Trade Policy Note Final-rev08 - Development

Box 11: Aid-for-Trade
The need for scaling up aid-for-trade resources to LDCs and other low income countries was
widely recognized by the international community in 2005, culminating with the inclusion in
the December 2005 WTO Hong Kong Ministerial Declaration of key paragraphs on both an
enhanced Integrated Framework for Trade Related Technical Assistance for the LDCs (IF)
and broader aid-for-trade. Ministers in Hong Kong agreed to establish a new Aid-For-Trade
Task Force with the mandate to provide recommendations on how to operationalize aid-fortrade
components beyond an enhanced IF, so that it can most effectively contribute to the
development dimension of the Doha Round. Following wide-ranging consultations with
WTO member states, international agencies and other stakeholders, the Task Force submitted
its report to the WTO General Council on 27 July 2006. The report, which was finalized after
the suspension of the Doha negotiations, makes clear that aid-for-trade is a complement to the
Doha Round and not conditional upon its success.
The main thrust of the Task Force’s recommendations is that existing arrangements and
commitments should be built upon in financing aid-for-trade needs, guided by the Paris
Declaration on Aid Effectiveness. In this context, The WTO Director General is urged to
“seek confirmation from donors and agencies that funds are readily available for the
implementation of the aid-for-trade initiative …”.
As for the scope of aid -for-trade, this should be broad enough to cover the diverse needs of
developing countries, and clear enough to differentiate aid-for-trade from other development
assistance (of which it is a part). Trade-related development priorities included in the
recipients’ national development strategies should be considered as falling under the aid-fortrade
umbrella.
Specifically, aid-for-trade is expected to encompass trade policy and regulations; trade
development; trade-related infrastructure; building productive capacity; and trade-related
adjustment.
This is a broad enough definition to cover the wide array of supply side constraints affecting
developing countries’ competitiveness on world markets, including investments in projects
addressing cross-country and regional impediments to trade development, such as regional
transport corridors, standards, disease or pest issues - areas that have traditionally been
neglected and require a much higher priority than they have received so far.
Another important area that is, quite innovatively, covered, even though there is no consensus
on its inclusion, are short-term adjustment needs (i.e. fiscal loss of government revenue as a
result of MFN tariff reduction, changes in terms of trade for net food importers, preference
erosion through MFN or FTA tariff reductions, or the elimination of special preferential
arrangements). The costs of adaptation to the elimination of the quota system on text iles and
clothing, (see Annex 3A) and the implementation costs of trade agreements are also included
in many definitions.
The Task Force’s report also makes provision for AFT reporting requirements - either as
donor or recipient - in periodic trade policy reviews of WTO member states. A global
periodic aid-for-trade review is also recommended. This is to be convened by a monitoring
body to be set up within the WTO. The Director-General is expected to establish an ad hoc
consultative group to take forward the practical follow up of the Task Force’s
recommendations.
Source: UNDP Concept Note on Aid for Trade, January 2006 (http://www.undp.org/poverty/) and
WTO document “Recommendations of the Task Force on Aid For Trade”, WT/AFT/1, 27 July 2006
(www.wto.org).
Export growth is part of the virtuous spiral described in Section 3, providing
financing for the import of new technologies needed to increase competitiveness and
improve living standards.
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