Pandemic Lessons: TPO Funding Lifted Trade, While E-Commerce Programs Lagged Behind

A new study by the International Finance Corporation, the Finance, Competitiveness and Investment Global Department, and the Development Research Group at the World Bank takes an unprecedented deep dive into how trade promotion organizations (TPOs) shaped export performance during the COVID-19 pandemic. Drawing on an exclusive World Bank survey of 57 countries, the research shows that well-funded TPOs acted as a stabilizing force when global trade collapsed in 2020, but that effect faded as recovery took hold. At the peak of the downturn, when world trade fell by 10 percent, the steepest drop since the Great Recession, increasing TPO budgets produced substantial returns. A one percent budget increase during these negative shocks raised exports by about 0.01 percent, translating into an average of USD 171 in exports for every additional dollar spent on TPO activities. Yet, during the rebound in 2021, larger TPO budgets yielded no measurable export gains.

High Returns Through Intensive Margins, Not New Markets

The analysis reveals that budget boosts during downturns worked mainly through the intensive margins of trade, helping countries sell more of existing products to existing markets, rather than through the extensive margins of launching new products or entering new markets. This finding challenges firm-level studies that emphasize TPOs’ role in facilitating market entry. The authors reconcile this by explaining that at the aggregate level, what may be a “new” product or destination for one firm often already exists in the national export mix. TPOs tend to use information gathered from current exporters to help other firms expand in established channels, enabling rapid export volume gains when global markets are contracting.

The E-Commerce Paradox

One of the most striking and counterintuitive findings concerns e-commerce training and mentoring programs. Around 75 percent of surveyed TPOs launched such initiatives during the pandemic, anticipating that the surge in global online retail would offset the impact of disrupted physical trade. However, in sectors not well-suited to online trade, these programs coincided with weaker export performance during downturns. The study suggests that scarce resources may have been redirected from high-impact areas, such as logistics support, international marketing, or capacity building, towards online-focused programs that offered limited benefits for international sales. Even in e-commerce-intensive sectors, the impact was negligible, with no statistically significant gains in export performance. This indicates that while digital tools are valuable, their effectiveness depends heavily on sectoral suitability and cross-border applicability.

Exploiting Sector-Specific Shocks for Evidence

The research design capitalizes on the highly uneven nature of pandemic trade shocks across sectors. For example, in the second quarter of 2020, global vehicle trade dropped by 51 percent, while trade in textile articles, boosted by demand for protective masks, rose by 225 percent. This sectoral variation enabled the authors to create exogenous measures of trade shocks that were independent of individual countries’ TPO budgets. Using quarterly customs data from 46 major importers, accounting for about 70 percent of world trade, and matching it with the TPO survey, the study examines how budget changes interact with both positive and negative trade shocks. Distinguishing between these types of shocks allowed the researchers to detect asymmetrical effects, confirming that TPOs deliver the most value when global markets are shrinking.

Robustness checks bolster the credibility of these results. The authors re-estimated the models by recalculating trade shocks without including a country’s exports, and by substituting alternative indicators of sector vulnerability such as labor intensity. Across these variations, the patterns remained the same. Importantly, the use of quarterly rather than annual data was critical, as it captured the rapid swings in trade during the pandemic, something annual figures would have masked. Even when budget changes were lagged by up to three quarters, the positive impact during downturns persisted, though it gradually weakened over time.

Policy Lessons for Future Trade Resilience

The findings carry important implications for policymakers. The authors argue that TPOs should adopt counter-cyclical budget frameworks, increasing resources during periods of global trade contraction to maximize their effectiveness. This is especially critical for low-income countries, which, according to the survey, often faced TPO budget cuts even after initial lockdowns eased, potentially widening resilience gaps between richer and poorer economies. High-income countries, by contrast, frequently increased TPO funding, reinforcing their ability to weather the crisis.

The study also urges caution in over-investing in e-commerce initiatives during global trade shocks. While domestic online sales boomed during COVID-19, the extent to which this translated into international transactions is unclear. The World Bank survey did not distinguish between domestic and cross-border e-commerce training, raising the possibility that many programs focused on local markets rather than global reach. For sectors less adaptable to digital platforms, these programs may not only be ineffective but also detrimental if they draw resources away from more impactful strategies.

Ultimately, the COVID-19 pandemic offered a rare natural experiment in export promotion policy. The evidence shows that TPOs can be highly effective in sustaining exports during severe global downturns but far less so during booms. This reinforces the case for flexible, targeted, and well-timed interventions. While the results are most directly applicable to supply-side shocks like those triggered by the pandemic, they echo patterns from the 2007–2009 financial crisis, suggesting broader relevance for navigating trade volatility. The challenge for policymakers is to channel resources into the right instruments at the right time, ensuring that when the next global shock hits, TPOs are ready to deliver maximum resilience where it matters most.