Trade Negotiations Insights • Volume 8 • Number 4 • April 2009

‘Delivering the goods’ on Aid for Trade

A TNI interview with the UK Minister for Trade and Development Gareth Thomas

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Despite emerging more than three years ago at the 2005 WTO Hong Kong Ministerial, on-the-ground implementation of the “Aid for Trade” (AfT) initiative has proved complicated so far. While there has been progress in agreeing definitions of AfT categories and increased monitoring of donors, ACP countries routinely point out that they have yet to see tangible benefits from AfT. A high-level conference on 6-7 April brought donors together with representatives from across COMESA, EAC, and SADC countries to launch the North-South Corridor initiative, an AfT pilot project covering transport and trade facilitation. Trade Negotiations Insights interviewed the Hon. Gareth Thomas MP, Minister for Trade and Development, for his thoughts, given the UK’s role as a key contributing donor to the project, and the new opportunities available through AfT.

Trade Negotiations Insights: Aid for Trade (AfT) first came to prominence at the WTO Hong Kong Ministerial at the end of 2005, before the recent slowdown that is now affecting the world economy. How can donors such as DFID ensure that commitments to increase AfT are kept, while also maintaining development spending in other important areas?

Gareth Thomas: The UK has made a formal pledge to deliver at least £409m per year as Aid for Trade by 2010 and we are well on track to deliver this. We are also party to an EU-wide target of €2bn per year by 2010. Recent statistics show we are well on course to reach this target as well. I think the current crisis has shown how important Aid for Trade is - both to address short-term needs like shrinking access to trade finance, and to address long-term structural challenges to help countries build their capacity to trade and remain competitive in an increasingly globalised world. We will do and are doing our bit to argue for continued high ambitions around Aid for Trade going forward.

TNI: As part of its commitment to delivering Aid for Trade, DFID last year launched a dedicated strategy for AfT. What are the significant features and opportunities of the new approach, and how does it differ from previous efforts to increase developing countries’ trade?

GT: We launched our first Aid for Trade strategy in late 2008. It sets out how we will deliver out ambitious plans and increased levels of resources for Aid for Trade at the country, regional, and global level. What is new is the increased emphasis on mainstreaming trade throughout DFID’s programmes and activities resulting in more concrete support towards a growth and trade agenda in DFID’s priority countries. Also, we are stepping up our support for regional programmes significantly, including support to African Regional Economic Councils (RECs), towards regional integration like the North-South Corridor (NSC), etc. The strategy also sets out how we will continue to play an important role championing Aid for Trade and moving the debate forward at the global arena, as well as working closely with key multilateral partners like the World Bank, the African Development Bank, and the European Commission. For instance, we are just about to provide support towards a new World Bank Trade Facilitation Facility helping countries reduce the time and cost it takes for goods to cross borders, and to support the International Trade Centre in its efforts to help women traders and highlight the importance of women in trade. We are also supporting research, thinking, and policy development around the linkages between trade and poverty and how we can design support programmes that help the world’s poorest to fully benefit from more open markets.

TNI: Most recently, DFID along with other donors such as the European Commission, World Bank and African Development Bank pledged USD 1bn for a pilot AfT project, the ‘North-South Corridor’, in East and Southern Africa. How is this expected to contribute to increasing trade and development in the region, and what are the key lessons for future AfT projects in the region and elsewhere?

GT: This was the fruit of long and hard labour. For the first time, it brought together the much needed political buy-in and support (through the presence of four African Presidents and some twenty-five ministers) and the funding (through the presence of key donors and agencies and more than USD 1bn raised) around a common investment need: to improve conditions for trading along one of Africa’s busiest trading routes. It adopted a regional approach and relied on the concerned regional RECs to design, own, and take the initiative forward. It brought together the hardware investment needs (roads repair) with the software reform needs (rail concessions, border crossing management, etc.). It was also a breakthrough for our ways of working as donors; grounded in a true African-led process, donors agreed to adopt a regional approach and offer regional solutions. We are hoping to support other RECs to replicate this interesting and promising concept in other regions and areas.

The North-South Corridor will provide huge opportunities for trade in Southern and Eastern Africa. This highly practical scheme will free up bottlenecks that lie on the main trading routes across eight African countries through faster border crossing, improved railways, and better highways. If the road upgrades do not take place then the North-South Corridor road links will gradually deteriorate and become impassable in ten to fifteen years.

The initiative is seeking to finance the upgrade and maintenance of 8,000 kilometres of road – the equivalent to the road distance between Paris and Beijing - and rehabilitate 600 kilometres of rail track. Travelling times by road from Lusaka to Durban will fall by 10% after improvements are made along the North-South Corridor. Transit times at the Chirundu border post - between Zimbabwe and Zambia - will fall by at least 20%. The Corridor will directly benefit eight countries: Tanzania, DRC, Zambia, Malawi, Botswana, Zimbabwe, Mozambique, and South Africa.

