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If trade openness is not an automatic good then World Bank report can be assessed in a novel way (March 2006)

Rethinking Bretton Woods | Tue, Mar 28, 2006

By Aldo Caliari
Letter to the Financial Times commenting on the World Bank's evaluation of trade assistance.

Published March 28, 2006
Read this letter online

From Mr Aldo Caliari.

Sir, The report by the World Bank evaluation department ("World Bank focus on trade 'too narrow' ", March 23) is susceptible to different readings. The report says that the Bank succeeded in opening markets in borrowing countries but not in ensuring these reforms would lead to growth and poverty reduction. One could, indeed, read this as pointing towards the need for the Bank to do more on complementary reforms to trade.

However, if one is open to consider the possibility that trade openness is not good per se, but only insofar as it helps achieve development and poverty reduction outcomes, quite a different reading would emerge.

First, maybe the reason trade openness did not work cannot be attributed to the lack of complementary reforms. It rather confirms an ample body of research questioning the assumption that trade liberalisation leads to growth and poverty reduction.

Second, the Bank's value added in promoting trade reforms through policy-based lending is doubtful. It is quite possible that borrowing countries, acting on their own, could have found a better timing and sequencing for the reforms.

Third, the report shows the Bank's inability to "get the reforms right" on trade when promoting them through lending programmes. It is hard to see why the Bank should be trusted in its newly-found role as trade "technical adviser" and "advocate" for developing countries.

Fourth, the continued lack of remedies for the impact of exogenous trade shocks may simply be showing that the Bank, due to either technical or political reasons, is unable to address them.

Trade policy advice and negotiations should factor this limitation as a permanent element of the trade system, rather than as an accidental, surmountable one.

As policymakers discuss the future involvement of the Bank on trade issues let us hope that this second, equally plausible reading of the report will also be fully assessed on its merits.

Aldo Caliari,
Director,
Rethinking Bretton Woods Project,
Center of Concern,
Washington, DC 20017, U.S.