Development and building trade capacity

Trade facilitation is central to Africa’s competitiveness in the global economy. Costs related to trade facilitation make up a significant proportion of overall trade-related costs which in Africa are higher than in any other developing region. This acts as a barrier for the integration of African countries into global markets as well as greater intra-African integration. Improving trade facilitation is essential for lowering costs for African agricultural producers as well as supporting the development of higher value-added activities in agribusiness manufacturing and services including participation in regional and global value chains. Diagnostic tools used by the World Bank Group such as the Logistics Performance Index as well as country-specific diagnostics highlight the key challenges faced. The evidence also shows that performance varies with some countries making significant progress on reform programs to improve trade facilitation. With other developing regions having generally more advanced trade facilitation regimes the lessons from these regions can be instructive in designing and implementing reforms in Africa which the World Bank Group is actively supporting at the national and regional levels. A priority for the Bank Group is implementing trade facilitation programs that do more to reduce trade-related costs facing the extreme poor given the concentration of extreme poverty in Africa.

De plus en plus de personnes s’accordent à penser que le facteur ayant eu la plus forte incidence sur le commerce ces dernières années est l’introduction de technologies nouvelles et innovantes. L’évolution des technologies de l’information de par sa vitesse et son intensité a une incidence sur le commerce et plus généralement sur notre vie quotidienne comme jamais auparavant. Elle a rendu possible des interactions entre les humains entre les humains et les machines et entre les machines d’une manière qui aurait été inconcevable il y a encore quelques années. L’ère du numérique est une nouvelle réalité et c’est elle qui porte la croissance et le développement économiques. Elle pose des difficultés et ouvre des possibilités à tous les niveaux. Elle donne la possibilité aux pays en développement de mieux s’insérer dans les échanges internationaux par le biais des chaînes de valeur mondiales (CVM) par exemple mais il n’existe pas de mode d’emploi.

The nature of technology used in products plays a major role in determining the governance structure of value chains and the benefits of participation for developing countries. Standardization through breaking production into modules with a high degree of functional autonomy (limited mutual interference between modules) can dramatically reduce the amount of research and development (R&D) learning by doing and the number of complementary skills needed to produce a good. This greatly increases opportunities for developing country firms to participate in formerly capital-intensive industries through reducing entry costs into global value chains. However widespread access to standardized products with little ability to modify technical features can lead to an excessive supply of homogeneous products in a local market resulting in intense price competition and limited technology transfer. By contrast technology that facilitates scope for product modification and greater interaction with technology owners can help boost technology transfer and product upgrading by developing country firms. The chapter illustrates this interaction between changes in technology and opportunities for developing countries through developments in the automotive and mobile phone handset industries with a particular reference to China’s growth experience. It also finds that automation is likely to have only a limited impact on developing countries’ opportunities to participate in value chains through the offshoring of production by high-income countries at least in the short term.

Structural transformation is imperative for Africa’s economies. An unprecedented policy unanimity has emerged amongst African government and business leaders that to achieve sustained growth and development Africa must industrialize and secure a greater share of the benefits of its participation in global value chains. This requires further advances in a programme for ‘development integration’ that simultaneously combines market integration with purposeful industrial development intervention and cooperation to strengthen regional value chains underpinned by efforts to develop and rehabilitate cross-border infrastructure for greater connectivity across Africa.

The World Trade Report has been written under the general direction of Patrick Low Director of the Economic Research and Statistics Division. The main authors of the Report are Bijit Bora K. Michael Finger Marion Jansen Alexander Keck Patrick Low Hildegunn Nordas Roberta Piermartini and Robert Teh. Trade statistics and tariff information were provided by the Statistics Group of the Economic Research and Statistics Division co-ordinated by Guy Karsenty Julia de Verteuil Andreas Maurer and Jürgen Richtering.

This year’s World Trade Report looks at how trade and other forces of change are affecting our world. It combines contemporary analysis with conjecture about the future. The approach is eclectic reflecting many different forces at work. The intermingling of these drivers of change is multidirectional and complex and the pace of change is rapid.

International trade rebounded in 2002 from its contraction in the preceding year growing at about 2.5 per cent in volume terms which was faster than the growth of global output. The rebound occurred despite the weakness of the global economic recovery greatly reduced capital flows major changes in exchange rates increased restrictions on international trade transactions to mitigate risks from terrorism and rising geopolitical tensions. Trade growth was strong in Asia and the transition economies largely reflecting better economic performance in those regions. However trade was stagnant in Western Europe and contracted in Latin America as a result of economic turmoil in a number of countries in the region. North America’s imports recovered in line with stronger domestic demand while exports continued to decrease in 2002.

Following the so-called “Asian option” of transition from the early 1990s Viet Nam adopted the Doi Moi (renovation) process a combination of liberalization stabilization and structural reforms. This included two main waves of trade liberalization one in the 1990s and a second in the 2000s (Coello at al. 2010). The first wave lasted from the initial opening of the country until approximately 2001 and foresaw the total abolition of trade licences and the removal of most quantitative restrictions (Thanh and Duong 2009). The second wave—still ongoing—includes the full involvement of the country in the global network of reciprocal trade agreements (both multilateral WTO accession in January 2007 and bilateral such as agreements signed with the United States in 2001 as well as FTA negotiations with the EU concluded in 2016).

Although small and medium-sized enterprises (SMEs) represent the vast majority of firms worldwide their participation in international trade remains limited relative to their share of overall economic activity and employment as compared to large firms. The rise of the digital economy could however open a range of new opportunities for small firms to play a more active role in global value chains (GVCs). This chapter reviews evidence of SME participation in international trade and production networks and looks at how the digitalization of our economies is already affecting or could affect future SME contributions to GVCs. New research by Lanz et al. (2018) finds evidence that digitally-connected SMEs in developing countries tend to import a higher share of their inputs than non-digitally-connected firms. Additionally it is shown that this positive digital effect is greater for SMEs than it is for large firms. The chapter reviews the various opportunities that the digital economy opens for SMEs especially in terms of cost reductions and the emergence of new business models but also discusses policy measures that could be taken to promote SME participation in GVCs. Indeed significant challenges remain for SMEs to enter GVCs some of which are exacerbated by the new digital economy. A holistic approach that combines investment in ICT infrastructure and human capital with trade policy measures and measures to improve the business environment access to finance and logistics and promote innovation and R&D is necessary. Improving the availability of data would also help to better understand and integrate SMEs in GVCs.