The Aid for Trade (AFT) initiative, launched at the Sixth Ministerial Conference in Hong Kong in December 2005, has evolved swiftly in a number of areas: the Task Force defined it and gave recommendations on how to operationalise it; the OECD has worked on the monitoring mechanism and achieved notable advances; the WTO has been the prime promoter and “coordinator” of AFT providers, including regional development banks, bilateral donors and multilateral agencies. Three regional meetings for “mobilising” AFT have already taken place and the first Global Review will discuss the outcomes. However, despite all this progress, the AFT picture remains blurred and many questions remain: How can countries access it? Will the “old” AFT (i.e. pre-2006) be folded into the new initiative and if so how can additionality be discerned? How will the new AFT be different from the “old”? What are the eligibility criteria? What mechanisms to measure quality instead of quantity? Hopefully, the Global Review will assist countries in clearing these doubts.

This information note seeks to update the previous communications issued by AITIC that have followed the evolution of Aid for Trade [note 1]: it takes stock of the steps taken in 2007 to operationalise it, including the three regional reviews, in Latin America and the Caribbean, Asia-Pacific and Africa and what is planned and expected of the Global Review. Finally it reminds readers of the area where questions still linger. It is hoped that the information contained in this note will assist the less-advantaged countries (LACs) to better follow the discussions to be held in the General Council on AFT in November 2007.

I. The Regional Reviews

1. The aim of the regional reviews was to examine AFT in developing countries, particularly the least-developed among them, in three different geographical areas: Latin America and the Caribbean, Asia and Africa. These reviews will be the building blocks for the Global Review by the WTO General Council. The focus was on building the capacity needed of these countries to expand trade and to effectively integrate into the world economy. Although the meetings mostly followed the same pattern, each had its unique features, which will be explained below. The meetings were very successful in bringing together bilateral donors, multilateral agencies and prospective recipients of AFT: they were informative, provided a unique opportunity for active networking although the conclusions and recommendations were somewhat elusive.

1. Objectives

2. In the words of the WTO Director General, Mr Pascal Lamy, three main clusters of objectives were sought in the regional reviews:

First, leadership and the regional dimension of AFT: these reviews aimed at highlighting the importance of leadership and vision in developing countries on how to trade, with a focused and unrelenting commitment to export-led growth and to become more competitive, and the relevance of a comprehensive strategy to achieve this. The first step to mobilise AFT was to make trade capacity and infrastructure a national priority. These priorities were often regional, which meant that new ways should be found to finance and implement projects regionally.

Second, the importance of mobilising the requisite finance: Mr Lamy stressed the need to focus on the required financing, on how to mobilise it, and on how to deliver it more effectively. The challenge was to make donors and international agencies focus more on trade and growth in their own development planning. He acknowledged that the reviews, while not closing financing gap overnight, should lay out the immediate and long-term plans for doing so.

Third, the role of the private sector: it was important to tackle the obstacles economic operators faced when trading and how their views could be incorporated more directly into national trade planning and strategies. Given that private investment — both foreign and domestic — was a major element to build capacity and infrastructure, there was a need to focus on the incentives that are required to attract private resources.

2. Common Features

3. The three reviews were organised with a general common format, under the general title: “Mobilizing Aid for Trade”. All three grouped participants from the region such as Ministers of Trade and Finance and key private sector operators, with representatives of bilateral donors and international and regional agencies. Two workshops were held the day before the AFT event proper. One of these workshops or “pre-events”, organised by the International Trade Centre (ITC), focused on the private sector dimension and on the different aspects of AFT it is involved in: its advocacy role in policy making, its participation in the design, finance and execution of infrastructure, trade finance as a tool of AFT and small and medium sized enterprises (SMEs). The other event, organised by the WTO was on the Standards and Trade Development Facility (STDF) [note 2]. The STDF helps developing countries to better benefit from market access opportunities. It also coordinates donor activities, mobilisation of funds and sharing of experiences and good SPS practices.

4. Similarly, all three regional meetings had a “post-event” organised by the OECD: the “Practitioners’ Forum on Monitoring Aid for Trade”, where the joint WTO-OECD questionnaires sent to donors, partner countries and international agencies as the basis for “self-assessments” were discussed. The aim was to explain the WTO monitoring framework of AFT and the rationale behind the questionnaires, and to assist the recipients in shaping the content of their replies which would contribute to fine tune the OECD’s monitoring mechanism for gauging AFT flows.

