A long-heldtenet of international-trade theory is that, in the long run, increased tradecorrelates with faster GDP growth. But the challenge – which my institution,the World Bank, is working to overcome – is to ensure that trade-driven growthbenefits the poor. That is why the heads of seven multilateral institutions,including the World Bank, strongly supported the push for the trade-facilitationagreement that was reached earlier this month at the World TradeOrganization’s ministerial conference in Bali.

To be sure,the incidence of poverty worldwide has reached an historic low, with the extreme-poverty rate(the share of the population living on less than $1.25 a day, inpurchasing-power-parity terms) falling in 2010 by more than half since 1990.But that still leaves more than one billion people worldwide living in extremepoverty. Moreover, progress has been uneven, with poverty rates having declinedfar more in East Asia and Latin America than in Sub-Saharan Africa.

In order tocope with this changing global context, the World Bank has introduced a newobjective to guide its poverty-reduction efforts: promoting sustainable, sharedprosperity by monitoring the income growth of the poorest 40% of everycountry’s population. Indeed, we are rethinking how we define success indevelopment and how we provide trade-related support to developing countries.

Trade’srelationship with poverty is variable and complex. Increased trade benefitsconsumers by reducing the prices of goods and services. It gives the pooraccess to a wider variety of commodities, while providing firms with a morediverse selection of inputs.

But increasedtrade can also eliminate low-skill factory jobs and reduce agricultural prices– outcomes that disproportionately hurt the poor. In India, for example,poverty has declined more slowly in areas where farmers face increased foreigncompetition. Given constraints on inter-sectoral labor mobility, stemming frombarriers to skills acquisition and rigid labor-market regulations, the poorestworkers have few options when such changes occur.

As a result,increased trade may demand difficult adjustments in the short term. Individualsmay need to change their consumption habits; labor may have to be reallocatedacross sectors; and some workers may have to adjust to lower wages, at leasttemporarily. Some firms will grow, while others will contract.

Experience hasdemonstrated that, with forward-looking policies, governments can enhancetrade’s benefits and mitigate its negative impact on the poor. Policymakers canpromote retraining programs for displaced workers and remove regulatoryobstacles that impede their flow into thriving, export-oriented sectors. And,in order to protect farmers, they can eliminate export restrictions and ensurethat timely, accurate market information is accessible.

With suchpolicies in place, the World Bank’s efforts to bolster developing countries’trade linkages could facilitate substantial poverty reduction. For example, wehelp developing-country governments connect firms, farmers, and households tomarkets and supply chains, thereby fostering increased investment and boostingeconomic activity.

Furthermore,we support infrastructure-development projects, enabling countries to build theroads, bridges, and ports that link traders to markets. For example, a $1.8billion highway project in Kazakhstan is facilitating trade-related transportacross the country, stimulating the economies of the country’s poorestprovinces, and creating more than 30,000 jobs. In Nepal, the Bank is financingreconstruction of the steep, dangerous, and busy road that carries most of thecountry’s exports to India, and it is supporting the government’s efforts toconnect some of the country’s remotest districts to the main road network.

The World Bankalso helps countries to establish clear customs rules that more effectivelyprotect traders from inconsistent treatment or solicitations for bribes. And weare working to address costly border inefficiencies. For example, we arehelping to simplify and modernize trade procedures through Cameroon’s Doualaport, and we have helped the government of Laos to establish an online portalthat provides traders with access to all relevant laws, procedures, schedules,and forms from border-management agencies.

Moreover,since 2010, the International Finance Corporation, the Bank’s private-sectorlending arm, has been promoting the integration of small and medium-sizeenterprises into global supply chains by increasing their access to capital.The $500 million Global Trade Supplier Finance program, a joint investment andadvisory initiative, is currently providing short-term finance to thousands ofemerging-market SMEs.

In order tomaximize the impact of such initiatives, world leaders should cooperate tobuild and maintain an open trading system. The WTO’s Bali conference providedan important opportunity to develop a new trade-facilitation agreement thatexpedites the movement, release, and clearance of goods at border stations;clarifies and improves trade-related rules; enhances technical assistance; andencourages cooperation among border-control agencies.

But theagreement that was reached in Bali cannot succeed unless wealthy countries anddonors agree to support developing countries’ efforts to enact related policiesand reforms. Given this, it is crucial that developed-country policymakersrecognize that a more efficient, better integrated, and more inclusive globaltrade regime will benefit all countries.

With genuinecommitment from the international community and the appropriate domesticpolicies in place, trade can be a powerful force for poverty reduction.