of developing countries and less attention was paid to other relevant aspects of the negotiations (NAMA). And the Bank has been slow to translate its extensive work on development aspects of WTO issues into practical policy advice for staff (services notably). The mainstreaming of trade policy issues in national development strategy has been uneven including in cases where analytical work had been done.
31	IEG Recommendations #1: Strengthen the micro-level underpinnings of trade. Despite increased poverty research and PSIA analysis, links weak in operations and advice. Country-level: More consistent and specific analysis of potential adjustment costs, institutional framework needed in trade policy components. Institutional-wide: Concrete program of adjustment assistance. Research: Micro-level adjustment to trade policies at firm, individual and household levels.
32	IEG Recommendations #2: Revisit balance between global and country agendas and strengthen operational links on trade issues. Given multi-sector nature of current trade agenda, participation of operational staff, other networks and Trade Department likely to yield greatest benefits. Greater strategic and intellectual guidance from network to country teams (including upstream CAS assistance). More formal set of interactions on (i) agricultural trade and policies; (ii) services liberalization; (iii) distributional outcomes associated with trade policies. Establish working arrangements between PREM and PSD on trade-related issues.
33	IEG Recommendations # 3 Strengthen knowledge management Greater cross-fertilization with other networks. Better integrate work done in the center with country-level work. Establish a mechanism to obtain regular feedback from operational staff on most immediate/relevant issues from country dialogue. Enhance country economist knowledge of global and regional trade agendas.
34	The WB Trade Units Besides the World Bank Caribbean Central Management Unit, where country operations are centralized, Three HQ based units provide support to WB and Client Country on trade Research: DECRG-TR Direct support to client countries: WBI-TR Support to World Bank units: PREM-TR http://www.worldbank.org/trade
35	Research Development Research Group, World Bank http://go.worldbank.org/DM176IIGJ0
36	Two main objectives Contribute to a better analysis of policies leading to welfare gains from trade opening and the reduction of barriers to trade Identify trade and complementary policies so as to: Raise productivity and growth Increase the benefits from trade for the poorest countries and contribute to poverty reduction Improve data on non-tariff barriers, including on services Global public good and a key element of the WB strategy Such data can find multiple uses within the WB, but also outside by researchers and policy makers Contributes to transparency and accountability
37	Four themes of research Understand the development impact of trade policies relating to goods, services and movement of persons Looking at both efficiency and redistribution impacts Analysis of complementary policies affecting the size and distribution of impact of these trade policies e.g. competition policies, labor markets, logistics and facilitation, performance of the services sector
38	Four themes of research Positive et normative analysis of trade agreements Upgrading and extension of data on policies affecting global integration antidumping measures; composite OTRI for 100 pays (used in last year’s Global Monitoring Report 2008); work underway with UNCTAD and ITC on Non-Tariff Barriers; indicators of services liberalization
39	A new strategy for research (1) Three specific areas of focus: Project on distortions in agriculture – 75+ transition and developing economies reviewed, 50 years of data Low income countries are negatively affected by policies that globally depress the prices of agricultural products on which poors’ livelihood depends (developed countries subsidize inefficient productions and developing countries tax agriculture) Results diffused in several book volumes; also used in the WDR 2008 and WDR 2009. Book series Distorsions to Agricultural Incentives available on our website. Services trade and non-tariff barriers Detailed country studies Data collection on services sector openness More rigorous models New and more robust aggregated indicators of openness Overall Trade Restrictiveness Index (OTRI) Logistics Performance Indicators Contribution to World Trade Indicators
40	A new strategy for research (2) Regulations, transaction costs and performance The object of this research is to identify the transaction and regulatory costs that prevent from benefiting from openness Trade and poverty Estimates using micro-level data, with specific focus on agricultural sector Trade agreements New estimates of the impacts of an expected Doha Round agreement Assessment of the impact of preferences Scenarios of different Special Safeguard Mechanisms specifications This agenda replies to the observations made in the IEG report
41	The World Bank Institute Improve the capacity of client countries http://www.worldbank.org/wbi/trade
