6. Frequently Asked Questions

1. What is Aid for Trade?

According to the report of the Task Force on Aid for Trade (AFT), assistance and capacity-building on the following six categories qualify as AFT:

1. Trade Policy and Regulations, e.g. training and support for trade officials in implementing trade agreements and standards
2. Trade Development, e.g. trade and investment promotion
3. Trade-Related Infrastructure, including building physical infrastructure
4. Building Productive capacity
5. Trade-Related Adjustment, assistance to adopt measures to benefit from trade liberalisation
6. Other trade-related needs

Some of these categories are yet to be refined:

It is difficult to narrow down the “trade-related” concept to decide what infrastructure investments and what adjustment support are considered AFT. The EC, the US and the World Bank have reported in their replies to the donor questionnaire in 2007 that they are developing methodologies/reporting guidelines to provide a good approximation of the cost of their trade-related activities, e.g. the share of trade-related infrastructure support. O ther donors will likely use by default of a better option the closest existing category in the Creditor Reporting System (CRS) , i.e. “economic infrastructure”. The category “productive capacity” does not distinguish between production for the domestic market and that for export. As a result, the “productive capacity” variable in the CRS risks overestimating the AFT flows in this category. Also, the Task Force report provides no guidance on what activities would address other trade-related needs. There is no suitable proxy in the CRS to measure the trade component of aid projects in other sectors such as education and health.

2. Is Aid for Trade a new Concept?

Yes and no. The term Aid for Trade (AFT) is recent, but donors have been providing assistance to developing countries to build trade capacity and infrastructure for many years. The 1994 Marrakech Declaration, which established the WTO, acknowledged the need to help least-developed countries ( LDCs) to implement their obligations within the multilateral trading system through tailor-made trade-related technical assistance. Nevertheless, AFT calls for more than an expansion of existing trade-related aid, be it in scope (i.e. inclusion of new types of support such as trade-related adjustment) or in size (i.e. commitment from donors to give additional support). The main innovations of AFT are:

1. It engages donors and recipients to work together to improve the identification of needs and the architecture of aid delivery; and
2. It should be conceived as a complement to a successful Doha package.

3. What is the State of play of Aid for Trade implementation?

In 2007, the OECD, the WTO and regional development banks collaborated closely to review existing monitoring and evaluation mechanisms i.e. data collection through the Creditor Reporting System (CRS), and to propose new ones, i.e. regional and global Aid for Trade (AFT) reviews. At the first Global Review in November 2007, donors confirmed their commitments to scale up AFT resources. The next stage is about mobilising and channelling resources for project implementation. Regarding non- LDCs/ International Development Association (IDA)-only countries, it seems that no ad hoc funding mechanism similar to the Integrated Framework for LDCs will be established. Rather than multilateral funds, AFT will most likely focus on reinforcing coordination among donors as suggested by the strategies of the EC, the US and other major donors. In terms of monitoring and evaluation, the CRS will be used to record AFT flows. It will incorporate past AFT flows until now reported to the Trade Capacity Building Data Base. The 2008 AFT Roadmap outlines the next steps.

4. What is next on the Aid for Trade Roadmap?

The Aid for Trade Roadmap for 2008 was presented by the WTO Director General (DG) at the WTO Committee on Trade and Development (CTD) on 25 February 2008. The Roadmap calls among other issues for fine-tuning the self-assessment questionnaires of the WTO/OECD. In 2008, the OECD will convene targeted outreach events in key recipient countries of AFT to reiterate the importance of the partners’ questionnaires. Other key achievements expected in 2008 are the identification of performance indicators for AFT, AFT reviews, as well as the establishment of regional AFT networks. An expert symposium on monitoring and evaluation will be held in summer 2008. AFT Reviews will be organised at the national and sub-regional levels in selected countries to assess AFT plans, to identify key priorities, and to agree on how these plans and priorities should be implemented. The second AFT Global Review is scheduled to take place in spring/summer 2009.

