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Singapore, 18 September 2006

“Why Aid For Trade? Why is the WTO Involved? and What Now?”

Statement by WTO Director-General at the Roundtable on Aid For Trade

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WTO to press for additional aid-for-trade resources


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Aid for Trade may not be a new subject. But it is a very new — and important — territory for the WTO. There has been a quiet sea change in the WTO — from viewing our role narrowly, in terms of negotiations and rule making, to seeing trade opening as part of a broader growth and development agenda. The priority we now attach to Aid for Trade is a sign of that change. This doesn't mean that the WTO should — or could — become a development agency. It does mean that we must work more coherently with other international and national actors to help countries benefit from globalization.

I have been asked to address three questions - Why Aid for Trade? Why is the WTO Involved? And What Now? — so let me move straight away to answers:

The rationale is straightforward. Many developing countries have been unable to benefit from the market opening that WTO has achieved, because among other things they lack the necessary trade-related capacity and infrastructure. And this has made some reluctant to consider further opening. Aid for Trade is not a substitute for a successful Doha Round — let us be clear — but we see it as a necessary and valuable complement.

Because trade is a complex economic activity, there are many different kinds of Aid for Trade. There is technical assistance — helping countries gain knowledge of trade opportunities and how to access them. There is institution capacity building — strengthening customs authorities, tax systems, and product testing, to lower the cost of trading. There are infrastructure requirements that are increasingly essential to linking exports to global markets. Then there is adjustment assistance — helping with any transition costs associated with tariff reductions, preference erosion, or declining terms of trade.

But the complexity of the details should not blind us to the basic objective. Aid for Trade is about helping developing countries to build the tools they need to benefit from more open world markets. It is about better harnessing trade as an engine of growth and development.

Why is the WTO involved? The formal explanation lies with the Coherence Mandate — one result of the Uruguay Round — which recognizes the WTO's responsibility for promoting “coherence in global economic policy making”. I see Aid for Trade as the first real test of this mandate — and a clear example of how the WTO has a growing stake in other global policy arenas besides trade.

But it is also an area where the WTO can neither deliver nor implement outcomes. The WTO is a not a financial or development agency. Its core mandate is — and will — remain setting up fair trade rules. The solution will only come from working with others — with the Bank, the Fund, UN agencies, and regional development banks at the international level; and with trade, development and finance ministries at the national level — because it is in national capitals that policy coherence must begin.

As for the third question — “what now?” — the Hong Kong Ministerial set in motion a three-track process to find answers: First, I have been conducting my own consultations with partner institutions, including the World Bank, the IMF, the regional development banks and relevant UN agencies, on securing additional financial resources for Aid for Trade, which I will report on before the end of the year. Second, I created a Task Force — consisting of a representative group of countries — to advise on how best to operationalize — or deliver — the additional funding. And thirdly, we established a Task Force on improving and enhancing the IF, which is one important part of the larger Aid for Trade picture.

I will leave Mia and Don to explain their results — except to note the fact that both Task Forces produced consensus decisions this summer, which demonstrates the strong and wide support among all WTO members for Aid for Trade, and underscores the impressive work put in by all Task Force Members, and in particular their Chairs.

Regarding my own consultations, four points are worth highlighting. First and foremost, I am convinced there is a strong and broad commitment to increasing Aid for Trade in the context of a projected overall rise in ODA. This was the intention of last year's Gleneagles Summit as well as the commitments made in Hong Kong .

Second, there is a realization that we cannot continue to do Aid for Trade in the same way we have done it in the past. There is a WTO mandate — and work programme — precisely because existing old methods and approaches are not working. This is not an argument for replacing or duplicating existing mechanisms, but for making them work better, more effectively, with measurable results.

Third, there is a wide and diverse range of priorities that need to be met in order to promote regional and global integration — and to realize the development potential of greater trade. How these needs can best be addressed can only be determined by countries themselves, working closely with national stakeholders, especially the private sector, and with their development partners. “Ownership” is not a buzzword. It is the precondition for making trade opening — and trade capacity building — work for developing countries.

Here I think Mauritius offers a model of how Aid for Trade can — and should — work and I commend you for this. Faced with tremendous changes in the external trade environment, you have chosen to respond with a new trade strategy that is home-grown, demand-driven, outward looking, and where Aid for Trade is a catalyst — and lubricant - for an ambitious policy of reform. I encourage other developing countries to learn from your approach and commitment.

Which leads me to a last — and critical — point. My consultations make it clear that Aid for Trade is a necessary complement to the Doha Round, but not a substitute. Opening up trade multilaterally and strengthening the rules-based trading system are seen by Members as being the most important contribution that the WTO can make to accelerating economic growth, promoting development and reducing poverty.

Last July, as you know, we decided to suspend the Doha negotiations to allow a period of “time-out” for Ministers to consider how they can each contribute to breaking down the remaining obstacles to substantial liberalisation of trade, particularly in agriculture. I know that serious political reflection has been taking place in capitals since then. I am convinced that the result of this process will be an acknowledgement that there is no acceptable alternative to the successful conclusion of the Round.

In the meantime, I believe it is important to move forward on Aid for Trade, building on the progress and momentum that clearly exists. I am working closely with Paul Wolfowitz, Rodrigo de Rato and others, and will continue to do so as the WTO initiative gathers momentum , and as we deepen and widen our coherence activities. Because Aid for Trade is not part of the single undertaking, progress in Geneva need not be affected by the temporary suspension of the trade negotiations. Nevertheless, I also believe that its benefits will be diluted and diminished without new trade opportunities that will flow from a successful Round.

My number one objective remains concluding the negotiations. But to do this, it is clear to me that we need to think more creativily about how trade, development and growth can fit together into a coherent whole. Aid for Trade is a key piece of that puzzle. It presents all of us with the major opportunity — and challenge — of translating our promise of greater global cooperation into concrete actions and meaningful results. Let's seize it.

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