TNI: Beyond the North-South Corridor pilot project, what other types of Aid for Trade projects and programmes is DFID considering for ACP countries? How does the process move forward from here, and how can ACP countries themselves build on the momentum and maximise the benefits of AfT?

GT: The NSC programme forms part of our new Trademark Southern Africa programme that will help deliver more trade, growth, and regional integration in Southern Africa. We have just approved a similar regional ambitious programme for eastern Africa focused on Uganda, Tanzania, Kenya, Rwanda, and Burundi. We are also designing a similar programme for West Africa. While all are slightly different, their broad aims are the same: to promote regional integration and growth through trade working with capacity building of key trade bodies, regional infrastructure, export promotion trade facilitation measures, etc. AfT is a partnership between donors and partner countries. Donors should provide more resources and give more emphasis on Aft in their programmes. But partner countries also need to do their part and better mainstream trade through their own development plans. All too often trade is overlooked or not considered part of an effective growth and development strategy, and trade ministries are marginalised. The more countries focus on trade as part of their development solution, the more support could come.

TNI: How are principles of developing country ‘ownership’ being incorporated into the AfT agenda, and why does this matter? Does AfT also provide an opportunity to foster better co-ordination among donors, as well as to improve the quality and quantity of aid?

GT: Ownership comes from the partnership aspect where trade is mainstreamed through national development plans. Also, the NSC was an excellent example of ownership: an African led initiative and programme with donors offering financial and technical support.

AfT offers an excellent opportunity to improve donor co-ordination. This is true for all areas of support, but for AfT to have most effect, we are talking about regional efforts or capital-intensive support. The more donors that can co-ordinate around this, the more impact AfT will have. DFID is also channelling an increasing part of our AfT support (60% at the moment) through multilaterals; this is a way to cut transaction costs and improve prospects for effective delivery. There is also a good WTO-driven debate on AfT that monitors our efforts and promises and offers a platform for debate and improved co-ordination.

TNI: Finally, a key concern for ACP countries has been the linkages between AfT and trade agreements such as the EPAs with the EU, and the stalled Doha Round at the WTO. How do you see such linkages?

GT: There are no formal linkages between these trade agreements and provision of AfT and AfT is not conditional on signing any EPAs or a Doha deal, etc. DFID has provided AfT-type support for decades and will continue to do so regardless of the future of any trade agreements. But AfT as a concept sprung out of the 2005 WTO Ministerial and a recognition that poorer countries will not be able to benefit from open markets and more liberalisation unless they receive support to build their trading capacities. So the more we open up markets, the more there will be a need for AfT. ACPs will also face some specific challenges around the signature of EPAs. It is important that the donor community continues to offer support that can help them make the most out of these new agreements; DFID is already doing this, working in close co-operation with the European Commission and other EU member states.

One response to “‘Delivering the goods’ on Aid for Trade”

Pastory Masomhe 3rd May 2009 at 16:02
The Minister for Trade and Development of the Uk in interview with TNI on Aid for Trade(Aft) commented that Aid for Trade is not conditional in signinig EPA and that there is no direct linkage between EPAs and Aid for trade. When reading this article Iwas shocked because when preparing for Framework Economic Partnership Agreement between EAC and EU we had full Article on development which showed the spirity of the agreement if one visits the draft EAC EU EPA Article 36 it clearly said I quote. “The EC Party and EAC Party reaffirm their recognition of development needs of the EAC region, and their commitment to ensure that EPA ia a toll for developmentwhich will promote and consolidate regional integration and aid the integration of EAC into the global economy. the Parties agree to work together to define and address the development needs of associated with the EPA in order to promote sustainable growth, strengthen regional integration and foster structuaral transformation and competitiveness to increase production, supply capacity and value addition of the countries concerned. The EC Parties confirms it will contribute towards the resources required for development under the 10th EDF, Regional Indicative Programme, Aid for Trade and the EU budget”. end of quote.With this paragration of intend the understanding of the EAC Partner States which many of them are LDC were that, EPA will assist EAC Partner States to put their products in the EU market.For EAC Partner States to be given DutyFree QuotaFree (DFQF) Market access will not achieve what was articulated in the Article 36. So far most of the EAC Partner States alrady have the DFQF in the EU market through Everything But Arms (EBA) so it is not a new thing to have it. The EAC Partner States joined the EPA negotiations because wantes to secure the following. 1.flexible rules of origin, Financial and Technical assisstance through development cooperation, to have contractual obligations on accessing EU market.Among all this if arranged in the level of their importance number one would be Development cooperation which could assist the EAC Partner States products to enter EU market. If the Minister for trade and development is saying that EPA and AfT has no direct link while AfT has been identifies as one of the ways then one cannot understand whether EU are Serious with EPA. nonetheless, EPA is divided into two parts one is development which is in the interst of the EAC Partner State and second part is Market Access which is in the interst of EU. if the development aspect is not linked to EPA then the way forward of the EPA is not known.