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Measuring the Impact of the Global Agenda of Aid for Trade

August 2013

Lamy, P. 2013. Measuring the impact of the global agenda of Aid for Trade. GREAT Insights, Volume 2, Issue 5. July-August 2013. Maastricht: ECDPM

Aid for Trade has become a firm part of the vernacular of the trade and development communities. Since it was launched at the 2005 WTO Ministerial Conference in Hong Kong it has been the subject of numerous academic and policy papers; seminars and think-tanks, and has been witness to equal parts critique and commendation.

These almost eight years of constant analysis, coupled with the act of implementing Aid for Trade on the ground, have resulted in a global compact that is robust yet flexible, which leads yet reacts, and which is increasingly being owned by those who use and benefit from it. This sense of ownership of the Aid for Trade agenda, which we continue to see around the world is a true testament to its success. The WTO and its partner agencies, including the OECD, the Development Banks and the UN institutions, have gracefully moved from the role of architects of the initiative to cede the space for the users of Aid for Trade to metaphorically and, in some cases literally, to ‘run the show’.

This has always been the central aim of the Initiative: to become a self-sustaining entity, which responds to the changing nature of trade and to the changing demands of its end users. Africa has been one of the major beneficiaries of the focus, which Aid for Trade has placed on connecting the trade and development pillars. Not only has the region been one of the greatest beneficiaries of Aid for Trade resources but the attention which has been placed on building supply side capacity and the ability to produce in order to trade has particularly resonated on the African continent, where it is the production limitations rather than simple market access that was often the prevailing constraint to increasing trade.

The Launch of the Initiative

The premise of Aid for Trade was a relatively simple one. Market access was not enough and there needed to be a more holistic approach to the negotiation of multilateral trade rules. What may sound positively mundane today was a revelation in 2005 when the Initiative was launched at the WTO Ministerial Conference. A missing link between trade and development, and between market access and market presence was identified and over the next eight years we collectively witnessed a series of milestones occurring under the Aid for Trade nomenclature.

The most visually arresting of these impacts and the easiest to monitor is that of resource mobilisation. Since 2005, approximately US 200 billion has been mobilised for Aid for Trade with approximately US 170 billion of this disbursed. This Aid for Trade – the concessionary loan and grant component of trade-related assistance – was increasingly coupled with substantial increases in South-South capacity building and investment from the private sector. In sum, the total amount of assistance for the trade sector, in monetary terms, is likely to be substantially higher than the US 200 billion recorded in the OECD DAC database.

But these numbers only tell a third of the story. With the tailwind of the economic crisis affecting the development assistance budgets in some traditional donor countries, overemphasis on numbers can potentially undervalue the impact, which the Aid for Trade brand can deliver. The increased discourse between trade and development partners both at the global level at the Global Reviews held at the WTO, and at the local level, is an intangible yet critical deliverable from the Aid for Trade initiative. This enhanced dialogue coupled with the focus placed on the mainstreaming of trade within sectoral, national and regional development strategies is a potential sea-change in how developing countries, especially, approach trade.

Aid for Trade demands the attention and the participation of multi-sectoral partners. For trade to be effective and truly work for growth, development and poverty reduction, a ‘whole of economy’ approach premised on coordination and stakeholder dialogue is key. Aid for Trade has created a platform through which this dialogue can happen. For Least-developed countries the Enhanced Integrated Framework (EIF) is one such conduit. Effectively an LDC gateway to Aid for Trade, the EIF continues to work with LDCs to help them improve the institutional framework for dialogue between and across partners. 

Shining a spotlight on the merits of this dialogue and of mainstreaming has been one of the outcomes of the collective work on Aid for Trade and has borne fruit in the increasing number of national and regional Aid for Trade strategies that are being developed. The latest of these is for the Caribbean region and was launched in June 2013 in Haiti. We have also seen this move to develop a regional approach to Aid for Trade priorities in the Pacific and in regions in Africa. The recent Central African review was an important goalpost in this regard.

