Magazine article International Trade Forum

Benefitting from Better Aid-for-Trade Flows

Magazine article International Trade Forum

Benefitting from Better Aid-for-Trade Flows

Article excerpt

[ILLUSTRATION OMITTED]

At a time when Aid-for-Trade flows have declined in every major region, Asia has emerged as the recipient of the largest share of flows. Still, this measurement from Aid for Trade at a Glance 2013, a joint publication by the Organisation for Economic Co-operation and Development (OECD) and the World Trade Organization (WTO), disguises the dichotomy that exists between most of Asia's developing countries and its challenged economies, including least developed countries (LDCs), landlocked least developed countries (LLDCs) and small island developing States (SIDS). Reasonably positive Aid-for-Trade trends in the Asian region are disproportionately captured by the more advanced developing countries, while many of Ash's most challenged economies continue to struggle to capture gains from trade.

Aid for Trade remains an important feature of the development landscape in Asia. As aid flows from developed economies continue to be constrained as a result of the global financial crisis, countries in Asia have adopted a broader concept of Aid for Trade with an enhanced role for the private sector.

Despite a recent 5% decline in year-on-year flows, Asia's inflows have risen by 29% over the 2002-2005 baseline. The ability to maintain only a small decrease in inflows in 2011 meant that disruptions to planned projects were relatively limited. WTO has noted that global flows to LDCs were less negatively affected by the crisis and now receive the greatest share of Aid for Trade. This resilience is also true in Asia, where LDCs received 22% of total disbursements in 2011.

A second trend in Aid for Trade in the region is the rise of South-South cooperation measures, with some evidence pointing to rapid growth in recent years. This is largely driven by China and India, but a number of other new players have emerged, including Malaysia and Indonesia. These new players favour a wider range of trade-promotion tools that often target the private sector, such as concessional export credits and training programmes.

A third feature of Asia's recent Aid-for-Trade experience has been the rise of public-private dialogues that enable governments to more effectively prioritize reforms and better target Aid-for-Trade resources. The Asian Development Bank's recently published regional review, Aid for Trade in Asia and the Pacific: Driving Private Sector Participation in Global Value Chains, highlights some successful examples. These cooperative efforts enable Aid for Trade to be directed to the specific impediments that are identified by the private sector.

Bypassing Asia's challenged economies

Asia's trade environment is relatively more integrated than other regions, in terms of the number of formal trade arrangements and also as measured by regional value-chain trade. Trade is a driver of growth for the region, and Aid for Trade has supported needed facilities and reforms. Yet while regional integration presents excellent opportunities for Asia's challenged economies, the reality is that few have successfully captured these potential gains.

One problem has been the proliferation of free trade agreements (FTAs) in the region. While the number of arrangements has increased rapidly, with 109 ratified FTAs involving an Asian country as of January 2013, Asia's challenged states have for the most part only taken part as members of a regional partner (for example, in the Association of Southeast Asian Nations (ASEAN)+1 FTAs). …

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