Aid for Trade is not new, but it formally became an issue in the negotiations under the Doha Work Programme at the Sixth Session of the Ministerial Conference held in Hong Kong, China in December 2005. During 2006, work on this initiative started amidst a wave of expectations from both developing and developed countries. The Task Force on how to operationalise Aid for Trade was established in February 2006. Numerous communications from multilateral agencies, regional banks, as well as different country groups were received by the Task Force, which issued its recommendations in July 2006, as mandated by the Hong Kong Ministerial Declaration. The Director-General of the WTO issued a follow-up report in December 2006 on monitoring and evaluation of Aid for Trade. This note seeks to summarise how this initiative has developed, inform on how the Task Force recommendations and the subsequent discussions have addressed some of the questions raised at the outset, and consider outstanding issues.

I. The Recommendations: The First Step

1. The Aid for Trade Task Force’s recommendations [note 2] were presented to the General Council on 27 July 2006. Contrasting with the grim mood prevalent at that meeting, three days after the suspension of the Doha negotiations, WTO members enthusiastically welcomed the report. In-depth discussion of the recommendations took place on 10 October 2006, at the General Council meeting.

2. The work of the Task Force focussed on a number of outstanding questions regarding Aid for Trade (AFT) raised during the five months of consultations: what projects would be included under AFT? What should be the coverage of AFT? What kind of support was needed? Which countries would be eligible? How to assess country-specific needs? What would be the nature of the support, grants or soft loans? How to mobilise additional resources? What would be the duration and sustainability of AFT funding? What mechanism would be set up to monitor and govern AFT? What is the status of AFT within the single undertaking of the Doha negotiations?

3. Paragraph 57 of the Hong Kong Ministerial Declaration [note 3] states that AFT is intended to enable developing countries to benefit from trade liberalisation, enhance growth prospects and reduce poverty. To fulfil this ambitious mandate, the Task Force recognised that “a dditional, predictable, sustainable and effective financing” was indispensable. It urged the Director-General (DG) of the WTO to seek confirmation of pledges made in Hong Kong to finance AFT [note 4] and to consult on "appropriate mechanisms to secure additional financial resources for Aid for Trade" [note 5].

A.  Scope

4. The Task Force adopted a broad definition of AFT to cover the needs of different countries, while establishing a clear demarcation between this and other forms of development assistance. Projects identified as trade-related priorities in the countries’ national development strategies, for example (but not exclusively) Poverty-Reduction Strategy Papers (PRSPs), would qualify for AFT funding. To ensure accurate accounting and for assessing additionality, global monitoring with clear benchmarks is necessary. Proposed AFT coverage includes:

i. Trade policy and regulations:training of trade officials; analysis of proposals and positions and their impact; support for national articulation of trade interests and identification of trade-offs; dispute settlement issues; technical support for implementation of and compliance with trade agreements and rules and standards.

ii. Trade development: investment promotion, analysis and institutional support for trade in services, business support services, and public-private networking institutions, trade finance, trade promotion, market analysis and development).

iii. Trade-related infrastructure

iv. Building productive capacity

v. Trade-related adjustment: assistance to adopt measures to benefit from trade liberalisation.

vi. Other trade-related needs

B. Gap Identification

5. Although since Doha, donors had increased trade-related assistance funds and recipients were integrating trade into their development strategies, much remained to be done. The  most pressing difficulties were: insufficient consideration to trade as a tool for development by both donors and recipients; limited involvement of the private sector in the identification of needs; lack of coherence and coordination of donor responses; bureaucratic hurdles in assessing and delivering trade-related assistance; limited absorption capacity in recipient countries; inadequate donor responses to trade needs at both at the national and regional levels; insufficient data and analysis of the impact of trade policies on development; ineffective monitoring of trade-policies and donor activities and, as a consequence, lack of independent and rigorous evaluations and impact assessments; inadequate support for the regional dimension of trade-related projects and for the adjustment costs of trade liberalisation; insufficient resources for building infrastructure and trade capacity; and uneven country coverage.

C. Guidelines and Implementation

6. The Task Force endorsed the Paris Declaration on Aid Effectiveness as the guiding principle of AFT delivery. Its standards [note 6] should be applicable to all parties involved in AFT, including d onors, agencies and recipients. The Task Force identified three areas that needed to be strengthened: the demand side, the donor response and the bridge between them.