5. When will Aid for Trade finance new projects?

In principle, implementation of new Aid for Trade (AFT) projects could start as soon as 2008. At the end of 2007, several bilateral donors announced their AFT strategy – e.g. the EC and Norway. Most declarations stated that the bulk of additional AFT resources will be channelled multilaterally. As a result, many multilateral and regional organisations have included AFT at the centre of their strategies. But it remains difficult to predict when donors will deliver actual AFT funding. Before concrete steps are possible, recipient countries (“partner countries”) need to identify priorities and corresponding bankable projects on the basis of a review of past trade-related assistance received. Due to capacity constraints, only a few of them have already evaluated their AFT needs, and some will need technical and financial assistance from donors to do so. The EC has announced that it will support the African, Caribbean and Pacific countries (ACP countries) in this endeavour.

6. Who is eligible for Aid for Trade?

Aid for Trade (AFT) is intended for developing countries, in particular least-developed countries ( LDCs) (Hong Kong Declaration). It also makes reference to low-income countries eligible for concessional loans from the International Development Association , referred to as the “ IDA-only” countries (IDA – International Development Association). This group includes low-income transition economies, some of which have called for clarification of AFT eligibility at the WTO and requested to be explicitly included as recipients. The European Union considers all official development assistance (ODA) countries to be eligible for AFT.

7. To whom should prospective recipients send their Aid for Trade project proposals?

Prospective Aid for Trade (AFT) recipients should send their requests for project financing directly to bilateral, regional or multilateral donors. No central structure will be created within the context of AFT to act as an intermediary, which would match and supply and demand of AFT. Instead, countries should establish national/regional committees gathering all relevant stakeholders potentially serving as a platform to access funding. It is recommended that LDCs use the existing IF structure in doing so.

8. Will technical assistance be provided to help set up the national/regional Aid for Trade committees called for in the Recommendations?

The EC has offered its financial and technical assistance to African, Caribbean and Pacific (ACP) countries, in particular to set up national Aid for Trade (AFT) Committees. A recent submission by Egypt to the WTO Committee on Trade and Development (CTD) has drawn attention to developing countries’ concerns, and especially possible assistance to conduct needs assessments. In 2008, national and sub-regional reviews could give recipient countries the opportunity to voice such concerns and formulate requests for assistance in doing so. Recipient countries that are interested in such support could also emphasise the need in their replies to the AFT questionnaire.  

9. How have donors decided to implement Aid for Trade?

In an attempt to avoid duplication of assistance, several donors have indicated their preference for channelling additional Aid for Trade (AFT) commitments multilaterally. AFT implementing agencies will include organisations such as ITC, UNIDO and the World Bank as well as regional development banks. Such an approach has been influenced by the principles of coherence and harmonisation of the 2005 Paris Declaration on Aid Effectiveness.

10. How to find out about available Aid for Trade?

AITIC is currently preparing an Aid for Trade (AFT) handbook focusing on bilateral donors in order to facilitate recipient countries’ access to AFT funding. It will contain detailed information, including main recipient countries and AFT focus areas, on AFT policies of a number of traditional and non-traditional donors. A parallel effort has been undertaken at the level of the United Nations (UN) to map all UN-provided trade capacity building activities. The preparation of this UN resource guide is coordinated by UNIDO. Both documents are expected to be released in 2008.

11. What are the funding mechanism(s)?

The Task Force on Aid for Trade (AFT) encouraged donors to consider using multilateral channels to provide AFT, noting that this could avoid them having to build institutional capacity and getting involved at country level. Some donors, however, view bilateral avenues as better means to ensure that the aid reflects their priorities and that it is delivered effectively. The possibility to set up a new funding mechanism aimed at strengthening the demand side in IDA-only countries (i.e. needs assessment and trade mainstreaming ) was considered but did not garner support from members. Donors favour enhancing coordination among themselves and developing efficient mechanisms for monitoring and evaluation rather than creating a new specific delivery mechanism.

12. What are the conditionalities?

A basic condition for obtaining Aid for Trade (AFT) funding is that trade is mainstreamed into a country’s overall development strategy (preferably in its Poverty Reduction Strategy Paper). However, once this condition is met, it cannot be assumed that all AFT resources will be disbursed in grant form and without any form of further conditionalities attached. AFT will be part of overall official development assistance (ODA). General ODA rules, terms and conditions for assisting countries cannot be entirely sidelined for the purposes of AFT. The degree of stringency of conditionalities will depend on the form of assistance provided and the recipient country’s economic performance. The challenge is to ensure that conditionalities do not run counter to but complement the individual country’s development strategies.

