International Trade

Development - Aid for Trade

Aid for Trade relates to the provision of a comprehensive trade package that aims to help developing countries, particularly least-developed countries, develop the trade-related skills and infrastructure for implementing the WTO agreement thereby benefitting from enhanced market access.

The success of the initiative depends on creating closer cooperation in national capitals between trade, finance and development officials of WTO member governments. This needs to be matched by close cooperation at the international and regional level among intergovernmental organisations with core responsibilities in these areas and their member governments.

Aid for Trade has assumed added significance especially in the light of the global economic crisis wherein Members are struggling to remain competitive and the external markets for exports are not too encouraging. For the year 2009, the OECD forecast of an expected fall in GDP by 2.75%, WTO projections of a 9% world trade volume contraction and the IMF forecast of a 20% dip in FDI inflows are indeed a cause for concern on the international economic front. The Therefore, it is imperative that the aid is effectively channelized to developing countries so that they can cushion the economic shock and effectively compete especially on products and services of their interest.

In response to the complexity of LDCs' trade-related problems, the Integrated Framework (IF) was inaugurated in October 1997 at the WTO High Level Meeting on Integrated Initiatives for Least-Developed Countries' Trade Development by six multilateral institutions ( namely IMF, ITC, UNCTAD, UNDP, World Bank and the WTO), which, with their distinct competence, could complement each other to deliver greater development dividends to LDCs in the multilateral trading system. Drawing from its experiences in its first years, the IF was first restructured in 2000.

The IF has two objectives:

· to "mainstream" (integrate) trade into the national development plans such as the Poverty Reduction Strategy Papers (PRSPs) of least-developed countries;

· to assist in the co-ordinated delivery of trade-related technical assistance in response to needs identified by the LDC. The IF is built on the principles of country ownership and partnership.

An Enhanced Integrated Framework (EIF) was recommended by a Task Force and was adopted by the IF governing bodies namely the Integrated Framework Working Group (IFWG) and the Integrated Framework Steering Committee (IFSC) in May, 2007 to start the implementation phase of the EIF.  The WTO Hong Kong Ministerial Conference in December 2005 and the Development Committee of the World Bank and the IMF at its autumn 2005 meeting endorsed the adoption of the EIF.  At the Hong Kong Conference, WTO Ministers welcomed the establishment of a Task Force by the IFWG and IFSC as well as an agreement on the three elements, which together constitute an enhanced IF namely the increased, additional, predictable financial resources to implement Action Matrices; strengthened in-country capacities to manage, implement and monitor the IF process; and enhanced IF governance.

The Enhanced Integrated Framework is the main mechanism through which least-developed countries access Aid for Trade. The aim is to enhance the operations of the current IF mechanism to ensure that its overall goal is achieved. An enhanced IF will give LDCs greater ownership of the EIF; increased commitments from development partners; and improvements in the IF decision-making and management structure to ensure effective and timely delivery of increased financial resources. An enhanced IF Secretariat has been established at the WTO, headed by an Executive Director.

The main objectives of the EIF are to:

· mainstream trade into LDCs' national development plans (NDPs), such as Poverty Reduction Strategy Papers (PRSPs)

· assist in the coordinated delivery of trade-related technical assistance (TRTA) in response to needs identified by LDCs

· develop the capacity of LDCs to trade, including through capacity building and addressing supply constraints.

A balanced and inclusive economic development is contingent on the mainstreaming the policy initiatives related to trade, growth and poverty reduction. Some of the key aspects that need to kept in mind for mobilising resources to build trade capacities, institutions and trade related infrastructure and must be part of our negotiating mandate on Aid for Trade are:

(i) need to demonstrate the large potential gains to be made from broad-based multilateral trade liberalisation and the integration of developing countries through a viable aid for trade package,

(ii) aid for trade is part of an holistic policy initiative of international co-operation, improved policy coherence and balanced economic policy development,

(iii) prioritising Aid for trade by identifying specific Members and their trade related projects and

(iv) identification of how aid for trade will address the trade impediments and fit into the evolving framework of regional and multilateral co-operation.