AID FOR TRADE
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AID FOR TRADE AID FOR TRADE Why, what and how?
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AID FOR TRADE. Why, what and how?. Trade has the potential to be an engine for growth that lifts millions of people out of poverty But many developing countries face barriers that prevent them from benefiting from the world trading system. - PowerPoint PPT Presentation
Transcript of AID FOR TRADE
AID FOR TRADEAID FOR TRADE
Why, what and how?
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Trade has the potential to be an engine for growth that lifts millions of people out of poverty
But many developing countries face barriersbarriers that prevent them from benefiting from the world trading system
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Some of these barriers are in export marketsexport markets which the Doha Round of multilateral trade negotiations aims to reduce or eliminate. These include non-tariff barriers – which are increasing in significance – as well as traditional tariff barriers.
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But internal barriers – lack of knowledge, excessive red tape, inadequate financing, poor infrastructure – can be just as difficult for exporters to overcome
Targetting these “supply-side” constraints is what
Aid for Trade is all about
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Aid for Trade is part of overall development aid, but with the specific objective of helping developing countries, in particular the least developed, to play an active role in the global trading system and to use trade as an instrument for growth and poverty alleviation.
It is not a substitute for trade opening, but a necessary and increasingly important complement
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Increased trade, competitiveness
and growth
Aid for Trade
trade reformentrepreneurship
private investment
trade-relatedcapacity andinfrastructure
catalyst
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There are There are fourfour main areas where main areas where Aid for Trade is needed Aid for Trade is needed
Trade policy and regulationBuilding capacity to formulate trade policy, participate in negotiations and implement agreements
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There are There are fourfour main areas where main areas where Aid for Trade is neededAid for Trade is needed Economic infrastructure
Investing in the infrastructure – roads, ports, telecommunications, energy networks – needed to link products to global markets
In Sub-Saharan Africa, alone, annual infrastructure needs are $17-22 billion a year, while spending is about $10 billion
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There are There are fourfour main areas where main areas where Aid for Trade is neededAid for Trade is needed
Productive capacity buildingStrengthening economic sectors – from improved testing laboratories to better supply chains – to increase competitiveness in export markets
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There are There are fourfour main areas where main areas where Aid for Trade is neededAid for Trade is needed
Adjustment assistanceHelping with any transition costs from liberalization – preference erosion, loss of fiscal revenue, or declining terms of trade
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Supply-side challenges exist across many Supply-side challenges exist across many developing countries and regionsdeveloping countries and regions
In the Andean Community, trucks spend more than half of the total journey time at border crossings
Transport costs for trade within Africa are more than twice as high as those within South East Asia
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Power generation costs in Burkina Faso are more than four times the costs in neighbouring Côte d’Ivoire – and ten times the cost in France
Power outages in Malawi average 30 days per year – causing product damage and delays in production and packaging that add 25% to costs
Supply-side challenges exist across many Supply-side challenges exist across many developing countries and regionsdeveloping countries and regions
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116 days to move a container from the factory in Bangui in the Central African Republic to the nearest port
Same transaction takes five days from Copenhagen
Supply-side challenges exist across many Supply-side challenges exist across many developing countries and regionsdeveloping countries and regions
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Supply-side challenges exist across many Supply-side challenges exist across many developing countries and regionsdeveloping countries and regions
The most direct flight between Chad and Niger is via France – over 4,000 km
Only one flight a week from Bangui in the Central African Republic to Europe
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What is happening?What is happening?
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ODA is forecast to increase substantially ODA is forecast to increase substantially after 2008 – if donors follow through on after 2008 – if donors follow through on
Gleneagles and Hong Kong commitmentsGleneagles and Hong Kong commitments
Source: OECD
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0
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1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
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1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
OD
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DAC members’ net ODA 1994 – 2005 and DAC Secretariat simulation of net
ODA 2006 – 2010
AFT: Doubling 2004 Volume
AFT: Stable Relative Share
Broad Aid for Trade (AFT)
This should be reflected in a scaling This should be reflected in a scaling up of the broad Aid for Trade Agendaup of the broad Aid for Trade Agenda
Source: OECD
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Share of Trade Related ODA in Overall Share of Trade Related ODA in Overall Development AidDevelopment Aid
Baseline 2002-2005 average
33%
26%
41%
Trade policy & regulations
Economic infrastructure
Productive capacity
GBS
Non-sector allocable Debt relief
Multi-sector initiatives
Emergency aid
Administrative cost
Social & Administrative Infrastructure
Education
Health
Governance
Source: OECD
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Total trade related aid commitmentsTotal trade related aid commitments(baseline 2002-2005 average)
US$ million
0 1000 2000 3000 4000 5000 6000
AustriaPortugal
IrelandFinland
IFADAustraliaBelgium
ItalySwitzerland
IDBNorwayCanada
SwedenSpain
DenmarkAfDBADB
NetherlandsFrance
GermanyUnited Kingdom
ECUnited StatesWorld Bank
Japan
Source: OECD
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USD million (2004 constant)
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
ProductiveCapacity building
Infrastructure Adjustment Assistance
5 227
11 248
8 915
885
TPR
Commitments, 2002-2005 average
of which: TD
Source: OECD
Overall distribution of trade related Overall distribution of trade related ODA by programODA by program
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Overall distribution of trade related Overall distribution of trade related ODA by program and project ODA by program and project
05
101520253035
2001 2002 2003 2004 2005
Trade related structural adjustment Productive capacity buildingInfrastructure Trade policy & regulations
US$ million (2004 constant prices and exchange rates)
Baseline 2002-2005 average
Source: OECD
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Overall distribution Overall distribution oof f trade related ODA by regiontrade related ODA by region
9 095
2371 551
2 494
4 232
2 205
AfricaOceania
South and Central AmericaSouth and Central AsiaFar East AsiaEurope
US$ million
Source: OECD
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How should Aid for Trade work? How should Aid for Trade work?
