Trade and International Integration:

A Developing Program of Research

World Bank Development Economics

Research Group

Geneva, June 2013

Three areas of focus

I. Implications of the changing patterns of

international integration for development

II. Designing policy in a changing world

III. Identifying priorities and strategies for

international cooperation

Countries don’t export, firms do!

The Exporter Dynamics Database covers 45

countries (expansion is underway)

37 Developing countries 8 Developed countries

Larger concentration of data in Latin America, Sub-Saharan Africa and Middle East and North Africa

Remarkable concentration of

exports • Exports are concentrated among a very small

number of large firms - the top 1 percent (Freund

and Pierola, 2012)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Share of Top 1% Exporters

• Should export promotion target SMEs? Note: Average for 2006-2008 period

Turnover of firms in export

markets

In poorer countries,

exporter entry rates

are high …

ALB

BEL

BFA

BGD

BGR

BRA

BWA

CHL

CMR

COL

CRI

DOM

ECU

EGY

ESP

EST

GTM

IRN

JOR

KEN

KHM

LAO

MARMEX

MKD

MLI

MUS

MWI

NIC

NOR

NZLPAK

PER

PRT

SEN

SLV

SWE

TUR

TZA

UGA

YEM

ZAF

R2=-0.44

.2.3

.4.5

Entr

y R

ate

6 7 8 9 10 11Ln GDPpc

Entry Rate - GDPpc

ALB

BEL

BFA

BGD

BGR

BRA

BWA

CHL

CMR

COL

CRI

DOM

ECU

EGY

ESP

EST

GTM

IRN

JOR

KEN

KHM

LAO

MAR

MEXMKD

MLI

MUS

MWI

NIC

NOR

NZL

PAK

PER

PRT

SEN

SLV

SWETUR

TZA

UGA

YEM

ZAF

R2=-0.36

.2.3

.4.5

.6

Exit R

ate

6 7 8 9 10 11Ln GDPpc

Exit Rate - GDPpc

… but so are exporter exit rates

Note: Average for 2006-2008 period

Note: Average for 2006-2008 period

Source: Cebeci, Fernandes, Freund, Pierola (2012)

Many firms enter but few survive

0%

10%

20%

30%

40%

50%

60%

70%

One-Year Survival Rate of Entrants

Note: Average for 2006-2008 period

If there is a case for support, should we

assist entry or survival?

Sectoral and occupational

mobility of workers need to be

estimated to forecast

distributional effects of trade

liberalization.

Labor surveys of developing

countries can be used to

estimate these effects.

Household surveys covering

28 countries and 12.million

people used to estimate

impacts of changes in food

trade policies and food prices

Counterfactual simulation of wage changes with

trade liberalization

Source: Artuc and McLaren (in progress).

-6

-4

-2

0

2

4

6

8

10

12

White collar Service blue

collar

Production blue

collar

Agriculture

Manufacturing

Non-Traded Services

Traded Services

Countries don’t suffer, people do!

Hence: a focus on the impact of trade and trade reform

on the individual

2a. Immigration stock as percentage of the population

2b. Emigration stock as percentage of the population

2c. High-skilled immigration as percentage of total immigration

2d. High-skilled emigration as percentage of total emigration

Geographical distribution of migration intensity and positive selection in 2000

Source: Docquier, Marfouk, Ozden, Parsons (2011)

Results

Impact on wages of less educated non-movers

Source: Docquier, Frederic, Caglar Ozden and Giovanni Peri (forthcoming) “The Wage Effects of Immigration and Emigration,”

Economic Journal

II. Designing policy in a

changing world

Price insulating-protection is still

pervasive in agriculture • Individual countries try to insulate themselves from changes in world prices of staple foods

•Individually rational, but creates a serious collective action problem

• 45 percent of the 2008 surge in rice prices was due to export restrictions & import tariff reductions

•Poor people vulnerable to high food prices: 100 million people thrown into poverty in 2005-8

-40

-30

-20

-10

0

10

20

30

-

100

200

300

400

500

600

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

NRA %

US

D

Pw SE Asia

World rice prices and protection in South

East Asia

Source: Martin and Anderson (2010)

13

0.0 - 20.0 (37)20.0 - 40.0 (44)