42	Key dimensions of WBI’s approach Objective - strengthen countries’ capacity to: Formulate and implement adequate trade policies at the national level Participated in an effective manner in international trade negotiations (multilateral and bilateral) Main target Negotiators, advisers and civil servants, researchers and civil society Areas of intervention Understand the impact of trade on development from an economic angle – building on the knowledge and results produced within the World Bank (but not solely) Partnerships Complementarity with other activities of the World Bank Strong link with operations (analyses, dialogues, lending), research, but also directly with client countries. With other organizations: multilateral and regional, governments and NGOs
43	Categories of activities Products: Technical courses on trade policies (services, trade & growth, export diversification, agriculture, regionalism, etc.) Seminars and workshops to define country action plans Research and consensus building seminars Knowledge and experience exchange seminars Support to capacity building Trade database: World Trade Indicators (new update) http://www.worldbank.org/wti2008 Dissemination modes: Face to face Global Distance Learning Network (GDLN) E-learning (Internet)
44	World Trade Indicators
45	Example of e-learning
46	Country and regional activities Country WTO accession course and support for Vietnam and Russia (with DECRG, VP Region, and WTO) WTO Post-Accession in China (with DECRG) Services courses in Indonesia, Russia and Bangladesh Regionalism courses in Bangladesh, on EPA agreements (in West, East and Southern Africa) Agricultural trade course (Mediterranean countries and Africa). Export development course in Kenya Sharing of experiences of negotiating trade agreement with US in Egypt Regionally Regional negotiations – Andean countries (PRMTR, IADB, and OAS) Services trade –Andean countries (OAS), SE Asia (UNDP), Middle East and North Africa, Central Asia, Indian Ocean (OMC) Research networks in Africa (JIECAP-ILEAP), SE Asia (ASEAN), and CEI (EERC)
47	Global activities and partnerships Handbooks: Handbook on Trade in Services, Trade Policy Course for Executives (forthcoming) Catalog courses: services, trade and growth, export development, standards, agricultural trade, trade policy executive course, trade and gender, trade finance and facilitation, regional trade (FY09) (F-2-F et e-Learning) Partnerships for the delivery of courses WTO, OAS, Columbia University, UNESCWA, ICTSD, ILEAP, COMESA, IDEP, VASS (Vietnam), FPRI (Thailand), and many others Partnership for funding of activities Core: UK, Sweden, Norway and Finland (Multi-donor Trust Fund), Austria Others: Japan, IDRC/CIDA, Netherlands and Italia
48	Future Directions: Core Courses and new Themes Core courses on key trade topics: the first one on preferential trade agreements (May 09) Modular and portable set of courses using advance training techniques and very best teaching material New themes will be developed: some core (e.g. trade facilitation, Trade Finance, Export Diversification), others to reflect important cross-cutting themes (e.g. climate change) Linked to this is enhanced response capacity on burning topics (in coordination with rest of WB): for instance a series of dialogues on the financial crisis, including sessions on trade and trade finance World Trade Indicators updated and new publication in 2009
49	PRMTR PROGRAM http://www.worldbank.org/trade
50	Engagement at the global level Trade and development: raising awareness within the WB on important trade issues and involvement of senior management and external relations Aid for Trade Aid for trade architecture Multi-donor trust funds on trade Forthcoming new $30 million Trade Facilitation Facility (launch in April 2009) Doha negotiations Research Communication (policy notes, editorials, etc.) Support to negotiations on trade facilitation (as Annex D member) Trade facilitation and logistics Logistic Perception Indicators – regional reports Integrated Border Management manual Trade and Transport Facilitation Audits and Transit manual
51	Engagement at the global level (2) Thematic focuses: export competitiveness, trade facilitation and logistics, agricultural trade, etc. New effort to focus on policy lessons that can be drawn from regional integration efforts: regional integration program. New focus on services work: logistic services. Works on selective issues: environmental labels, tariff reform impact simulation tool (TRIST), study on export processing zones, trade preferences. http://go.worldbank.org/2P8FPC0760 (link to TRIST) New books (available on website): Trade Preference Erosion: Measurement and Policy Response;
52	Country and regional engagement Support to reform agenda of trade policy and regulations affecting trade – multiply impact through strategic partnerships Trade policy → WB Trade Department Trade facilitation → WB Infrastructure Standards → ARD PSD → FIAS Services → WB Trade Department Supply a combination of: Knowledge products Expertise Additional resources with thematic Trust Funds
53	What is the impact? Important growth of Economic and Sector Work on trade in the WB in 2003 trade ESW given a new lease of life thanks to Integrated Framework and donor support Now trade policy questions are routinely included in WB analysis Examples of important country reports on trade (Pakistan, Bangladesh, Peru, Ecuador, Mexico APL, Kenya, and 37 DTIS) Regional reports and technical assistance (COMESA, Caribbean) Transit and TF work, and standards work was precursor and now included in WB analysis (in CEMs) and operations (ex. Greater SubMekong region).