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On the On the “supply side”“supply side”, donors need to:, donors need to:
Provide additional funding Aid for Trade should not divert resources away
from other development priorities, such as health and education
Scale up trade expertise and capacity Trade and growth issues need to be better
integrated in donors’ aid programming Trade expertise needs to be strengthened - both
in capitals and in-country
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On theOn the “demand side” “demand side”,, recipient recipient countriescountries need to:need to:
Make trade a priority Trade needs to be a bigger part of national
development strategies. Aid for Trade will only work if countries decide that trade is a priority
Take ownership Countries need to determine their own Aid for
Trade plans, involving all stakeholders Focus on results-oriented “business plans”
Aid for Trade is an investment, not just a transfer. The question is not only how much Aid for Trade is available, but whether it is effective and actually benefits developing countries
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ToTo bridge “supply” and “demand” bridge “supply” and “demand”,, both both donors and recipients need to:donors and recipients need to:
Improve cooperation The challenge of Aid for Trade is to marshal the
efforts of many – and to create the right incentives so that recipients and donors work together more effectively
Involve the private sector It is businesses, not governments, that trade Financial resources flowing from increased private
investment and trade easily dwarf government aid
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Improve transparency and accountability Best way to ensure that pledges are honoured,
needs are met, and financial assistance is used effectively, is to shine a brighter spotlight on Aid for shine a brighter spotlight on Aid for TradeTrade
To bridgeTo bridge “supply” and “demand”, “supply” and “demand”, both both donors and recipients need to:donors and recipients need to:
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WTO is not a development agency – and should not become one. Its core function is trade opening, rule making, and dispute settlement
But the WTO does have a role – and a responsibility – to ensure that relevant agencies and organizations understand the trade needs of WTO Members and work together more effectively to address them
A role for the WTO: A role for the WTO: monitoring and evaluationmonitoring and evaluation
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A role for the WTO: mobilizing, A role for the WTO: mobilizing, monitoring and evaluating aid for trademonitoring and evaluating aid for trade The WTO is well placed to play this role
Direct interest in ensuring that all its members benefit from trade and WTO agreements
Multilateral, consensus-based organization where developing and developed countries have equal weight
Institutional experience in reviewing complex policy areas through Trade Policy Review Mechanism
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Monitoring and evaluation Monitoring and evaluation in the WTO on three levels:in the WTO on three levels:
Global level Global level – using data compiled by the OECD-DACTo assess whether additional resources are being delivered, to identify where gaps lie, to highlight where improvements should be made, to increase transparency on pledges and disbursements
Donor level Donor level – based on self evaluations– based on self evaluations To share best practices across countries, to identify areas for improvement and to increase transparency on pledges and commitments and get finer detail on Aid for Trade coverage
Country and regional levelCountry and regional level – based on self assessments – based on self assessmentsTo provide a focused, on-the-ground perspective on whether needs are being met, resources are being provided, and Aid for Trade is effective
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Proposed Architecture of the Monitoring Proposed Architecture of the Monitoring FrameworkFramework
Measuring Aid for Trade
Monitoring the delivery and effectiveness of Aid for Trade
1st tier: Global Monitoring of 1st tier: Global Monitoring of Trade-related Aid FlowsTrade-related Aid Flows
22ndnd tier: Donors’ self-assessment tier: Donors’ self-assessment reports reports
3rd tier: In-country assessments3rd tier: In-country assessments
ANNUAL REVIEWANNUAL REVIEW
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Spotlight EffectSpotlight EffectAwareness - Information - Incentives
WTO Monitoring
& Evaluation
Demand SideLDCs
Developing countriesRegional Groups
Supply SideDonors, WB, IMF, OECD,
RDBs, UNCTAD,UNDP, UNIDO, ITC
Private SectorProducers
ManufacturersServices
Multinationals
Prioritize trade
Increase resources
Improve delivery
Prioritize trade
Take ownership
Implement effectively
Progress
Feedback
Prog
ress
Feed
back
Feedback
Progress
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With one objective....With one objective.... Ensuring that developing countries can harness trade
to raise living standard, improve health and education, protect the environment, alleviate poverty, and secure their development