40.0 - 60.0 (17)60.0 - 80.0 (4)80.0 - 100.0 (1)No data (105)

103 countries (of which 79 developing)

Borchert/Gootiiz/Mattoo -- Services Trade Restrictions Database

A new Services Trade Restrictions Database

Country-level STRI and per-capita income:

14

ECU

TTONZLPOLARMGEO NLDDOM IRLLTUNICMNGBOL GBRROMKGZ SWEBGRPRY ESPPER CZEMUSKAZARGHUN DEUGTM USAAUTGRCCOLGHAMOZMDG SEN ALBBRABDI AUSDNKMARZMB HND CANPRT BELKORCHLUZB JPNKHMRWA TUR FINRUSCIVCMR FRAITANGA UKRLSO PAK URYMLI CRIMEXKENTZA YEMMWI ZAFUGA VENBLR

NAMLKA BWADZAVNM JOR LBN SAUNPLBGD TUN MYS OMNPANTHACHN

IDN BHRDRC KWTEGYPHL

QATIRNZWE IND

ETH

020

40

60

80

100

Serv

ices tra

de r

estr

ictiveness index (

ST

RI)

5 6 7 8 9 10 11 12Log of GDP per capita

Note: GDP per capita 2007, PPP (constant 2005 internat US$)

Borchert/Gootiiz/Mattoo -- Services Trade Restrictions Database

Global patterns: substantial but uneven

liberalization

More restrictive transport policies are associated with

more expensive and poorer quality logistics services

Source: Borchert, Gootiiz, Grover and Mattoo (2010)

UZBLAO

RWAKAZ

MUS

URY

NICNLD

CRICHL

LTU

ALB

NZLDNK

PHL

PAN

LBN

GBR

IND

BGR

DOM

PRT

POL

PER

JPN

SWE

GRC

ITA

DEU

GHA

GTM

AUS

ESP

KORBEL

FIN

IRL

ROM

UGA

CANIDN

HNDARG

FRA

BRA

MDG

SEN

USA

ZAF

UKR

MEX

GEO

COL

ETH

LKA

KENDRC

KGZ

TUR

MOZ

ECU

NAM

VEN

ARMNPL

NGA

ZMB

KHM

RUS

PAK

MYS

MLI

BOL

PRY

DZAMNG

CZE

CIV

BWA

BGD

HUN

TZA

YEM

JORAUT

THA

BHREGY

TUN

CMR

VNM

IRN

KWT

CHN

OMN

QAT

SAU

-1-.

50

.51

e(

LP

I_com

p_pri

ced2009 | X

)

-.1 0 .1 .2e( agI_m0_tra | X )

coef = -1.4153001, (robust) se = .53648491, t = -2.64

LPI_comp_priced2009: IV estimation

Partial regression graph

UZBLAO

RWAKAZ

MUS

URY

NIC

NLD

CRI

CHLLTUALB

NZL

DNK

PHLPAN

LBN

GBRIND

BGR

DOM

PRT

POL

PER

JPN

SWE

GRC

ITA

DEU

GHA

GTM

AUS

ESP

KOR

BEL

FIN

IRL

ROM

UGACAN

IDN

HND

ARG

FRA

BRA

MDG

SEN

USA

ZAF

UKR

MEX

GEO

COL

ETH

LKA

KEN

DRC

KGZ

TURMOZ

ECU

NAM

VEN

ARMNPL

NGA

ZMB

KHM

RUS

PAK

MYS

MLIBOL

PRY

DZA

MNGCZE

CIV

BWA

BGD

HUN

TZAYEMJOR

AUT

THA

BHREGY

TUN

CMR

VNM

IRN

KWT

CHN

OMN

QAT

SAU

-1-.