5. In all three regional reviews, the WTO had the regional development banks and the World Bank as its partners in the organisation of the events. The Presidents of all three regional development banks attended the meetings, to which the host national governments assigned top importance: in Lima, President Alan Garcia of Peru, and in Manila, President Gloria Macapagal Arroyo of the Philippines closed the Latin American and the Caribbean and the Asia reviews respectively. In Dar es Salaam, the conference was opened by Tanzania’s Vice President Ali Mohamed Shein.

3. Regional Specificities

6. Although similar objectives and programmes characterised the regional reviews, each one had unique features in line with the differences in country composition as well as on levels of development.

A. Latin America and the Caribbean (Lima, 13-14 September 2007)

7. After the opening plenary session, the meeting was started with a global presentation by the Inter-American Development Bank (IDB) on AFT in Latin America and the Caribbean, followed by a dialogue between Ministers of Finance and Trade and representatives of major donors (US and the EU) and the OECD and the World Bank. This dialogue was followed by case studies of Peru and the countries in the sub-regions: the Caribbean and Central America and Mexico. The diversity of the countries, mostly middle-income, but which also include small, vulnerable economies, as those in the Caribbean and Central America, and a least-developed country (LDC), Haiti – highlighted the importance of a case-by-case approach. It could also be assumed that the larger and more influential countries in the region, with a good track record on trade (such as Brazil, Argentina and Mexico) would be involved in AFT not so much as recipients, but as prospective donors, mostly in providing assistance in kind. The cleavage between the better endowed and the LACs in the region was also noted in their differing trade interests: those negotiating Economic Partnership Agreements (EPAs) with the EU were concerned about the loss of preferences in the worst case, or their erosion in the best, when the others try to gain preferential market access through the negotiation of free-trade agreements (FTAs) with the US and the EU, or through APEC. One common trend in the region is henceforth the growing appeal of bilateral and regional trading arrangements. AFT could be a tool to give the region a sounder trade platform.

B. Asia – Pacific (Manila, 19-20 September 2007)

8. The meeting underscored the role played by trade in creating “two-speed Asias”, i.e. one that had adopted outward-oriented development strategies and had invested in infrastructure and was witnessing rapid economic growth and another, composed of Asia-Pacific countries (particularly the least-developed and small states) that still lacked the capacity and infrastructure to make the “big leap”. The fact that the Asia-Pacific review took place at the headquarters of the Asian Development Bank (ADB) permitted a wide participation of and dialogue with the bank staff, contributing to making the networking sessions more participatory. The opening sessions underscored the importance and the potential of AFT for the Asia-Pacific region. These sessions were followed by a plenary with representatives of the private sector on the potential of Private-Public Partnerships (PPPs) in AFT. This session focused mainly on the role of the private sector in providing export credit and investment insurance. The regional sessions focussed on the Philippines, South Asia and on the Greater Mekong Sub-region (GMS) – in which the Cambodia and Lao PDR, two LDCs, presented their ways of mainstreaming trade into their development strategies. The reports on the “break out” regional meetings were followed by a very interesting plenary on donor partnerships in the Asia-Pacific region.

C. Africa (Dar es Salaam, 1-2 October 2007)

9. In the Africa review, the United Nations Economic Commission for Africa (UNECA) joined the African Development Bank (AfDB) and the WTO in the organisation of the meeting. During the first plenary session, where the importance of AFT in Africa was the focus, the representative of the World Bank remarked that African countries could be as competitive as their Asia counterparts: their handicap was more in infrastructure, how to get products from the factory to the port. The break out sessions focused on the following regions: Central and West Africa, East and Southern Africa and North Africa. In these meeting there was active participation of policy-makers and private sector representatives, who highlighted the systemic obstacles that slowed-down trade development. At the second plenary session, on “Empowering the Private Sector” speakers included the heads of two UN organisations (UNIDO and ITC) and representatives of investors, employers, manufacturers and farmers associations. This dialogue promoted information sharing and paved the way for new approaches to harness the available resources (and those that would be forthcoming from AFT) for filling in identified gaps. The theme of the final plenary session was “Leveraging Development Banks” with the participation of high level representatives of the West African Development Bank, the Development Bank of Southern Africa and the Eastern African Development Bank, who informed about their past experiences on AFT and plans for making more AFT available in the future.

