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Trade liberalisation has
born little fruit
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05/2006
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[ World Bank ]
Trade liberalisation has born little fruit
In the past 20 years, World Bank projects and programmes to boost trade have sped up the opening of markets in many countries. However, they have not done much to help improve the performance of these countries in the world market, nor to alleviate poverty. This is the conclusion of a study carried out by the Word Bank’s Independent Evaluation Group, which investigated trade-related programmes from 1987 to 2004. In this period, the Bank granted $38 billion worth of loans to 117 countries for trade reforms. This corresponds to just over eight percent of all World Bank loans awarded in that timeframe.
The evaluation roughly divides the World Bank’s policy on trade promotion since 1987 into two phases. Until the late 1990s, country-specific approaches and the liberalisation of markets were the key focus. The assessors find no fault with the basic thrust in this phase. But they criticise that the World Bank paid too little attention to macroeconomic factors, which are not directly related to trade but nonetheless are important for exports and imports. The team claims that the Bank paid to little attention to macroeconomic stability, the investment climate and the labour market of the countries concerned. In Africa, for example, this neglect led to imports increasing dramatically, while exports stagnated or even decreased. “Consequently,” states the report, “Bank advice was too optimistic about the benefits of trade liberalization for growth in the short run.”
According to the study, the second phase started after 1999. After the WTO Ministerial Conference collapsed in Seattle, the Bank intensified its commitment to act as an advocate for a fair global trade system, focussing on fundamental issues accordingly. Once again, the study considers the shift to have been reasonable overall, but it also states that World Bank policy on trade risked becoming too abstract and remote from country-specific problems and requirements. Therefore, the assessors’ recommend that the Trade Department cooperate more closely – and share expertise – with other sectoral and, above all, country departments.
The other basic recommendation is that every trade-related project in future should be monitored as to how it impacts on poverty, the private sector, gender relations and agriculture in the country concerned. Furthermore, it is suggested that the bank set up a programme to help countries bear possible adjustment costs associated with trade reforms.
(ell)
On the internet:
www.worldbank.org/ieg/trade
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