54	Improve strategy to further impact Develop knowledge to inform trade policies of countries/regions Political economy environment conducive to enhanced competitiveness (incentive framework, ancillary services, obstacles to efficient reallocation of resources) Active promotion of exports’ growth and diversification Conceive & negotiate trade and preferential agreements in order to create more trade opportunities Thematic group on exports growth and competitiveness Partnership with FIAS, FPD, and PREM regional coordinators Expansion of activities on services trade Upstream engagement with country teams Senegal, Tanzania, Morocco, Tunisia, Bangladesh, Nepal Develop complementarities between Aid for Trade agenda and WB strategy
55	To sum up: Central points Many poor countries have leveraged the global economy for growth but moving to high sustained growth path requires not only market access, but improvements in competitiveness Aid for trade can help countries overcome supply side constraints – and amounts available are likely to increase Aid for Trade is increasing but not enough, and many countries who need it are underserved... World Bank is a leading provider of aid for trade but countries have to make improving competitiveness a pillar of their growth strategies
56	Part III Aid for Trade: Where it can help
57	Where Aid for trade can help: create a favorable environment for difficult reforms… Manage external shocks for a more sustainable reform and growth process Policy induced such as trade liberalization Exogenous such as terms of trade shocks Cooperate multilaterally and regionally for globally shared gains Provide added incentives for the delivery of trade global public goods
58	Where Aid for trade can help: alleviate supply side constraints and improve competitiveness… Designing programs to improve competitiveness Investments in trade-related infrastructure TA to improve trade-related institutions Aid for trade is large – some $24 b. according to the OCED (30% of total ODA) Available resources are likely to increase Gleneagles pledges will expand overall envelop WTO efforts since Hong Kong to raise awareness IDA 15 has increased WB resources by 30% But taking advantage of these resources requires governments to make improving competitiveness central to their development strategy
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60	Aid for trade: High Demand in need of a supply to match
61	Those that need aid for trade are requesting it, but several countries are still under-served
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63	The World Bank’s role… Provide financial resources for investment directly through loans Indirectly – guarantees and insurance WB is largest source of aid for trade to low-income countries Provide knowledge about what works in poverty reduction and what doesn’t through policy advice technical assistance bringing people together Provide “public goods” Data and comparative indicators of policy (trade, finance, doing business, debt) Research into what works and what doesn’t Advocacy of global policies that affect poor Global environmental work and infectious diseases
64	WB Aid for Trade Commitments (broad def.)
65	Aid for Trade narrow definition
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67	Key lessons from experience in aid for trade ….
68	Conclusion… Improving supply side impediments to export growth is as important – if not more so – than increasing market access abroad, and aid for trade can help Aid for trade is likely to increase sharply because of the Doha round and because of increases in overall development assistance The World Bank offers multidimensionality of approach and is ready to work with all countries in developing programs to improve their competitiveness to use trade to drive growth
69	Further readings on Aid for Trade Gamberoni, Elisa and Richard Newfarmer, 2008. Aid for Trade: Matching Potential Demand and Supply, World Bank. Coping with New Strains in the Global Trading System: Doha Round, Food Prices and Aid for Trade, IMF and World Bank Staff report to the Development Committee at the 2008 Annual meetings. Aid for Trade: Harnessing the Global Economy for Economic Development, IMF and World Bank Staff report to the Development Committee at the 2007 Annual meetings. Doha Development Report and Aid for Trade. IMF and World Bank Staff report to the Development Committee at the 2006 Annual meetings. Njinkeu, Dominique and Hugo Cameron, 2007. Aid for Trade and Development, Cambridge University Press.
70	Part IV What is the WB doing in the Caribbean ? Priorities and Challenges
71	Areas of Engagement Growth Trade and competitiveness Promoting fiscal and debt sustainability Monitoring economic developments, volatility and risks
72	Growth Policies for sustainable and inclusive growth AAA Regional Trade report for the Caribbean delivered early November 2008. Dissemination events took place in Jamaica in February 2009 and in Geneva (WTO) in early April 2009. Is being published as a World Bank flagship. Integrative growth reports [Haiti (2006); Dominican Republic (2006); Jamaica (2005); Guyana ICA (2007)] Policy notes: Dominican Republic (FY09) CEM: Dominican Republic and Haiti: Mutual opportunities (FY09) Technical assistance projects for growth Dominica (customs; national investment strategy; regulatory framework for energy sector) Grenada – customs, tax departments; investment promotion agency; export strategy St. Vincent and St. Lucia – demand for similar operation
73	Trade and Competitiveness Programmatic work on regional integration Possible future areas: logistics DR-CAFTA: Regional study with LC2 Advice and capacity building Just-in-time support for Caribbean Ministers on extending Caribbean Basin Trade Partnership with the US Capacity building for regional negotiating machinery and CARICOM Secretariat (FY09 and beyond)
74	Promoting Fiscal and Debt Sustainability Quality of fiscal adjustment, including fiscal risks and sustainability Jamaica: ongoing policy dialogue; fiscal sustainability analysis DSAs: ongoing: Haiti, Guyana Public debt management and debt restructuring Highly indebted MICs in Caribbean: Treasury technical assistance for debt management
75	Policy loans Policy based loans Haiti – Economic Governance operations + TA operations (public sector) Haiti: HIPC Completion Point (end-June 2009) Jamaica – DPL series Guyana – possible PRMPO follow-up; HIPC CP (done)
76	Monitoring economic developments, volatility and risks Macro-economic monitoring Monitoring briefs, incl. Unified Survey, data bases, RMSM-X Macroeconomic Scenarios Special topic reports (ongoing) Impact of slowdown of US economy on Caribbean Impact of high oil/food prices Co-ordinating with partners (IMF; IDB; EU; DFID)
77	Salomon Salomon SAMEN