50

.51

e(

LP

I_quality

_lo

gis

tics2009 | X

)

-.1 0 .1 .2e( agI_m0_tra | X )

coef = -1.613734, (robust) se = .58220632, t = -2.77

LPI_quality_logistics2009: IV estimation

Partial regression graph

Availability of competitively priced logistics

services Quality of logistics services

Services reform as trade facilitation

New work would find better indicators of performance and more rigorous

links between policy and performance

More open countries attracted more foreign investment for 2003-

2009

Foreign direct investment (M&A) received in 2003-09; predicted values at group-specific means

of covariates. Pooled Poisson estimation (93 countries, 8 sectors) with country and sector fixed

effects. 16

Services reform as investment promotion

020

40

60

80

Pre

dic

ted

Num

ber

Of E

ven

ts

0 1 2 3over_stri

Adjusted Predictions with 95% CIs

India’s services reform has boosted not only

productivity and exports in services, but also the

performance of downstream manufacturing industries Gains in Annual TFP Growth After Services Reform

0

1

2

3

4

industries with

limited

dependence

on banking

industries with

high

dependence on

banking

industries with

limited

dependence on

telecomms

industries

with high

dependence

on telecomms

Percent Gains in Annual TFP Growth After Services Reform

0

1

2

3

4

industries with

limited

dependence

on banking

industries with

high

dependence on

banking

industries with

limited

dependence on

telecomms

industries

with high

dependence

on telecomms

Percent

New study based on panel data for 4,000

Indian firms for the 1990-2005 period finds

that

banking, telecommunications and

transport reforms all have significant

positive effects on the productivity of

manufacturing firms

Source: Arnold, Javorcik, Lipscomb and Mattoo (2010).

Services reform as industrial policy

New work would help policy-makers

understand the implications of

alternative sequencing of reforms in

goods and services.

Emphasis of trade policy and World Bank

assistance to trade is changing • Trade Competitiveness: pro-active industrial policies for

productive capacity building and export promotion

To equip agricultural, manufacturing, and services producers to export

• Trade Facilitation and Logistics: customs reforms and infrastructure improvements

To reduce trade transactions costs and delays World Bank Group Trade Portfolio (WB/IFC commitments FY2008 )

A widely-felt need

for more credible

evaluation

methodologies

What can we learn from past evaluations

of World Bank trade-related projects?

Of the 85 World Bank trade-related projects initiated between 1995 and

2005, only 3/4 were evaluated; most by non-rigorous methods; and less

than 5 had a meaningful impact evaluation involving a control group

Subjective

“While the impact on the firms

assisted had not yet been

determined, a visit to two

beneficiaries by a supervision

mission confirmed that there had

been an impressive impact on

the firms' quality of products and

skills.”

Simple before-after comparison

“The achievement of the overall

goal of the project was measured

in terms of increases in exports'

share of GDP and greater

diversification, compared with the

initial year of the project.”

COLLABORATIVE IMPACT EVALUATION: CAN EXPORT

PROMOTION ASSISTANCE LEAD TO OVER-DIVERSIFICATION?

• Preliminary results suggest that Tunisian firms receiving FAMEX

assistance are encouraged to introduce new products and sell to new

markets with a consequent short-run boost to exports

• But the boost to exports may not be sustainable

Source: Gourdon, Cadot, Fernandes and Mattoo (2010) Products

Countries Exports

0

10

20

30

40

50

60

70

80

90

100

17 18

18

11 12

17 20

19

12

10

50

96

The consequences of export assistance provided under FAMEX 2005

III. Identifying priorities for

international cooperation

Evaluating Doha

What would be lost if

Doha is dumped?

What can be gained

by deconstructing

Doha?

What lies beyond

Doha?

Multilateral Cooperation in a

Changing World Economy • Security a growing concern

– Agriculture and food security

– Oil and energy security

– Globalization/exchange rates and worker security

– Financial globalization and financial security

– Climate change and environmental security

• Multilateral cooperation will be preferable in

many cases to unilateral actions but how is it

best designed?

Impact of Emissions Reductions,

Emissions Trading and Transfers

% change, relative to BAU in 2020. Emissions reductions by high income countries are fixed at 30 percent below 2005 levels.

on India’s Manufacturing Exports on SSA’s Manufacturing Exports

Generating a Technological Revolution:

Can trade policy play a role?

Key step: Raise

carbon price

Progressively eliminate consumer

subsidies

Commit to commit: “For every one dollar

increase in carbon price at T, we will raise

carbon price by $X by T+Y”

Allow limited border tax adjustments

Eliminate constraints on green subsidies

Contribute to global technology fund

Raise protection of IPRs related to green

energy and technology

Carbon

price-related

actions

Trade-related

actions

Technology-

Related

Actions

What does the

West do?

How does the Rest facilitate?