International Conference on Linkages between Trade, Development and Poverty Reduction

What is Aid for Trade in WTO Context?

Nairobi, Kenya, 15 th March 2007

Why Aid for Trade?

A4T is a part of overall aid to development to help developing countries to:

• Benefit from further liberalisation • Overwhelm constraints to trade and reduce

potential negative impact of liberalisation

• Enhance competitiveness • Play an active role in the international trading system

Ultimate goal: Use trade as an instrument for poverty alleviation and accelerated rate of growth to reach country specific development goals

Volume of A4T

Trade-related Assistance in 2004

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Over 24 percent of total ODA US$2.5bn

Trade-related Technical assistance

US$7.3bn

Nearly

US$23bn US$12.9bn

Productive capacity Infrastructure building

New financial pledges for the creation of an A4T Agenda:

•Japan: US$10bn over 3 years •US: US$2.7bn a year by 2010 •EU: US$2.6bn a year by 201à

How has A4T come on WTO agenda?

Through the repeated disappointing results of former initiatives, it was acknowledged that market access does not automatically lead to increased growth and trade:

• As early as 1968: UNCTAD established GSP • Uruguay Round: “Trade not Aid” • WTO-UNCTAD-ITC in 1996: Joint Integrated Technical Assistance Programme • WTO members in 1997: Integrated Framework • Several initiatives: US launched AGOA in 2000; EU started EBA in 2001.

The Integrated Framework

The Integrated Framework for Trade-related technical assistance to LDCs was launched in 1997 by the six founder agencies - IMF, ITC, UNCTAD, UNDP, WB, WTO-.

The IF coordinate assistance strategies.

is used to trade-related and ensure coherence with the country priorities and development The Task Force on A4T has advocated for an Enhanced Integrated Framework Main Purposes:

•Support LDC governments in trade capacity building and integrating issues into national development strategies •Continue to respond to trade development needs •Ensure maximized use of scarce resources in support of enabling LDCs to be full and active players and beneficiaries of the MTS •Coordinate donors’ response

Hong Kong WTO Ministerial Declaration Paragraph 57 on A4T

In December 2005, at the Sixth WTO Ministerial of the Doha Round in Hong Kong, the necessity of an A4Twas recognized. A Task Force was requested to provide recommendations on how to operationalise A4T.

“Aid for Trade should aim to help developing countries, particularly LDCs, to build the supply-side capacity and trade-related infrastructure that they need to assist them to implement and benefit from WTO Agreements and more broadly to expand their trade. Aid for Trade cannot be a substitute for the development benefits that will result from a successful conclusion to the Doha Development Agenda (DDA), particularly on market access. However, it can be a valuable complement to the DDA”

Aid for Trade Coverage

o Trade policy and regulations: capacity building and technical assistance for trade policy mainstreaming, compliance with trade standards and implementation of trade agreements. o Trade development: improvement of business climate, promotion of investments and exports, better access to finance and insurance. o Trade-related infrastructure: transport, energy supply, communications. o Building productive capacity: removal of supply side constraints to boost productivity.

o Trade-related adjustments: accompanying measures to assist countries to benefit from liberalised trade.

Recent trend in A4T

In October 2006, the General Council of WTO endorsed the recommendations of the Task Force on A4T submitted in July 2006.

The Paris Declaration Principles OWNERSHIP HARMONISATION MUTUA

L

ACCOUNTABILITY MANAGING FOR RESULTS ALIGNMENT

Three main plans of action

1. Strengthening the “demand side”: all relevant stakeholders commitment to country driven approaches; government capacity building; national dialogues with 2. Strengthening donor “response”: priorities donors need to integrate trade more effectively into their aid programming; donors’ response has to be tailored to the country 3. Strengthening the bridge between “demand” and “response”: matching donors’ resources and countries’ needs; need for a coherent collaboration; assist countries in mainstreaming trade into their national development strategies.

Which countries are the A4T funds likely to be directed to?

• LDCs’ needs:  A4T can help strengthen LDCs trade capacity, increase competitiveness and integrate their economies into the MTS.

• Non-LDCs’ needs:  A4T can help mainstream trade into their national development strategies and ensure national consultations include all relevant stakeholders.

• Regional needs:  A4T can help reduce the constraints involving cross-border, sub-regional or regional issues. Ex: cross-border infrastructure, transit or management of common good.

Some of the expected benefits for poor countries

• Better business climate through infrastructure improvement and trade facilitation for export and domestic ma rkets • Increase in productivity, trade, employment • Increased capacity to seize trade opportunities reach for economies of scale • Seize economic opportunities of former rounds of negotiations • Participate more actively to a more equitable MTS • Reduction of possible negative effects of liberalisation • Use benefits of growth to reach development goals

These benefits should not be conditional upon the Doha Round completions

Some further needs under discussion

Diverse adjustment costs such as:

• Erosion of preferential market access • Fear of rising food prices in net food importing developing countries • Adverse terms of trade shocks following the end of the Textile and Clothing Quotas Agreement • Government revenue losses • Costs of compliance to product standards • Implementation costs of WTO agreements • Resources needed for social costs due to loss of livelihoods activities and increased unemployment

A4T as a compensation for losses

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A4T as an investment in future welfare Difficult calculation of the amount of A4T needed

Some apprehensions of the poor countries

• Developing countries do not have the same concerns and they fear their own country specific needs could be bypassed by A4T • Some scepticism about the credibility of donors’ commitment • Insufficient funds for significant impact: proper needs assessments are required • Reallocation of funds from the development budget • A4T put forward as a substitute for a real non-discriminatory trading system • Possible conditionalities and bias towards donors’ interests • Inadequate capacity building

Further initiatives needed for A4T implementation

Need for a legal and institutional framework including:

• Funding commitment made binding • Establishment of enforcement mechanisms

Need for an authoritative description of A4T including:

•Financing mechanisms •An non-exhaustive list of A4T needs •Concrete steps for implementation

Need for a reliable global monitoring and evaluation system including:

•Data collection and analysis at different levels of investigation •Management for results: focus on outputs •Broad and systematic dissemination of results