Trade Impact 2.0: Facilitating trade through Public-Private Partnerships

Country experiences and empirical studies show that private investment and integration into global markets for goods, services and labour go hand in hand and reinforce each other as engines of economic development. Finding ways to leverage private sector know-how, innovation, technology, services, and finance provision is fundamental in promoting sustainable development and prosperity.

Improving the efficiency of the movement of trade across borders and developing new trading routes is one area where the private sector can harness its capabilities for the benefit of all. Where such partnerships occur, it is essential to monitor their performances, evaluate their impacts on trade flows and other economic variables, and draw lessons from their experiences. Three main econometric techniques can be used to that end: the Gravity Model, the Synthetic Control Method, and the Difference-in-Difference approach; each of these techniques is well-grounded in both the theoretical and empirical literature, and the choice amongst them depends on several issues, including data availability and timeliness.

Recent and current events, including the COVID-19 pandemic, supply chain bottlenecks, and military conflicts, are prompting countries and companies to rethink their trade and sourcing policies. Sustainability targets also add to the complexities of choices facing policymakers and businesses. Perhaps more than ever, ex-ante qualitative, quantitative and hybrid approaches that complement each other are needed to assess the potential environmental, social and economic impact of different options/strategies. Based on the assessment, stakeholders’ consultations would follow and explore opportunities for private-public partnerships based on solid analysis.

A case in point is the World Logistic Passport or WLP, a new trade PPP initiative launched two years ago, just before the COVID pandemic’s outbreak, to facilitate trade among its members. Pre-pandemic, ex-ante analysis of the initiative was undertaken, and now, two years into its operation, it is time to estimate its impact. However, this task is complicated given the need to focus on the different parties involved:

• the businesses that are active in the initiative
• the job opportunities they provide
• the growth impetus they generate

Current econometric techniques need to be adjusted to capture all of these aspects. The full report offers some ideas on how this upgrade can be undertaken.