One other area where we have had good results is in monitoring and evaluation. To really gauge the effectiveness of Aid for Trade an inbuilt monitoring and evaluation framework was framed within the initiative. Held every two years the Global Review of Aid for Trade is the beginning of each new monitoring and evaluation cycle. With each Review the formula has become more expansive in scope and more deliberate in depth. At the first global review the focus was very much on monitoring the numbers. At the second global review the emphasis was on reaching the users of Aid for Trade: the WTO Members and Observers and the International and regional organisations involved in the delivery of Aid for Trade. This was done through an in-depth questionnaire exercise. At the third Global Review this was broadened to include a case story exercise where actors- governments, academia, the private sector, international and regional organisations- were asked to showcase how Aid for Trade was working and how it could work better. From that exercise which resulted in hundreds of case stories, we were able to have a very clear sense of the best practices involved in Aid for Trade on the ground and the gaps that remained to be narrowed to enhance its effectiveness.

For the fourth Global Review, which will be held on 8 to 10 July 2013 in Geneva, the ante has again been increased. In addition to the now established monitoring of Member states’ Aid for Trade activities, the process has been broadened to solicit the opinion of the private sector. This has yielded over 800 responses – a phenomenal evidenced-based collection of the priorities, concerns and challenges experienced by those who ‘do’ trade- the private sector. Widening the parameters to incorporate the views of business was a natural progression of the Initiative, which has at its core the idea of leveraging the existing development resources to exponentially increase the proverbial pot with investment from domestic and foreign sources. It was also a reaction to the theme of the Global Review, which would be on ‘Connecting to Value Chains’, a subject at the very heart of modern business and trade. The results of this monitoring process have been analysed and a series of specific publications will be made available at the Global Review.

One area where work will have to continue, not just in Aid for Trade, but across the development schema, is on evaluation. How can the actual impact of Aid for Trade- and indeed of any form of development assistance and investment- be measured on the ground? What quantifiable evidence can be gathered to show the impact on development, growth and poverty reduction? The positive outputs and outcomes of Aid for Trade are clearly evident and in an increasing number of cases we are also able to discern distinct impacts but work must continue to focus on fine-tuning this causal linkage.

Looking Ahead

Although launched just eight years ago, the world of 2013 is different in some fundamental ways from the world of 2005 and the Aid for Trade agenda will have to be flexible enough to respond to these changes. 

From a resource mobilisation perspective, although the amount of committed Aid for Trade in 2011 is down from 2010, it remains at higher than the 2002-2005 baseline. The signs are that resources have plateaued but demand for trade-related assistance continues to be high. This will necessitate a more efficient use of existing resources but also a broadening of the Aid for Trade canopy to embrace other forms of trade-related assistance including continuing to profile South-South activities and placing more emphasis on investment in trade from the private sector. Traditional development assistance coupled with domestically and foreign sourced investment can be a powerful ingredient in delivering on trade-related priorities. I have seen this in the area of trade facilitation and trade-related infrastructure and believe this partnership between public and private monies can deliver real results in helping countries to build up their quality standards architecture and address what I see today as the most common form of barriers to trade- non-tariff barriers. 

Aid for Trade must also play a more supportive role in helping governments to formulate and concretise their regional agenda. The African Union decision on boosting intra-African trade is just one of the opportunities where Aid for Trade can add value. Increasing intra-regional trade, especially in developing regions such as in Africa, the Caribbean, the Pacific and Central America is critical. Small markets, sometimes isolated by landlockness or the sea, need to increasingly look to their neighbours as the most viable and initial trading partners. The barriers to intra-regional trade are often the same barriers to increasing trade across regions: poor customs procedures, a series of non-tariff barriers; inefficient trade infrastructure, limited standards compliance and coherence. Demand driven and sustainable Aid for Trade coupled with other forms of finance, can help to address these barriers to trade. I have seen this occurring on the ground in East Africa and South-East Asia and believe that focused trade-related capacity building is an essential ingredient in pushing forward the development story.

Going forward, Aid for Trade must become more responsive and agile to the changing conditions of the multilateral trading system. The transforming geo-politics, which are increasingly modulating the responsibilities of emerging economies; the increase in the expanse and depth of regional and global value chains; and the transformative effects of technology and the cost of transportation are the sign posts of the future. From the fourth Global Review in July I expect a series of messages aligned around one clear roadmap to Bali and beyond. The changing nature of trade has not diminished the need for and the impact of Aid for Trade. Indeed, it has made it even more necessary to permanently anchor in within the trade and development discourse. 

Pascal Lamy is Director-General of the World Trade Organization.

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

 

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Economic Transformation and TradeAid for TradeBusiness and DevelopmentTradeAfrica

External authors

Pascal Lamy