The potential impact of the Aid for Trade initiative

Working and discussion papers
March 2007
Sheila Page

The Aid for Trade initiative marked international acceptance of the limitations of trade as a tool for development and of a role for the WTO in aid. Countries need infrastructure, institutions, technical capacity, and investment in order to trade, and to respond to liberalization. Although many in developing countries would gain from a WTO settlement, there are small gains or even costs for some developing countries. More or better preferences cannot help all developing countries; they face challenges from non-preferred countries and may obstruct multilateral liberalization. Aid for Trade as an issue in the Doha Round was driven by the need to find benefits for all countries. By the time the Round stalled, it had acquired sufficient support to go forward independently of the Round. When it was part of the negotiations, there was pressure to define a new structure for trade aid, outside normal aid mechanisms and parallel to those for other international concerns such as health or the environment. Without the need to secure developing countries’ support for a trade settlement, there is now a risk that it will be absorbed into normal aid programmes. To ensure that Aid for Trade reflects trade priorities and decisions made in the WTO, countries must require donors and the international financial institutions to accept priority for trade and the obligation of coherence with the WTO.

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