7. For reinforcing the demand side, the recommendations refer to the work of the Task Force on the Enhanced Integrated Framework (IF). More generally, the Task Force reiterated the importance of country-driven actions, in particular, recipient governments’ commitment to mainstream trade into their development plans, for which they required assistance and capacity-building for trade policy design, as well as AFT projects. To ensure effective national coordination, the Task Force recommended using and improving existing consultative mechanisms. For IDA-only countries with no such mechanisms, the necessity to establish separately-funded in-country procedures would be examined. Donors and regional institutions were encouraged to identify regional, sub-regional and cross-border needs, including those related to regional integration. Finally, the TF recommended the establishment of a system of data collection and analysis at country level.

8. To improve the “donor response”, the Task Force encouraged multilateral and bilateral donors to integrate trade and growth into their aid programming using needs assessment procedures and their results. The Task Force also advised donors to move towards activity-based budgeting for programmes that are country-owned and mainstreamed in national development strategies, and where robust systems of accountability are in place.

9. The Task Force recommended measures to bolster the bridge between the “demand” for AFT and the “response” at the country, regional and global level.

i. Country level

10. To assist in matching the demand to the response, and to facilitate the evaluation, the Task Force recommended the establishment of a National Aid-for-Trade Committee. Its remit would be to ensure trade mainstreaming in national development strategies, determine country needs and set priorities to propose priority trade projects for donor financing. Recipient countries could request agencies to perform a coordinating role. Indicators of progress should be agreed on. Local and regional private sector , as well as South-South cooperation through triangular schemes, should be promoted.

ii. Regional level

11. The Task Force highlighted the need to strengthen cross-border infrastructure and regional policy cooperation. Suggested measures included building capacities related to needs diagnosis, the costing and preparation of project proposals and needs assessment at the regional, sub-regional and cross-border level. In addition, improved donor coordination was necessary to respond to requests (such as cross-border infrastructure and policy-integration projects) that were difficult for donors to sponsor through country-based processes. The Task Force also suggested exploring the advantages of establishing a Regional Aid-for-Trade Committee to oversee the regional dimension of AFT, to inform on needs, responses and impacts and to assist on monitoring and evaluation.

iii.  Global level

12. The tasks to be performed at the global level comprise collection of data and statistics, indispensable for determining priorities of development cooperation; dissemination and sharing of evaluation of results and development of best practices and guidelines. The Task Force recognised that funds for such activities needed to be secured. It also remarked on the advantages of channelling donor funding through multilateral means, which would allow support for AFT without the need for donors to build individual institutional capacity or to get involved at country level. In the view of the Task Force, establishing a new clearing house at the global level was unnecessary; improving and strengthening the existing mechanisms should be considered first.

D. Monitoring and Evaluation

13. Monitoring concrete and visible results in the field, and evaluating progress, were considered essential, both for donors and recipients. The Task Force noted that for the reporting on the first two AFT categories, i.e. trade policy and regulations and trade development, the definitions of the Joint WTO/OECD Trade Capacity-Building Data base should be followed. The other four categories, which fall outside the definitions of the Joint Database, should be reported as AFT when these activities were explicitly identified as trade-related priorities in the country’s national development strategies, such as the PRSPs.

14. The recommendations assign a major role to the WTO on monitoring and evaluation of AFT through several means. A periodic review should be conducted by a monitoring body based on reports from recipients, donors, regional and multilateral agencies and the private sector, which would be published on the WTO web site. To facilitate such reporting, the feasibility of a notification process should be considered. The periodical reviews should be discussed by the General Council. Countries would be expected to report on mainstreaming their trade needs into the development strategies, on the donor responses and on implementation and impact. The responsibility for reporting at the country level would be vested in the National Aid-for Trade Committee. Donors should report on funds contributed to AFT and on how they intend to meet their announced pledges, on the categories covered, and on progress in mainstreaming trade into their aid agenda. Multilateral and regional organisations should be encouraged to report regularly on their AFT activities, progress and impact. These organisations – including the OECD/DAC – could assist in providing inputs and in organising the periodic review in the WTO. The private sector should also be given the opportunity to report on their AFT contributions. The WTO Trade Policy Reviews (TPRs) of donors and recipients should include an assessment of Aid for Trade. Lastly, the Task Force recommended a review of the coverage of the Joint WTO/OECD Database to update it based on more accurate identification of needs (and the responses) by donors and recipients.

