From the Task Force Recommendations (2006) to the Second Global Review (6-7 July 2009)
Aid for Trade was launched in 2006 at a moment when the crisis was not yet at the horizon, and the Doha Development Agenda (DDA) seemed on track to be concluded (not without difficulties). Three years after the Task Force (TF) Recommendations on Aid for Trade (2006), the second Global Review on Aid Trade faces high expectations, in spite of the gloomy context in which it takes place.
Indeed, the deadlock of the DDA negotiations as of July 2008, and the financial crisis give to this second Global Review on Aid for Trade a rather important symbolic value.
Further to the Doha Development Round of trade negotiations, the Hong Kong Ministerial Declaration instructed the WTO Director-General to set up a Task Force to provide recommendations on how to implement Aid for Trade.
In its report to the 27 July 2006 General Council meeting the Task Force defined the rationale of Aid for Trade as follows:” Aid for Trade is about assisting developing countries to increase exports of goods and services, to integrate in the multilateral trading system, and to benefit from the liberalized trade and increased market access. Aid for Trade will enhance growth prospects and reduce poverty in developing countries, as well as complement multilateral trade reforms and distribute the global benefits more equitably across and within countries”. The Task Force on Aid for Trade identified the scope of aid for trade: (i) Trade policy and regulations, including training, analysis and capacity building to comply with WTO rules and standards; (ii) Trade development, including market analysis and development; (iii) Building the supply-side capacity and trade-related infrastructure to facilitate market access and increased export; (iv) building productive capacity; (v) Trade-related adjustment, including putting in place measures to benefit from trade liberalization; (vi) Assisting regional and global integration; (vii) Assisting in implementing WTO Agreements.
The Recommendations also stated that Aid for Trade should address the supply and infrastructure constraints of developing and LDC WTO Members, and help these countries to better (i) adjust to trade liberalization; (ii) integrate regionally and internationally, and (iii) implement WTO Agreements .
The general theoretical assumptions of mainstreaming trade in development as well as the methodological aspects of monitoring and evaluation of Aid for Trade were analyzed in the 2006 Paper: Aid for Trade and the Doha Development Agenda (DDA): Finding the Policy Link .
This article aims at providing a contribution on the occasion of the Second Global Review (6-7 July 2009) on the challenges ahead, including regional integration and Aid for Trade as well as Aid for Trade in physical infrastructure.
Regional Integration and Aid for Trade
Aid for Trade does not operate in vacuum. It is worth recalling the salient systemic trends observed since its launching in 2006. First, regionalism has accelerated over the past few years, and it is presented as a new opportunity for economic development and for preparing developing countries to come out of the crisis. The increasing number of regional agreements poses a systemic challenge to the multilateral trading system particularly as multilateral negotiations continue to be deadlocked.
Initiatives were taken to tackle these challenges. The 2006 decision to fast-track transparency mechanism negotiated in the Doha Round resulted from the need to better understand what is going on in many different Regional Trade Agreements (RTAs).
In the same dynamic, Pascal Lamy stated in his speech at 29 April 2009 General Council: «We should collectively think about some way of gradually «multilateralising» concessions made in FTAs» «Food for thought for article XXIV (of the GATT) negotiators», he said.
Indeed, the relationship between multilateral and regional dynamics raises a number of questions also in connection with Aid for Trade.
They are the following:
(i) How will the regional integration processes, including South-South initiatives affect Aid for Trade allocation of resources? (ii) Should regional allocation of resources take over the national allocation of Aid for Trade founds to make sure that sectors of regional interest, such as infrastructure be handled by regional coordination units? (iii) What shall be the division of responsibility in the implementation process between regional and national entities? (iv) Should Aid for Trade be one item of the monitoring mechanism of RTAs (it is already part of the Trade Policy Reviews)? (v) Should Aid for Trade also include technical assistance related to the eventual harmonization of trade rules and regulations whenever needed in the articulation between regional and multilateral agreements?
