On 10 July the World Trade Organisation concluded the Fourth Global Review of Aid for Trade. Trade ministers and officials will soon be heading to Bali to attend the Ninth WTO Ministerial Conference (3-6 December 2013) where they are expected to discuss future directions for Aid for Trade (AfT). What are the most important things from the AfT review that could be carried into the Bali agenda?
The AfT review gathered experts and policy-makers from across the world to examine AfT flows as well as to discuss how it could be made more effective. ODI and the Commonwealth Secretariat held an event to launch a book, Aid for Trade effectiveness: current issues and future directions, which documents evidence on the impact of AfT, factors that influence its effectiveness, and how the initiative can remain relevant into the future.
The global review highlighted several points: that AfT flows had been increasing significantly since the initiative was launched in 2005 – but in 2010-2011, AfT flows reduced for the first time. Also, increasingly, trade takes place between intermediaries (about 60% of global trade). It showed that entering into (and upgrading within) global and regional value chains is important, but developing countries still face numerous capacity challenges. There is also an emerging interest in investment for trade, and in what role AfT can play in potentially longer-term solutions.
So, what ideas should the trade ministers and experts pack into their briefcases for Bali? It is unlikely that the ongoing trade negotiations of the Doha Development Round will be concluded in Bali. Nevertheless, the WTO Ministerial Conference would do well to deliver a firm commitment to the role trade can play in development. They could do so by:
· Reaffirming their commitment to AfT initiative. At Bali, it will be eight years after the Ministerial Conference committed to AfT in paragraph 57 of the Hong Kong Ministerial Declaration of 2005. In light of the reduction in AfT flows, the Ministers should arrest the slide and unequivocally reaffirm the commitment made in 2005.
· Establishing a new task force on AfT initiative. The task force, set up in 2005, delivered a report in 2006 that provided recommendations on operationalising the AfT initiative. Whether these recommendations have been fully implemented remains contentious,. It would be timely to take stock of experience thus far as well as note emergent development agendas and give the initiative new and meaningful direction.
The initial premise of the AfT initiative (as per paragraph 57 of the Hong Kong Ministerial Declaration) was to help developing countries implement trade agreements, and to support them to increase their supply-side capacity. However, merely producing more of the same products cannot be counted as being developmental. More of the same doesn’t help to build sufficient governance capacity to achieve and sustain high investment, nor to implement policies that encouragethe acquisition and learning of new technologies. Instead, developing countries need help to build productive capacity to produce better and higher value products. The AfT review discussion on global value chain highlighted increasing productive capacity, improving trade logistics, and designing effective industrial policy as three areas of importance in gaining benefit from such product value chains.
The Bali Ministerial must be taken as an opportunity to set the future direction of the AfT initiative. The past experience could help inform future directions - with our research partners DIE and ECDPM, ODI has been studying what makes AfT effective and in what circumstances. Looking forward, the initiative must also build coherence with other emergent development agendas such as the post-2015 global development agenda and the UN-adopted Istanbul Programme of Action for the sustainable development of least developed countries.
So how should the AfT initiative evolve? AfT should help developing countries reduce the cost of trading. At the moment AfT seeks to be, as one delegate at the review put it, ‘everything and anything’, and risks being nothing. A focus on reducing the cost of trading would help to streamline the initiative and to increase its effectiveness, and also allow it to demonstrate how it can contribute meaningfully to the broader development agenda. AfT resources (grants and concessional loans) should flow to those facing a high cost of trading. AfT performance should be measured and evaluated on how it contributes to reducing the cost of trading, and how AfT leverages in investment.
The Global Review of AfT has already built momentum around the need to help developing countries reduce their costs of trading and to leverage investment to build productive capacity. Now, the new WTO Director-General must seize this opportunity and mobilise consensus on a renewed commitment to AfT by WTO member countries as well as set up a new task force on AfT to suggest future directions. Doing so will not only show he means business from the very beginning, but will help keep the decisions made at the Bali Ministerial alive long after its conclusion.