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The future of Aid for Trade – what are the experts saying?

Yurendra Basnett's picture
Yurendra Basnett
July 2013

The Organisation for Economic Co-operation and Development (OECD) Policy Dialogue on Aid for Trade (AfT), organised in co-ordination with the Swedish government, the European Union and ODI, was held in Paris on 16-17 January 2013. A wide variety of stakeholders attended including ministers, senior officials, academics and think-tank staff from a broad range of countries. The conference report by Dirk Willem te Velde can be found here.

During this conference, ODI asked a number experts and leading figures in the area of Aid for Trade (including the Director-General of the World Trade Organization (WTO), trade ministers, ambassadors, officials and academics) on what the future holds for the concept after the 4th Global AfT Review and towards the 9th Bali WTO Trade Ministerial in December 2013.

The experts suggested the AfT initiative needs to make progress in delivering impact, leveraging investment, developing trade infrastructure, mainstreaming trade-related constraints into national development policies, increasing the developmental outcomes of global value chains and facilitating trade negotiations. Here is what they said.

On delivering impact
Pascal Lamy, the Director-General of WTO, described how AfT initiatives have helped improve development outcomes. The WTO’s work to facilitate market access for developing countries would be fruitless without addressing supply-side constraints. By incorporating this into its agenda, the Aid for Trade initiative has shown results on the ground. The Director-General said that his main policy conclusion from handling AfT was that it necessitated a focus on results and on impact. Looking forward to the global review of AfT in July, its impact-oriented focus was useful in a world of increasing budgetary constraints on official development assistance.


On leveraging investment
Francois Kanimba, Minister for Trade and Industry in Rwanda, spoke about how AfT had helped drive the impressive growth, export and poverty alleviation outcomes in recent years. He pointed out that  total AfT flows since 2006 accounts for $800 million, roughly 25-30% of total aid to Rwanda. This was allocated to infrastructure, energy, transport, information and communications technology, and capacity building of productive sectors. The minister said that the country’s key challenge now was to graduate to a middle-income status by 2020. To achieve this he expressed his hope that development partners would assist Rwanda to use AfT to leverage more private investment.


On developing the much-needed trade infrastructure in developing countries
Yvonne Chileshe, from the Ministry of Commerce, Trade and Industry in Zambia, spoke on how AfT has helped improve trade infrastructure. For instance, physical goods being transported that previously took 4-5 days to receive clearance are now processed in under 24 hours. Zambia is working on improving the institutional capacity to manage infrastructure improvements effectively through the adoption of coordinated border management that brings together various government agencies such as customs, security, health, agriculture and revenue authorities. 


Frank Matsaert, CEO of Trade Mark East Africa, revealed that their work in the two physical trading corridors in East Africa, which account for 98% of trade volumes, has helped reduce transaction costs by around 15%: approximately worth $7 billion. The company also invests in ports and one-stop border posts to improve trading efficiency. East Africa has the highest trading costs globally, which undermines their competitiveness.


On mainstreaming trade-related constraints into national development policies
David Luke, senior advisor and coordinator at the United Nations Development Programme, highlighted that the AfT initiative had helped foster greater recognition of the role trade plays in the structural transformation and economic growth of a country. Its continued effectiveness would require mainstreaming trade in national development strategies as well as mobilising wider development stakeholders such as government, private sector and civil society on trade policy.


On flexible and context-specific AfT
Carlos Braga, Professor of International Political Economy at the International Institute for Management Development, suggested that we should look at the overarching trade regime to identify binding constraints, which are likely to be context-specific. For instance the issue of infrastructure was likely to be a priority for a land-locked country, while for small and vulnerable island economies access to electricity (also infrastructure) and weak governance will be important constraints.


Moses Mose, the ambassador for Solomon Islands, suggested that the AfT initiative should focus on building the supply-side capacity of the country in order to benefit from international trade. This would entail building capacity for private-sector operators and other government agencies associated with trade facilitation. A focus on economic infrastructure would help to link up producers in rural regions with domestic and international markets.


On increasing the developmental outcomes of global value chains
Debapriya Bhattacharya from the Centre for Policy Dialogue pointed out that the participation in global value chains may not always translate into better social outcomes for workers. Workers are often not paid their due wages and there is no incentive for enterprises to invest in upgrading skills due to high turnover. Resolving this issue through public policy intervention would require increasing the capacity of workers and entrepreneurs to gain more value from value-chain participation. AfT could boost collective action, skill building and greater compliance to the social environment within which workers operate.


Jacqueline Maleko, who works for the Ministry of Trade and Industry in Tanzania, urged the AfT initiative to consider the informal sector. Women workers comprise 70% of the informal sector. Addressing development challenges in the informal sector will be important for poverty-alleviation goals.


On facilitating trade negotiations
Shree Servansing, the ambassador for Mauritius, emphasised that the AfT initiative has produced many gains, including an appreciation of the linkages between trade and development. He suggests shifting the discourse at the WTO to focus on improving trade (both imports and exports) for development, rather than just exports. The older focus on exports created a defensive agenda. The AfT initiative could be a catalyst to move to a more conducive agenda for global trade negotiations.