Trading Up from Poverty

With such policies in place, the World Bank’s efforts to bolster developing countries’ trade linkages could facilitate substantial poverty reduction. For example, we help developing-country governments connect firms, farmers, and households to markets and supply chains, thereby fostering increased investment and boosting economic activity.

Furthermore, we support infrastructure-development projects, enabling countries to build the roads, bridges, and ports that link traders to markets. For example, a $1.8 billion highway project in Kazakhstan is facilitating trade-related transport across the country, stimulating the economies of the country’s poorest provinces, and creating more than 30,000 jobs. In Nepal, the Bank is financing reconstruction of the steep, dangerous, and busy road that carries most of the country’s exports to India, and it is supporting the government’s efforts to connect some of the country’s remotest districts to the main road network.

The World Bank also helps countries to establish clear customs rules that more effectively protect traders from inconsistent treatment or solicitations for bribes. And we are working to address costly border inefficiencies. For example, we are helping to simplify and modernize trade procedures through Cameroon’s Douala port, and we have helped the government of Laos to establish an online portal that provides traders with access to all relevant laws, procedures, schedules, and forms from border-management agencies.

Moreover, since 2010, the International Finance Corporation, the Bank’s private-sector lending arm, has been promoting the integration of small and medium-size enterprises into global supply chains by increasing their access to capital. The $500 million Global Trade Supplier Finance program, a joint investment and advisory initiative, is currently providing short-term finance to thousands of emerging-market SMEs.

In order to maximize the impact of such initiatives, world leaders should cooperate to build and maintain an open trading system. The WTO’s Bali conference provided an important opportunity to develop a new trade-facilitation agreement that expedites the movement, release, and clearance of goods at border stations; clarifies and improves trade-related rules; enhances technical assistance; and encourages cooperation among border-control agencies.

But the agreement that was reached in Bali cannot succeed unless wealthy countries and donors agree to support developing countries’ efforts to enact related policies and reforms. Given this, it is crucial that developed-country policymakers recognize that a more efficient, better integrated, and more inclusive global trade regime will benefit all countries.

With genuine commitment from the international community and the appropriate domestic policies in place, trade can be a powerful force for poverty reduction.

Mahmoud Mohieldin is the World Bank President’s Special Envoy.

Copyright: Project Syndicate/Global Economic Symposium, 2013.To obtain the embed code for the chart that accompanies this commentary, .