These questions are to be answered in the implementation phase as they relate to the streamlining of resources allocation and can affect the impact of Aid for Trade.
Infrastructure and Aid for Trade
The importance of physical infrastructure is now generally acknowledged as one of the fundamentals (following strengthening of productive capacity ) to increase trade both regionally and globally. This section will highlight a few selected questions/issues.
They are the following:
(i) African countries identified re-habilitation of railways (are easier to maintain than road in the long-term) and improvement of energy distribution networks (electricity cuts affect production) as priorities for their supply side capacity-building. These two sectors are among the strategic sectors of development policies. In light of its strategic and geopolitical implications, can Aid for Trade tackle effectively and in a sustainable manner energy-related constraints, including its distribution-related aspects? (ii) The North-South corridor seems to be a first step, however the long term aspects of this approach remain to be further developed. Is such a corridor a long-term sustainable project? (iii) Connectivity of national developing economies with the global and regional economies is high on the agenda of the Aid for Trade discussions. Are donors ready to tackle challenges of the connectivity at the internal level between the rural and the urban areas within countries? In many developing regions rural areas remain cut off from the urban centers: small farming production units, which are usually managed by women, lack access to the export markets as well as to the marketing channels at the national level. (iv) Efforts must continue to address specific constraints of small scale exporters to meet international technical standards, particularly on test procedures and information technology (the energy distribution is strictly related to this aspect of the debate) as well as it concerns packaging and risk management to mention only a few.
Consultation of Stakeholders
It is now more and more common to hear that the private sector shall be consulted and be part of the implementation of Aid for Trade. That makes sense from the perspective of the consultation of stakeholders to ensure that priorities identified are matching their needs. A note of caution shall, however, be posed.
The discourse of trade and trade policy is already private sector as by definition trade flows are mostly private sector piloted. Governments have, however, to insure that self-assessment of needs processes take into account the whole range of needs and not only the more structured and visible private sector actors.
The emerging private sector actors, namely the small self-employed women in the informal and services sectors are also to be included in the consultation process. In many cases, these sectors employ over 70 per cent of the local population and do have great export potential that does not materialize.
Do Few Things Well
Needs are enormous. Resources remain inadequate to meet the challenges ahead. Nevertheless, Aid for Trade can be a useful tool to start tackling some of the major constraints related to trade facilitation. It is a step toward a long-term goal: rebalancing an unbalanced economic global system. In this perspective, its implementation must be focused, streamlined and guided by accountability and transparency.
The WTO as global monitoring body of trade policy shall set a clear and objective-oriented (the self-assessment methodology raises doubts with regard to the objective assessment of Aid for Trade impact and effectiveness) methodology for monitoring and evaluation of Aid for Trade activities. Efforts shall be pursued to keep Aid for Trade realistic and functional as framed by the Task Force in 2006 (there is a tendency to divert from the TF Recommendations).
Governments have to make sure that knowledge and information are wide-spread to national stakeholders, including small farmers, women groups and informal sector actors that are not in the official private sector category.
Hopes not to be deceived
As stated by Zambia on behalf of the LDC group “Aid for Trade has been on-going for long time. More than forty donors, bilateral and multilateral are providing aid in the area of trade for developing countries. What is new is the linkage between aid for trade and the multilateral trade regime, the development emphasis and the Doha Development Agenda (DDA), and recognition by donor community that trade should be actively used as an instrument of development policy to accelerate growth and reduce poverty” .
This statement acquires further importance in the present economic crisis, particularly in the context of the real economy where jobs are created and where growth potential, if accompanied by appropriate public policies, can lift people out of poverty.
For those (fewer and fewer) who continue to believe in the multilateral trading system, Aid for Trade is a complement to the efforts that have to be made to rebalance trade rules to provide real economic opportunities to industrial and agricultural goods producers and service providers from developing and emerging economies. Hopes cannot be deceived. The credibility of multilateralism is at stake.