The Financial Express

Aid-for-Trade needs a fresh look

Aid-for-Trade needs a fresh look

Since the launching of Aid for Trade programme way back in 2005 by the World Trade Organisation (WTO) at the Hong Kong Ministerial meeting, there has been an expectation that the targeted move to improve trade capacity building of developing and least developed countries would not only address the areas requiring international support but also facilitate creation of a level-playing field among trading partners -- big and small. Aid for Trade is an initiative of the WTO as well as a policy concept in international economic and trade development, concerned with helping developing countries and particularly the least developed countries build trade capacity and infrastructure. The broad objective is to bring greater coherence to existing trade-support programmes and generate additional funds to assist developing countries to build supply capacity and trade-related skills, so that they can adjust to the post-Doha trading environment. It also aims at helping countries develop trade strategies, plans or projects and implementation, such as building roads, ports, and telecommunications that link domestic and global markets, or investing in industries and sectors to help diversify exports.

Aid for Trade is seen as the main multi-agency apparatus for addressing supply side and institutional constraints that restrict developing countries from increased participation in the international trading system. As such, it has become a key component of international Official Development Assistance (ODA). More importantly, in the absence of any significant initiative from UNCTAD-the UN agency that for decades looked after the interest of poor and less advanced countries in many forms of trade promotion, the WTO-launched programme looked like a major attempt to fill in the gap caused by UNCTAD's gradual shift as a direct trade facilitator following the emergence of the WTO. In fact, it was UNCTAD which had been stressing the need for an integrated approach to aid and trade in support of lasting developmental gains, especially for the Least Developed Countries (LDCs).

But how far have things advanced in the past one and a half decade? Over the years, there were a number of reviews of the progress made. The next review will take place from 27 to 29 July, with the theme "Empowering Connected, Sustainable Trade". According the WTO secretariat, the review which will take place both in-person at WTO headquarters as well as virtually, will bring to the fore areas where developing and least-developed countries (LDCs) need support to overcome supply-side constraints limiting their participation in international trade. The event will be opened by Director-General Ngozi Okonjo-Iweala.

It is interesting to see that in the forthcoming review, Aid for Trade is included in Sustainable Development Goal-8 concerning "decent work and economic growth", which is one of the 17 Sustainable Development Goals set by the United Nations General Assembly in 2015. Goal-8.a aims to "Increase Aid for Trade support for developing countries, in particular, least developed countries, including through the Enhanced Integrated Framework for Trade-related Technical Assistance to Least Developed Countries."

From the previous Reviews it could be learnt that in 2017, there was a leap in donor commitments. In 2018 donor commitments remained stable, at $58 billion, based on current prices. South and Central Asia received the highest share (31.4 per cent), followed by sub-Saharan Africa (29.2 per cent). Lower-middle-income countries received 37.5 per cent of aid for trade, followed by least developed countries (36.8 per cent). There is, however, criticism as to whether the funds were released on thorough scrutiny of the areas needing assistance by the beneficiaries, and whether attention was given to equitable distribution. Also, there is the issue whether the funds meant under Aid for Trade got overlapped with the development findings- not directly related to the trade as such.
Meanwhile the OECD and WTO established an 'aid-for-trade monitoring framework' to track progress in implementation of the Aid-for-Trade Initiative. It consists of the following elements:
• mainstreaming and prioritising trade (demand)
• trade-related projects and programmes (response)
• enhanced capacity to trade (outcome)
• improved trade performance and reduced poverty (impact)

The forthcoming review, it is expected, will offer an opportunity for donors and recipient countries to examine whether Aid for Trade and its related programmes are helping developing countries, particularly the LDCs, to overcome trade and productive capacity constraints.
Years ago, recipient countries were asked to rate the success of Aid for Trade in their own countries on twelve broad criteria. The results showed that there was consensus amongst countries that the programme should include greater resources, support export diversification, enhance the profile of trade in development strategy, reduce poverty, and promote economic growth.

Over the years, it is believed that there has not been much change in the overall perception. Hence, to bring the desired results, the programme should be directed to fulfil its objective in a more precise manner, and should include: enhanced understanding of trade, increased profile of trade in development strategy (mainstreaming), more harmonised and aligned Aid for Trade projects and programmes, increased Aid for Trade resources, increased and diversified exports, increased economic growth, reduced poverty, greater environmental sustainability, greater gender equality.

In this context, it is often alleged that much of the programme has been a repackaging of existing trade-related aid flows. This has worrying implications for the future of the scheme and for the developmental impact of aid on trade. It is expected that the review will also take stock of the Covid shocks suffered by less advanced countries in their trade and commerce sector.

[email protected]

Share if you like