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More on Aid
for Trade
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WHAT is Aid for Trade?
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Aid for Trade is about helping developing countries, in particular the
least developed, to build the trade capacity and infrastructure they
need to benefit from trade opening. It is part of overall Official
Development Assistance (ODA) — grants and concessional loans — targeted
at trade-related programmes and projects.
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It is recognized that Aid-for-Trade can be a valuable complement to the
DDA, but it cannot be a substitute for the development benefits that
will result from a successful conclusion to the DDA.
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Because trade is a broad and complex activity, Aid for Trade is broad
and not easily defined. It includes technical assistance — helping
countries to develop trade strategies, negotiate more effectively, and
implement outcomes. Infrastructure — building the roads, ports, and
telecommunications that link domestic and global markets. Productive
capacity — investing in industries and sectors so countries can
diversify exports and build on comparative advantages. And adjustment
assistance — helping with the costs associated with tariff reductions,
preference erosion, or declining terms of trade.
WHY is the WTO involved?
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The simple answer is that the WTO is a global trade body, and it has a
clear role and responsibility for ensuring that countries can
effectively participate in — and benefit from — world trade. But the WTO
can not deliver development assistance. It is not a development agency,
and has no intention of becoming one. Our core mandate is — and must
remain — setting trade rules.
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The challenge is to get the many existing development assistance
mechanisms to work together more effectively. Here the WTO has a
catalytic role to play — ensuring that the agencies responsible for
development understand the trade needs of WTO Members, and encouraging
them to deliver solutions.
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This is where the WTO “Coherence Mandate” — one important Uruguay Round
result — comes in. It recognizes the WTO's responsibility for promoting
“coherence in global economic policy making” — and for working with the
World Bank, the IMF, and other international actors to deliver more
coordinated international policy. Aid for Trade is a clear test of this
mandate — and a clear example of how the WTO has a growing stake in
other global policy arenas besides trade.
HOW to provide more and better Aid for
Trade?
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The 2005 Hong Kong Ministerial Meeting set in motion a two-track process
to help answer that question: First, Director-General Lamy engaged in a
series of consultations with partner institutions on securing additional
financial resources for Aid for Trade — the results of which reaffirmed
that donors remain committed to scale up their Aid for Trade, and made
clear that a number of new and non-traditional donors are also willing
to be part of the process. This advocacy role will continue.
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Second, DG Lamy established a Task Force to advise on how best to
operationalize — or deliver — this additional funding. Its report,
endorsed by the WTO's General Council in October 2006, set out a series
of recommendations for reaching this goal. In particular, it called for
strengthening the “demand side”, strengthening the donor “response”, and
closing the gap between “demand” and “response” at the country, regional
and global level. It also suggested that the WTO could best advance this
agenda by better monitoring and evaluating Aid for Trade.
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Monitoring will take place at three levels: (1) global monitoring,
carried out by the OECD; (2) donor monitoring, in the form of
self-evaluations; and (3) in-country monitoring, also in the form of
self-assessments. These various threads will be woven together in an
annual Report and an Aid-for-Trade debate in the WTO General Council in
November 2007.
WHAT is the situation now?
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OECD data show trade-related ODA commitments running at about $25-30
billion a year in the past few years, which is around 30% of total ODA.
This covers four main categories:
(a) Trade policy and regulation amounted to roughly $0.9 billion in
2005. This helps build local capacities to development of national trade
policies, participate in trade negotiations and implement trade
agreements. Annual commitments have increased by about 50% since the
Doha Ministerial Declaration in November 2001.
(b) Building Productive Capacity amounting to roughly $9.5 billion This
includes trade development spending of about $2 billion a year. It is
targeted at helping enterprises to trade and at creating a favourable
business environment. Annual commitments have increased by about 75%
since the Doha Ministerial Declaration.
(c) Economic infrastructure spending was $12.1 billion in 2005. This
assistance helps countries build the physical means — transport and
storage, communications and energy — to produce and move goods and
export them. Its value to a country's economy extends well beyond trade.
Since there is no way of breaking out the amount that is strictly
“trade-related” (how much of a road is used for export trade as opposed
to general domestic transport, for example), the total is treated as a
proxy measure of Aid-for-Trade.
(d) Another component of the broadest measure of Aid-for-Trade is
assistance for trade-related structural adjustment (about $3-6 billion a
year).
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At the WTO's Hong Kong Ministerial Conference in December 2005, the
United States, the European Union and Japan made pledges to increase
their Aid-for-trade contributions.
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Most Aid-for-Trade is disbursed bilaterally by donors or through
multilateral and regional finance and development organisations, such as
the World Bank and the regional development banks.
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The WTO participates in the disbursement of a very small share of
Aid-for-Trade in categories (a) and (b), through the DDA Global Trust
Fund, the Integrated Framework, JITAP, the STDF, and the ITC.
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