Making policies work

GREAT insights Magazine

Editorial: Aid for Trade

August 2013

Bilal, S. 2013. Thematic focus: Aid for Trade. GREAT Insights, Volume 2, Issue 5. July-August 2013. Maastricht: ECDPM

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The 4th Global Review of Aid for Trade (AfT), taking place at the WTO in Geneva on 8-10 July 2013, is an opportunity to examine how the AfT agenda has progressed so far but also to reflect on the challenges ahead and how the AfT agenda should adapt to the changing context. While perspectives vary, some major trends and themes can be identified.

First, the AfT initiative, launched in Hong Kong in 2005, has been successful in harnessing trade as a key component in the broader development endeavour. This has resulted in increasing donor attention and aid flows to trade-related activities. More importantly, developing countries have increasingly integrated trade and its related dimensions into their development strategies. 

Second, AfT activities have taken various forms and contributed in numerous ways to development. While this has been well documented, including the collection of case stories facilitated by the WTO and OECD, systematic evaluation remains a serious challenge. Project monitoring and evaluation generally remains too superficial and ad hoc. Broader impact studies often stumble on causality issues, with tenuous linkages between AfT and trade performance or poverty alleviation. 

Third, and perhaps most importantly, trade matters more than aid in the AfT agenda. Development assistance has a role to play, but traditional modalities of donors are being challenged in a rapidly changing global context with an increasing emphasis on domestic resources and strategies, leveraging private sector engagement for development, and emerging economies and South-South cooperation..Increasing attention is being given to the national and regional development perspectives, and the catalytic role trade can play. Moreover, as emphasized by Pascal Lamy, “a ‘whole of the economy’ approach premised on coordination and stakeholder dialogue is key” for trade to unleash its development potential. This is well understood by many developing countries and regions, as illustrated in this issue as well by the remarks of ECOWAS Trade Commissioner Ahmed Hamid. 

As a result, a major challenge is to define the future contours of the AfT endeavour. From trade-policy formulation to adjustments, infrastructure development to productive capacity, business climate reforms to social and labour conditions, the agenda for trade might become too large to remain meaningful. Should AfT be slimmed down and focused on directly trade-related issues only? Should it be articulated around specific endeavours, such as trade corridors? Or should it encompass a broader agenda of private sector development?

Such questions might be more relevant to the donor community than developing countries and regions, for which a ‘whole of the economy’ approach to economic transformation is an imperative rather than an option. Fostering value addition, raising productivity, developing national and regional markets, building adequate infrastructure, providing necessary social and labour protection to their citizens, and integrating into regional and global value chains are some of the priorities for developing countries and regions. Understanding the policy instruments and the politics of achieving these are fundamental. Aid for trade is therefore only one piece of this puzzle. 

The high-level contributions presented in this issue of GREAT Insights, from key political figures, international institutions, experts and private sector offer some much needed insights on the achievements so far, remaining challenges and ways forward in making AfT an effective instrument in promoting economic transformation

San Bilal is Head of the Economic Governance, and Trade and Regional Integration Programmes at ECDPM.

This article was published in Great Insights Volume 2, Issue 5 (July-August 2013)

Economic Transformation and TradeAid for TradeBusiness and Development