Global Policy Forum

By Sophie Walker

The World Bank's trade programs may have helped open markets over the last two decades but they have not done enough to tackle poverty and boost growth in developing countries' exports, a study found.

An assessment by the institution's Independent Evaluation Group of $38 billion worth of trade programs between 1987-2004 said the bank did not pay enough attention to complimentary measures needed to cushion poor countries and help them adapt to the effects of trade liberalization.

"Liberalizing trade by itself is not enough to generate growth and to fight poverty. While the World Bank has done the right thing in promoting more open trade worldwide it has not done everything right to help generate the payoffs," said Vinod Thomas, director general of the IEG at the World Bank. The trade initiatives did not generate sustained export growth, especially in Africa, Thomas said. "Many of the bank's clients in Africa have not succeeded in diversifying their exports, making them still vulnerable to commodity shocks," he told a news conference.

The study found that developing countries' exports were limited by an absence of competition policy and vital measures to free up labor markets and improve regulatory framework so that countries could compete in world markets and attract more investment.

It also found that the Bank often promoted specific trade policies in countries without adequately assessing the potential impact they might have on affected communities. Thomas said the Bank needed to look at each case independently and acknowledge that not every country was able to throw open all of its markets at once.

Economic Reform

"We live in a pragmatic world of political economic reform where across-the-board opening is not as easy or even politically feasible," Thomas said. "I'm suggesting a more open, neutral approach that looks at the real world and says each country is different."

Yvonne Tsikata, lead economist with the IEG, said while trade liberalization had opened up countries' economies and provided convertible currencies, the World Bank had not taken into account macroeconomic policies in place in some nations which counteracted what it was trying to achieve.

But she said the Bank was getting better at taking into account the business climate in developing nations, which often have excessive administrative and regulatory hoops making it hard for new firms to operate. "The bank has increased emphasis on business climate issues so the lesson seems to be on the way to being absorbed," she said.

But the Bank needs to tackle the way it is organized internally and improve "cross-pollination" among its macro-economists and its agriculture, services and telecoms specialists if it is to provide a more rounded approach to its market opening programs, she said.

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