E. Next Steps

15. To fulfil in a holistic manner the mandate of paragraph 57 of the Hong Kong Ministerial Declaration, the Task Force exhorted the DG to use the recommendations to consult on "appropriate mechanisms to secure additional financial resources for Aid for Trade". It also invited him to continue, under his coherence mandate, the dialogue with the agencies on how to implement the advice of the Task Force, to establish an ad hoc consultative group to develop the practical follow-up of the recommendations and to examine how to implement the monitoring role of the WTO.

II. Follow-up to the Recommendations of the TF: the Report by the Director-General

16. At the December 2006 General Council meeting, the DG informed WTO members on his consultations with donors, who had reaffirmed their pledges made at Hong Kong, and gave his views on moving from the policy debate to the practicalities of implementation [note 7]. He stated that there was a better idea of the additional resources that would be available. At the July 2006 General Council meeting, the DG had reported on his consultations to secure additional financial resources for AFT with the relevant international organisations and agencies ( IMF, the World Bank, UNCTAD, ITC, UNDP, the Inter-American Development Bank, Asian Development Bank and African Development Bank, bilateral donors – US, UK, Japan, EC, Canada – and major bilateral development agencies) . His consultations had sought to determine the baseline donors and agencies intended to use to measure additionality and the criteria to decide to provide support in grant or loan form. Further clarification was required on the procedures for disbursing the AFT funds and if on the basis of this information a target AFT figure could be announced by the end of 2006. The DG stated that he would report on the outcome of these consultations, once he considered the process finalised. Taking into consideration the impact of the suspension of the negotiations of the Doha Work Programme on AFT, he stated that work on AFT would proceed, as the rationale for AFT remained valid, i.e. the link between a developing country’s trade policy and trade opening, whether with existing or new rules.

17. In his December 2006 report to the General Council, the DG reiterated the view of the Task Force that mobilising additional resources would depend on recipient countries making trade funding a priority and putting forward viable projects. He also stated that the main challenge was to arrive at a qualitative and quantitative assessment of AFT. More important than how much AFT was available, was to determine whether it was effective.

18. The DG also raised the problem of definition: how to distinguish AFT from overall economic assistance. He recognised that the Task Force had advanced on defining the appropriate categories, although these were still not precise enough. A line needed to be drawn, e.g. in infrastructure to avoid classifying all expenditure in infrastructure as AFT. Moreover, donors and recipients had different ideas of which projects or activities would fall under AFT and, while respecting these differences, the challenge still was to provide a coherent picture. Transparency and monitoring, to have a clearer view of what is taking place at present and what would be future needs, were indispensable for advancing the AFT agenda. Thus, his follow-up report [note 8] to the TF recommendations centred on monitoring and evaluation.

19. The DG’s report focused on the fundamental role the WTO will play in monitoring and evaluating AFT, by reviewing “whether AFT is adequately funded and whether it is delivering the expected results”. This surveillance would take place through periodical reviews in the Committee on Trade and Development and in an annual General Council debate, the first to take place in the autumn of 2007. The DG remarked on the WTO’s institutional experience of the TPRs. However, he made clear that the WTO would only be the provider of “outputs” (evaluation and dissemination of results and best practices) in the monitoring process, and that it would rely on other agencies and actors to provide the “inputs”, i.e. necessary data, information and case studies.

20. The contributions provided by AFT-related actors to be reflected in the periodic reviews on AFT would be based on monitoring at three levels: assessing global flows; progress reports from agencies and organisations and in-country assessments. On the total flows of AFT, the DG noted the importance of knowing whether additional resources were delivered, to identify the gaps and to increase transparency on pledges and disbursements. The DG cited the recommendation of the TF that the WTO/OECD Database should be reviewed to take into account the Task Force’s definition of AFT. Although not mentioned by the Task Force, the DG considered the other data collection and reporting system of the OECD/DAC, the Creditor Reporting System (CRS) the adequate mechanism to provide a global assessment of AFT flows and trends. His report supported the views of the Task Force on the role of multilateral and regional agencies in reporting on AFT activities progress and impact. In his view, they are best equipped to make quantitative and qualitative self-assessments on the scope and effectiveness of AFT activities. The in-country assessments, provided by the countries in cooperation with other stakeholders, would focus specifically on whether trade-related needs are being met, on the adequacy of financial resources and on achieving results on the ground. The participation of all stakeholders in the in-country assessments could provide incentives to promote mutual accountability.