13. What is “Mainstreaming” Trade?

Trade mainstreaming refers to the process of making trade a priority in the national development strategy. As trade is considered a key vehicle of a country’s growth, the trade component of the national development strategy should be formulated jointly by all ministries concerned, and then integrated in to the overall development strategy. This process would ensure that synergies between trade and other areas (e.g. economic and social) are identified and potential incoherencies remedied.

14. What is the link between Aid for Trade and the Integrated Framework?

As recommended by the Task Force on Aid for Trade (AFT), AFT will be channelled through existing mechanisms. For LDCs, the concrete process available to implement AFT is the Integrated Framework (IF). It provides the platform enabling LDCs to identify trade-related assistance priorities, and to present them to donors. However, the scope of projects which may be financed under AFT is broader than under the IF. Indeed, in addition to trade-related technical assistance, countries may add to their priorities AFT specific issues such as support for adjustment, productive capacity building and infrastructure. The extension of the scope of assistance (e.g. inclusion of AFT specific issues) could be explicitly taken into account in the IF diagnosis of needs, called the Diagnostic Trade Integration Study (DTIS). An efficient and comprehensive trade-related needs assessment will require inter-ministerial coordination.

In other words, the IF platform has prepared LDCs to receive larger scale projects through AFT. Non- LDCs (in particular non-LDC International Development Association (IDA)-only countries) could set up a platform similar to the IF in order to benefit from AFT.

15 . What is the link between Aid for Trade and trade facilitation?

The dynamics of the Doha Work Programme (DWP) negotiations have led to a conceptual separation of Aid for Trade (AFT) from assistance in the area of trade facilitation. AFT is linked to the DWP but not part of its single undertaking. It is intended to reinforce eventual market access results of the DWP and not to become part of the bargaining across the different areas of negotiations. In trade facilitation, sufficient technical assistance and support for capacity building will determine to what extent developing countries can be expected to enter into binding commitments. Some WTO members have proposed the establishment of a Trade Facilitation and Capacity-building Support Unit, while others have suggested that members notify their self-assessments to the Committee on Trade Facilitation. It is not clear what the relationship of a central platform would be with institutions implementing AFT in general. Assistance on trade facilitation issues will appear in the trade policy and regulations category of the CRS database. However, larger trade facilitation projects such as transport corridors will be more difficult to trace as such activities will correspond to the infrastructure category.

A joint project was launched in 2005 by the IMF, the World Customs Organisation (WCO), the World Bank, the WTO and other partners in order to help trade facilitation negotiations move forward. In anticipation of a future WTO agreement in the area of trade facilitation, the project also aims to support members in identifying gaps between the existing systems and the measures under examination at the WTO. The project’s main achievements to date include a negotiations support guide, pilot national workshops and a study, which assesses that the costs of implementing a trade facilitation agreement would be limited in view of existing technical assistance efforts. In 2008, the partner institutions will organise several national and regional workshops for members to use a trade facilitation self-assessment tool. In June 2007, the WTO had already received 53 requests from developing countries and LDCs to participate in the programme.

16. How will global Aid for Trade flows be assessed?

Global AFT flows will be assessed with the help of the OECD-DAC database and its Creditor Reporting System (CRS) . This assessment has required further work on clarifying definitions of the Aid for Trade (AFT) categories and adapting the database. For the reporting on the first AFT category, i.e. trade policy and regulations, the definition of the Joint WTO/OECD Trade Capacity-Building Database (TCBDB) will be followed. Data from the TCBDB on the two first categories of AFT will be incorporated into the CRS. The TCBDB will be folded into the CRS and as a result it will be discontinued as an independent tool. The CRS will also be updated to include the other three categories referred to by the Task Force. The category “trade-related adjustment” will be created in the CRS and subsumed under “trade policy and regulations”. The other two, i.e. trade-related infrastructure and productive capacity building will be matched with aggregates existing in the database. The revised CRS, as described above, will be operational from 2008.

17. What is the role of the WTO in monitoring and evaluation?

In December 2006, the recommendations of the Task Force on Aid for Trade (AFT) called for the Director-General (DG) to set up a monitoring body within the WTO, which would be tasked with holding periodic reviews of AFT. The DG set up the Ad Hoc Consultative Group , a new inter-institutional body which includes the WTO, the OECD and other stakeholders, to take stock of progress on AFT implementation. Work on the AFT reviews is also periodically discussed in the WTO Committee on Trade and Development (CTD).  

