The research program on trade and international integration is an integral part of the World Bank’s work on development. The goal is to promote more informed national policies, international cooperation and development assistance. Research is helping us to better understand the role of international trade in development, poverty reduction, and shared prosperity. We are also contributing to the development of databases, techniques, and policy tools to facilitate independent analysis of the impact of trade policy reforms. We help provide technical assistance and policy advice to governments seeking to reform their policy regimes, sometimes in conjunction with policy-based loans to support reforms.
Successful international integration, supported by sound national policy and effective international cooperation, has underpinned most experiences of rapid growth, shared prosperity, and reduced poverty. However, global trade growth has slowed down, a backlash against globalization is sweeping through the countries that were once its strongest advocates, and some of the most ambitious initiatives for international cooperation, from the Doha Agenda to the Trans Pacific Partnership, have run into difficulty. The objective of our research is to generate new knowledge on how international integration can be harnessed to promote development in these challenging circumstances, particularly in regions that are further away from reaping its full benefits.
Our activities include data collection, research, and dissemination on three inter-related issues:
- How does economic integration affect productivity and poverty in a diverse set of countries?
- How can national policies related to international integration be reformed to enhance growth and shared prosperity, and to reduce poverty?
- How can international cooperation help in achieving these objectives?
Despite significant advances in country-level analysis of trade patterns in final goods and conventional trade policies, we still need to improve our understanding of key issues relating to:
- Macroeconomic aspects of the slowdown in global trade growth and how this process might affect development prospects;
- Microeconomic aspects of international integration, involving firms, workers, and households, as well as the implications of technological change and global production fragmentation;
- New policy challenges, especially the growing use of non-tariff measures such as technical regulations in developing countries and their trade partners, and devising cost-effective strategies for trade facilitation and export promotion;
- International trade cooperation, especially the changing political economy of international trade cooperation, stalled multilateral and mega-regional negotiations, and the stuttering efforts to accomplish deeper regional integration among developing countries.
The focus is on concrete, applied research, supported by data and empirical tools. The aim is to assist World Bank operations and to help inform and shape policy. In many cases, the specific policy research questions we address are defined by demand from Bank operations, client countries, and our development partners. The answers are based on rigorous analysis of new data, in collaboration with researchers from developing countries, partner organizations, and prominent academic institutions. The databases and findings of research are widely and publicly disseminated and translated into actionable policy recommendations. The research projects described below are examples of the research that we are carrying out and intend to carry out rather than a comprehensive list of projects.
The current research program has four main pillars.
- The Causes and Consequences of the Trade Slowdown
This component is focusing on the patterns of growth in trade and investment, globally and in specific regions and countries. Three broad questions are being addressed: How has the relationship between growth in trade and growth in incomes changed, especially in the years after the financial crisis? Why has trade growth slowed down and failed to keep up with the growth in GDP, after growing nearly twice as fast in the long 1990s? And, most important, does the slowdown matter for development?
- The Micro-Foundations of Trade, Productivity and Poverty
This component is focusing on the impact of international trade on the firm, the worker and the household and hence on productivity and poverty. Three broad questions are being addressed: What are the key determinants of export participation, expansion, and survival of firms in developing countries? What are the opportunities and challenges for developing countries created by the global fragmentation of production and the emergence of global supply chains in goods and services? How does globalization interact with technological change to affect workers, and hence poverty and shared prosperity?
- Trade Policy Reform for Inclusive Growth
This component reflects recent changes in policy focus, with emphasis not only on conventional trade restrictions like tariffs and quotas but also on non-tariff barriers in goods and services that are gaining prominence across a wide range of countries. In parallel, we are undertaking and developing techniques for the rigorous impact evaluation of policy interventions designed to reduce trade costs and promote exports which now command a large share of international assistance and national resources in the realm of trade.
- International Trade Cooperation for Development
This component is seeking to understand the altered state of international trade cooperation, and examine how it can be revived in a way that contributes to international development. While the more ambitious projects, from the Doha Agenda to the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) have run into difficulty, some of the regions where poverty is concentrated and that are among the least integrated regions of the world are making new efforts to promote regional integration. Four questions are being addressed: How has the political economy of trade cooperation changed? How have international trade agreements evolved in terms of scope and depth? What are the implications of the progressively deeper agreements for participating and for excluding countries? What can be done to promote desirable integration and to protect the interests of those who are left out?