Publications

1. Broadening the Trade Agenda

58. Today, the trade reform agenda in developing countries goes well beyond border measures. To leverage trade into faster growth and poverty reduction, complementary actions that address broader issues are needed. Trade liberalization alone may not bring benefits if it is not accompanied by improvements in the macroeconomic and business climate, transportation and communications infrastructure, standards, and technical regulations. Policies to reduce border barrierstariffs, nontariff barriers, and customs inefficienciesneed to be integrated with policies to address domestic issues. Without actions on the domestic front, the economy may not be able to respond to opportunities offered by increased access to foreign markets. Moreover, domestically, jobs lost to foreign competition may not be replaced, with high costs for those who worked in previously protected industries.

59. The proper sequence and mix of reductions of border barriers and domestic reforms needs to be examined carefully, as the impact of trade liberalization on the poor varies depending on country-specific factors. The extent to which the poor benefit from trade reforms depends on the initial nature of protection, the structure of production and effects on relative prices and demand for labor (especially unskilled labor, the basic asset of the poor), the characteristics of the poor, and the extent of good governance (World Bank, 2001f). As Chapter II showed, the ease with which private sector firms can create new jobs and the level of education of the poor are important determinants of whether trade reforms increase demand for labor among the poor. A case for phased liberalization accompanied by complementary reforms and social protection mechanisms may exist, if a series of reforms is needed to ensure that the poor are able to benefit from opportunities created by trade liberalization. Access by the poor to new opportunities in globalized markets may be helped by changes in business regulations, support for small and medium-sized enterprises, increased access to credit, and training (World Bank, 2001f).

60. Similarly, it may be necessary to make changes in a country's revenue collection systems to ensure that trade liberalization is not accompanied by a significant reduction in the resources available to fund key expenditures in education, health, infrastructure, rural development, and other sectors.

61. Governments and people in developing countries need to own this broader trade and structural reform agenda; without domestic support, reforms cannot succeed. In low-income countries, the Poverty Reduction Strategy approach offers an opportunity to integrate trade in country-owned poverty reduction strategies and to forge broad consensus around reforms through participatory processes.