Responses to the self-assessment questionnaires on country-level AFT policies were submitted in September 2007 to the OECD and the WTO by multilateral organisations, donor countries and eight recipient countries. The information collected was compiled by the OECD and the WTO in a report titled Aid for Trade at a Glance , which was published at the Global Review. This report contains baseline figures assessing AFT flows of OECD-DAC members over the period 2002-2005. To stimulate a stronger participation of recipient countries in the monitoring exercise, the WTO and the OECD will work in 2008 to improve the self-assessment tool. An expert symposium on monitoring and evaluation will also organised by the WTO and the OECD.  

Another channel of AFT monitoring that is envisaged by the WTO is the coverage of AFT in donor and recipient countries’ Trade Policy Reviews. The DG also stated that recipient countries needed to identify appropriate mechanisms to channel the assistance.

18. How much did Aid for Trade flows represent between 2002 and 2005?

Work has been undertaken by the OECD and the WTO to determine a baseline of trade-related assistance and capacity-building delivered in previous years, using the OECD-Development Assistance Committee (DAC) database. In the OECD publication, Aid for Trade (AFT) at a Glance 2007 , the baseline period of 2002-2005 starts with the launch of the Doha Development Round in November 2001 and ends with the 2005 Hong Kong WTO Ministerial Conference. Taking the 2002-2005 average as a starting point, statistics show that donors committed on average USD 21 billion per year for AFT over this period. This represents one third of sector allocable official development assistance (ODA) . As of 2008, the OECD will also release data on AFT disbursements.

19. How much is the Aid for Trade initiative worth?

Given that there is no agreed definition on what constitutes Aid for Trade (AFT), it is difficult to determine figures. If all donor commitments are met, total ODA will increase to USD 130 billion by 2010, that is twice the amount spent in 2000. Given donors’ current focus on AFT, its relative share will likely grow faster than the projected increase in overall ODA.

20. Who are the main recipients of Aid for Trade?

According the WTO-OECD baseline figures, Asia received 51 per cent of total Aid for Trade (AFT) between 2002 and 2005. Africa comes second with a 30 percent share of AFT: 14 of the 25 first recipients of AFT are African countries. The top ten recipients include seven Asian countries: in descending order, Viet Nam, India, Indonesia, Pakistan, Bangladesh, China and Sri Lanka; two African countries Egypt and Ethiopia, as well as Serbia.

21. How to ensure that Aid for Trade is effective?

Aid for Trade (AFT) delivery will be guided by the 2005 Paris Declaration on Aid Effectiveness . It commits donors, recipient countries, and international agencies to the following key principles: country ownership; mutual accountability; alignment of aid to national development strategies; effective donor coordination; harmonisation of donor procedures; adoption of programme-based aid modalities; managing for results; transparency; and predictable and multi-year commitments. Work on applying these principles in aid delivery is still at an initial stage and will constitute a learning exercise for all stakeholders. The OECD’s commitment to promoting AFT effectiveness translated in autumn 2007 into the organisation of three regional practitioners’ fora. These meetings gave an opportunity to examine the results of the self-assessment questionnaires that were sent out during summer 2007. These questionnaires were designed to evaluate whether existing AFT programmes in developing countries were making the most of their trade capacity and to discuss a set of best practices reiterating the Aid effectiveness principles.

The Third High-Level Forum on Aid Effectiveness will be held in Accra 2-4 September 2008, and will bring together signatories of the Paris Declaration on Aid Effectiveness.

22. What are the possible issues for follow-up?

Work accomplished in 2007 has clarified a number of issues regarding AFT. However several questions remain open: Will donors provide assistance to recipient countries to set up national/regional Aid for Trade (AFT) Committees as proposed in the AFT recommendations? Will the commitment of donors to provide additional resources for AFT translate into increased support in the field? Will the CRS give a clear assessment of whether additional resources have been provided under AFT? Which performance indicators should be chosen to evaluate AFT? How to avoid that new resources concentrate on a number of successful countries and ignore “AFT-orphan countries”? How to successfully take into account the regional dimension of AFT? How to ensure a successful self-assessment exercise for recipient countries?

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