Is Lowering Trade Costs Essential to Get a Country Out of Poverty?

The World Bank is talking about trade, again and as always, here. Once again it highlights the importance in lowering trade costs:

Research at the Bank demonstrates that reform in trade facilitation matters a great deal to the least developed countries; it documents that reform to lower trade costs – and increase transparency in the trading system promises a high payback and rate of return on our efforts. This is especially true for highly targeted aid for trade assistance

New partnerships between the Bank, the United Nations, and the least developed countries would complement and support work in the new G20 Working Group on Development – specifically on trade and development, which emphasizes the importance of duty free, quota free (DFQF) market access for the least-developed countries and increased cooperation between emerging economies and low income countries in capacity building.

Something is missing here. Trade is not a “good" thing in and of itself. Increase in trade volume by lowering trade costs or transaction costs does not mean the country as a whole will automatically reap benefits, because trade comes with distributional consequences. It also depends on the economic structure, level of human and social capital, access to upstream and downstream markets etc., to just have efficient trade, let alone having net well-being improvement for the society. In other words, trade is merely a part of the domestic policy-mix, a variable in and of development, and the efficacy of trade being a out-of-poverty policy depends on other variables as well. That’s why successful trade-oriented countries like China, Japan, Korea and Taiwan etc. “had" industrial policies along with trade, something the authors neglected to mention.

The discussion should be about how to make trade a out-of-poverty policy, not how to have more trade; this element is missing in the discussion in the past 20 plus years ever since the establishment of WTO. To say trade costs need to be lower is just repeating the Washington Consensus. Furthermore, the authors are not very clear on whether trade costs need to be lower in or for the least developed countries (or both). These are two completely different issues. It would be better for the Bank to discuss trade as a policy not just trade itself.

http://wp.me/pXZbk-qf

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1 Response to Is Lowering Trade Costs Essential to Get a Country Out of Poverty?

  1. 引用通告: qf level 6 -網誌熱搜"qf level 6"

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