21. In addition to the General Council debate on AFT and its periodic review in the CTD, the DG assigns a role to the Ad Hoc Consultative Group, which was recommended to be established, in the “infrastructure” for monitoring and evaluating AFT. It would be composed of the relevant multilateral institutions, the regional development banks and institutional representatives of the private sector. It would be convened periodically by the DG to assist in the preparation of the global reviews of AFT and would provide support in advocacy and fund-raising at country and regional level. The DG also reiterated the need for inclusion of Aid for Trade activities in the TPRs.

III. The Aid for Trade Debate: Reactions and Expectations

22. Both the Task Force recommendations and the DG’s reports on additional funding and on monitoring and evaluation gave WTO members a clearer idea of AFT, in particular with regard to its definition, coverage, additionality of resources, possible implementation and monitoring and evaluation. WTO members applauded the work of the Task Force and welcomed its recommendations. Although progress had been undeniable, fundamental questions remained. They relate mainly to the form in which AFT would be disbursed, i.e. as grants or as concessional loans.

23. From the AFT debates in the General Council, the position of the recipients was unanimous that for AFT to work, additional funding was essential. The African Group made clear that its expectation was that AFT resources would be additional, substantial, sustainable and in the form of donations. The LDC group shared this view, but added that for LDCs and IDA-only countries AFT should be in grant form and without conditionalities and that this would require a change in the culture of the multilateral institutions and in the countries concerned. The ACP group suggested that AFT should have two components: a soft one that would provide for adjustment through capacity-building and address the social costs of adjustment to trade liberalisation, and a hard-core physical component that would address trade infrastructure and diversification. The ACP group encouraged WTO members to seriously reflect on the institutional role of the WTO and its capacity to monitor aid delivery and effectiveness. Most members also agreed that as trade-related needs existed independently of the negotiations, AFT should not be conditional on the successful conclusion of the Round and should be implemented as soon as possible.

IV. Questions for AITIC Participating Members and Partners

24. Some questions are posed below to guide the debate at the Consultative Meeting organised by AITIC on AFT (and the enhanced IF) with Participating Members and encourage participants to give their views on specific unsettled issues pertaining to AFT implementation.

i. What are the baselines that should be used for gauging the additional resources that have been pledged for AFT?

ii. What are the main difficulties encountered in the identification of trade priorities and of viable projects? What complementary support is necessary in the process?

iii. What are the priorities in ensuring a more effective implementation and avoiding past failures?

iv. How to ensure that AFT actually builds capacities instead of replacing them?

v. Which government officials at which levels would need to be targeted for AFT-related training and capacity-building?

vi. How can trade advocacy be effective in creating a “culture of trade”?

vii. What capacities are lacking at the private sector level?

viii. What support is required in matching country needs and donor responses?

ix. What would be the terms of reference of the national and regional AFT committees? What assistance is required in the process of setting them up and coordinating their work?

x. What are the difficulties in carrying out the needs assessments?

xi. How to include AFT in the recipient country Trade Policy Review?

xii. How do you envisage the provision of information to the AFT Ad Hoc Consultative Group?

xiii. The Task Force recommended various third party monitoring responsibilities under Aid for Trade. What parties do you envisage to perform this role?

xiv. What would be the best way to keep non-residents informed on developments on AFT?  

List of Acronyms

Note 1: See Recommendations of the Task Force on Aid for Trade, WT/AFT/1, 27 July 2006. (return to text)

Note 2: See Recommendations of the Task Force on Aid for Trade, WT/AFT/1, 27 July 2006. (return to text)

Note 3: "Aid for Trade should aim to help developing countries, particularly LDCs, to build the supply-side capacity and trade-related infrastructure that they need to assist them to implement and benefit from WTO Agreements and more broadly to expand their trade. Aid for Trade cannot be a substitute for the development benefits that will result from a successful conclusion to the DDA, particularly on market access." (return to text)

Note 4: Japan committed USD10 billion over three years for trade-related development, the USD2.7 billion a year by 2010, and the EU and its member States of €2 billion per year by 2010. (return to text)

Note 5: Paragraph 57, Doha Work Programme, Ministerial Declaration Adopted on 18 December 2005, WT/MIN(05)/DEC, 22 December 2005. (return to text)

Note 6: 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. (return to text)

Note 7: See General Council 14-15 December 2006, Aid for Trade – Follow-up to Report and Recommendations of the Task Force, Statement by the Director-General, WTO, JOB(06)/267, 20 December 2006. (return to text)

Note 8: See Follow-up to the Aid-for-Trade Task Force Recommendations (WT/AFT/1), WTO Monitoring and Evaluation, Report by the Director-General , WTO, JOB(06)/262, 12 December 2006. (return to text)