With billions of dollars at stake, Aid for Trade can be a shot in the arm for developing countries. When defining the scope, pay attention to the supply side, say ITC and its clients.
The Doha trade talks may have stalled in July 2006, but there has been consensus on one issue: the importance of "Aid for Trade".
At the WTO's last ministerial meeting in Hong Kong, Japan announced trade-related development assistance spending of $10 billion over three years, the United States announced Aid for Trade grants of $2.7 billion a year by 2010 and the European Union and its member states announced trade-related development assistance spending of euro2 billion per year by 2010.
A WTO Task Force on the subject released recommendations at the end of July. "[T]here was a clear consensus in the Task Force that Aid for Trade is important in its own right and that it should move forward expeditiously despite the current difficulties in the Round," said Mia Horn af Rantzien, Ambassador of Sweden to WTO and Chair of the Task Force.
Organizations such as UNCTAD, the World Bank and ITC have linked trade and development in the past. Until recently, however, the link was not prominent in broader development circles. The tone began to change when world leaders announced the Millennium Development Goals in 2000 and gained momentum when the WTO launched a new round of talks in 2001.
The Doha Development Agenda promised to put developing countries' concerns at the heart of trade negotiations. Belonging to the world's largest trading club is important and WTO members from developing countries are queuing to join.
But being a member of the club isn't enough. Part of the answer lies in Aid for Trade. "The fact is that many developing countries have been unable to benefit from the market opening that WTO has achieved because they lack the necessary trade-related capacity and infrastructure," said WTO's Director-General, Pascal Lamy, at the September 2006 meeting of the World Bank and International Monetary Fund (IMF) in Singapore.
Towards more coherence
There is still debate and varying views about Aid for Trade. It means different things to different people.
Various issues shape the Aid for Trade debate, relating to both the quantity and the quality of aid. One important influence is the Paris Declaration on Aid Effectiveness. The Organisation for Economic Co-operation and Development (OECD) is examining how to measure and evaluate the impact of aid for trade. Other commentators offer "lessons learned" or good practices from regional or bilateral trade-related assistance initiatives. Among such lessons are the need for more predictable financing, "demand-driven" programmes to ensure ownership and coordination among donors. Some are calling for a stronger poverty reduction focus. Most urge donors and beneficiary countries to implement the recommendations of the Enhanced Integrated Framework for trade reform in least developed countries.
ITC is contributing to ongoing initiatives and encouraging debate. It organized a round table on Aid for Trade at its annual meeting in April with clients, donors and partners, held an online staff discussion and has been monitoring the WTO Task Force and other Aid for Trade debates.
Responding to questions from WTO's Task Force, ITC's Deputy Executive Director, Stephen Browne, suggested four broad areas in which to apply aid for trade:
* Policy: National and international policies to support trade development. At the national level, export strategies in development plans; cross-border facilitation; rule-making.
* Infrastructure: Roads, ports, utilities and other infrastructure necessary for trade.
ITC's lessons learned
Extracts from ITC's e-discussion on Aid for Trade:
1. Technical assistance works best when recipients request it and influence its design themselves.