Aid for Trade fact sheet

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WHAT is Aid for Trade?

  • 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.

  • 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.

  • 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?

  • 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.

  • 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.

  • 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?

  • 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.

  • 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.

  • 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?

  • 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).

  • 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.

  • 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.

  • 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.