2. Any changes the WTO makes improve the plan and strengthen the organization.

The issues presented in this chapter should be seen as providing a framework for analysing some of the key trade related policies that can maximize the potential contribution of trade to ending poverty. Integrating markets can transform countries’ economies, lifting growth, driving productivity gains, and boosting incomes. These changes were instrumental in the poverty reduction of the last two decades. Keeping markets open and further lowering trade costs, along with policies to address the key constraints the poor face in each country in profiting from the opportunities created by trade, will be essential for ending poverty. Potential gains from reducing trade distortions and trade costs are great. For example, the agricultural sector will continue to play a critical role in lifting people out of poverty, but tariffs in destination markets and distortive subsidies continue to be high, and exporters continue to pay the high costs of poor trade facilitation. A successful conclusion of the Doha Round, regional trade cooperation, and unilateral reforms, as well as the implementation of policies that can effectively reduce trade costs, such as an improved business environment, improved trade facilitation and trade-related infrastructure, are key to creating new economic opportunities. In the countries where the poorest are concentrated, implementation of the reforms set out in this chapter could deepen integration with the global trading system and contribute to stronger connectivity of the extreme poor to international markets, while managing the risks the poor face. The World Bank Group and the WTO cooperate with each other, as well as other multilateral institutions, to promote trade as a means of poverty reduction. The Bank Group is a central partner in the Aid for Trade Initiative. Other key examples of cooperation include the Bank Group’s support for negotiation and implementation of the WTO Trade Facilitation Agreement; both institutions’ roles in the Enhanced Integrated Framework; and their advocacy to ensure that the Basel Committee on Banking Supervision’s new financial sector regulations following the global financial crisis did not impose unintended, negative consequences on the availability of trade finance.204. n implementing the framework for policy analysis and action outlined in this chapter, policymakers should recognise that many poor people in different economic sectors face common challenges. For example, the challenges and constraints presented by the employment of most poor people in the informal economy apply across the services, agriculture and manufacturing sectors. Policy responses that apply across sectors are likely to have more impact than narrower ones. Institutional frameworks or economy-wide constraints — for example those that prevent women from achieving full economic participation — need to be addressed if policies targeted at particular sectors are to achieve their intended goals. At the same time, analyses of the drivers of competitiveness in specific sectors and value chains of importance to the poor remain relevant. Realising the potential created by international production sharing for poverty reduction requires an understanding of linkages between sectors and policy dimensions. By allowing countries to participate more easily in segments of a particular value chain, GVCs offer the possibility of a more fragmented and eclectic development pathway — with opportunities being created for the poor in more ways — than a traditional model based on “progressing” from one sector to another (see Box 1.5). In the same way that GVCs require policymakers to better understand the linkages between trade, investment, skills, infrastructure, and other policies, the linkages between sectors are important in determining GVC participation. The capacity to access quality and affordable services (e.g., logistics) can be a key determinant of GVC-driven investment choices. By understanding the potential for GVC participation and upgrading, policymakers can focus on the different points where benefits for the poor can be increased and address specific barriers that may limit participation of the poor at particular stages of a value chain. A fundamental message that emerges is that in order to have the greatest impact toward ending poverty, trade policy must be made and implemented in conjunction with other areas of policy. The framework set out in this chapter points to clear relationships between poverty dimensions. Addressing the challenges facing small traders, for example, will benefit many women among the extreme poor, and mitigating the trade-related risks facing fragile and conflict states is likely to help the many rural poor in these countries. At a broader level, while economic integration can be pursued in ways that helps maximize the gains and minimize the risks generated through poverty, trade outcomes for the extreme poor are also shaped by the nature of poverty. So, for example, while trade-related policy improvements can play an important role in limiting conflict in fragile states, the ultimate impact on poverty reduction will be limited unless the root causes of conflict are addressed. Or, in countries where deep gender bias persists, there will be limits to the extent to which the benefits of trade can reach the extreme poor, even if trade can help create economic opportunities for women. This underlines the need flagged at the opening of this chapter for more integrated approaches to tackling extreme poverty, based on an understanding of the fundamental drivers of poverty in each country, and the way in which economic integration can work in concert with other areas of policy to improve livelihoods for the extreme poor. The World Bank Group and the WTO both have a strong role in promoting coherence to support multilateral governance of the trading system, and the implementation of trade policies in a way that delivers the greatest possible benefits for the poor. The multilateral trading system has a significant positive effect on the global enabling environment. This supports trade’s contribution to growth and poverty reduction, as well as contributing to countries’ economic performance. An open, predictable, non-discriminatory, rules-based multilateral trading system will continue to be a necessary tool for development and poverty reduction in the future. Success in moving forward effectively on the Doha agenda will create new economic opportunities, boost business confidence and revive the support for multilateral cooperation aimed at reinforcing the stability of the world economy. As well as supporting multilateral, regional and unilateral trade reforms, the World Bank Group is increasingly taking the challenges faced by the poor in benefiting from trade into account. Its Trade Strategy and the formation of the Trade and Competitiveness Global Practice provide the tools for doing so, along with intensified efforts to address the challenges of fragility, agriculture, and others. The two institutions cooperate closely together on a wide-ranging agenda. Aid for Trade and other forms of multilateral cooperation are important in reducing persistently high trade costs in developing countries, and reducing poverty. This report stresses the importance of expanding the focus of this agenda to maximize the positive effects of trade for the poor.