Trade Negotiations Insights • Volume 9 • Number 10 • December 2010
Aid for Trade: Is it working? We want to know
Matthew Wilson
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It has been five years since the December 2005 WTO Ministerial Conference in Hong Kong, China and there is no denying that Aid for Trade has earned its place in the lexicon of international trade and development. As funding levels rise, questions about Aid for Trade are changing from “Aid for Trade: What is it for?” to “Aid for Trade: Is it Working?” In essence, this is the question that the Third Global Review of Aid for Trade will seek to address when it convenes in July 2011.
In a period of fiscal consolidation and donor spending reviews, the impact of aid is coming under increasing scrutiny. Some may be forgiven for seeing this as a one-dimensional process driven by budget constraints. But it goes wider than this. Citizens in developing countries want accountability too; they want to see economic growth and development. There is an emerging consensus that we need to show the evidence of our actions. The Third Global Review of Aid for Trade aims to do just that: examine whether the initiative is working
The WTO and the Organisation for Economic Cooperation and Development put in place a monitoring and evaluation framework for Aid for Trade in 2007. This framework has proved adept at capturing information on the flows of funding which go to aid for trade categories: trade policy and regulation, trade-related infrastructure, trade-related adjustment, building productive capacity (including trade development) and other trade-related needs. (These are the categories identified by the Director-General’s Task Force in its recommendations in 2006. [1].) The OECD uses proxies in its Creditor Reporting system to report on categories of assistance which mirror the supply-side and trade-related infrastructure constraints of developing countries. On the basis of the OECD reporting, we can say with confidence that one of the successes of the Aid for Trade initiative has been resource mobilisation, although part of the increase may be due to better categorisation and reporting of aid flows dedicated to trade categories. Aid for Trade spending reached US$ 41.7 billion in 2008, up 62 percent from average annual expenditure between 2002 and 2005.
While we can say that we have been successful at mobilising resources, what can we say about the impact of those resources in partner countries and on regional economic communities? Intuitively, assistance for productive capacity should lead to increased productive capacity. Aid for Trade interventions aimed at reducing supply-side constraints must surely overcome these constraints. Support for trade-related infrastructure must by definition lower the cost of doing business and transporting goods. But does it? Has it? And how can we measure it?
This is why the director-general of the WTO and the secretary-general of the OECD have launched a new monitoring exercise to gather information on impact and outcomes for the Third Global Review through a call for case stories. The aim of this process is to get a better view of the impacts and outcomes of Aid for Trade assistance and lessons learned on good practice; it also aims to gather information on how things could be improved. The goal is to illuminate what is actually happening on the ground. The call for case stories has established a new element to the monitoring framework for the Third Global Review. It is our hope that these case stories will provide a much-needed window into what works, what doesn’t work, and what can be improved upon in Aid for Trade.
To help members participate in the monitoring and evaluation exercise, a number of regional training events are being organised by the WTO and its partners. A successful event was held for Francophone Africa in October. Further events are planned for English-speaking Africa in November, with the assistance of UNECA. Training events for Asia and Latin America will be held in November. An event for the Pacific islands is being organised with Australian support. The Caribbean will also benefit from a regional forum on Aid for Trade, with the support of the Inter-American Bank, in January 2011.
The WTO and OECD have already started to receive submissions of case stories. The first one received was from a landlocked, small, vulnerable economy: Mongolia. Our hope is that other WTO members, observers and observer organisations will also submit their experiences, allowing us to build a body of evidence that can deepen the discourse on Aid for Trade. There is much to debate: the role of the private sector in setting priorities; implementation and partnering on trade-related programmes; how Aid for Trade can be used to leverage additional forms of domestic and foreign direct investment; the role of South-South trade-related capacity building and its growing importance as a conduit for knowledge and technological transfer. There is no shortage of topics to discuss.
We can already see the positive impact of the aid-for-trade discourse on trade and development. So long separate fiefdoms, the trade and development communities are now engaged in an ongoing dialogue that explicitly recognises the potential of trade to support and catalyse economic growth and poverty reduction. As WTO Director-General Pascal Lamy stated at the Millennium Development Goals Summit in New York in September: “the regions where most progress has been made in eradicating poverty are those that trade most. There is a direct correlation between integration into the multilateral trading system and economic growth, between growth and poverty reduction.”
The focus of the Third Global Review is on showing the impact of Aid for Trade and setting in motion a process that can eventually answer the question: “Is it working?” This is a tall order; we don’t underestimate it. Fundamentally, it can only be achieved with the ownership and leadership of partner countries and their development partners.
Aid for Trade has changed the way in which the development community positions trade, and it has changed the way the trade community see development. The knowledge is there, the appreciation is evident and all that remains is to show how it is working and determine whether it could work better. I suggest that not only WTO members, observers and observer organisations, but also civil society and the private sector are well placed to provide input. To that end, we look forward to hearing your answers to the question: Is Aid for Trade working?
Matthew Wilson is Deputy Aid for Trade Coordinator in the Development Division at the WTO. To contribute to the Third Global Review of Aid for Trade, please visit: http://www.oecd.org/document/31/0,3343,en_2649_34665_41830879_1_1_1_1,00.html>http://www.oecd.org/document/31/0,3343,en_2649_34665_41830879_1_1_1_1,00.html.
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Kind regards and best wishes.