II. Global Review (Geneva, 20-21 November 2007): What are the Expectations?

10. The official objectives of the review as explained by the WTO would be threefold: (i) taking stock and taking the different strands to present a coherent picture of what has taken place on AFT; (ii) identification of the next steps; and (iii) improvement of the monitoring and evaluation system. On the first objective, according to the WTO the results and “recommendations” of the three regional reviews will be discussed as well as the “three tiers” of monitoring: (a) the global tracking of AFT using the OECD’s Creditor Reporting System (CRS), (b) the reports on the donors’ self assessments and (c) the reports on the partner countries’ self assessments; both (b) and (c) are the outcome of the WTO/OECD questionnaires.

11. On the follow-up or next steps, the focus will shift from raising awareness to implementation and thus to a more technical dialogue with the participation of donors, partner countries and international agencies. They will be expected to agree on a road map, by identifying key objectives and the strategies to accomplish them.

12. Finally, on the improvement of the monitoring and evaluation process, the objective is to develop qualitative assessment, with targets to improve trade capacity. The World Bank and the OECD are encouraged to play a key role.

13. While these objectives are laudable and augur a very productive two-day meeting, avoidance of the impression of it being “stage-managed” would have required to circulate among the WTO members and observers the results of the self-evaluation questionnaires prior to the meeting. Similarly, a report on the results of the three regional meetings soon after, in particular the recommendations, would also have been welcome, in particular by the partner countries, not only as a means of informing those who were not present, but giving time between the regional meetings and the Global Review to reflect on the follow up. Heads of important international organisations (OECD, the World Bank, IMF, UNDP, UNCTAD, ITC and others), and those of the regional development banks, will participate. This is an illustration of the importance assigned to AFT. However, if this first Global Review is to be judged successful and not merely in terms of spin and photo opportunities, it will have to produce tangible results on what are the concrete steps that will be taken, hopefully through a bottom-up and not top-down approach. A road map for 2008, which reflects the genuine concerns and priorities of the partner countries and how will these be addressed by the AFT initiative will be expected. Hopefully, proposals from the partner countries will receive a sympathetic hearing from donors and international agencies which are AFT providers.

III. The Unanswered Questions

14. A vital and as yet unanswered question is how to access AFT? The pre-condition for being eligible have been known for some time, i.e. mainstreaming trade into the national development plans. However, the mechanisms for submitting projects for finance under the AFT initiative have remained obscure. The answer given at the Aid for Trade chat with Mr Lamy [note 3] was: “The Aid for Trade Initiative is not about establishing a new mechanism for delivering aid – there are already enough development agencies and actor [sic]. The aim is to encourage existing agencies to [deliver] more Aid for Trade – and more effectively.” It was also stated that “the Global Review will […] ask multilateral and bilateral actors to explain how they plan to improve delivery and effectiveness – including simplifying and speeding up the way proposals are assessed and acted on.”

15. The Global Review can also be useful in resolving lingering doubts about other important AFT issues which remain unclear. Since the launching of the initiative Partner countries were concerned with additionality, i.e. that the funds pledged at Hong Kong (and before that at the G-8 Summit in Gleneagles) would be up and above what was already on the table as trade-related official development assistance (ODA), and that the AFT initiative would not amount to “creative accounting”.

16. In order to be able to gauge the additionality the definition of the reference period against which “new” AFT will be measured was essential. However, no clear answer has been given to this question. “Year one” has been mentioned (e.g. in the programme of the Global Review). However, it is not clear what “year one” is. A priori 2006 could be regarded as the start-up point, when the preliminary work was done by the Task Force, but its recommendations were only adopted in late 2006 (October). At the electronic Aid fort Trade chat with Mr Lamy the answer was all but clear [note 4]. The same doubt on the time frame concerns the monitoring and evaluation mechanism.

IV. AITIC’s Vision, Priorities and Plans for AFT

17. Following the encouragement of the WTO for agencies which are AFT providers to outline their “vision” and plans for AFT, AITIC has sought to plan taking into consideration the institutional and political contexts.

The Negotiations. Although neither their swift conclusion nor their outright failure can a priori be excluded, it seems unlikely that the WTO negotiations launched in Doha in November 2001 are to conclude in 2007, or even in the following year. Progress has been slow until now and the domestic political agenda of some major WTO members will make it very difficult for their governments to accept the kind of concessions required to reach an ambitious Doha outcome. Thus, in all likelihood, WTO members, and the LACs amongst them, will continue negotiating the Doha Work Programme (DWP) in the next few years. This is not altogether negative from the point of view of the LACs. This will give them more time that would be well used to improve their understanding of the already existing WTO agreements as well as the various issues under negotiation. This will allow them to further develop their negotiating strategies and positions.

Trade Policy. Whilst pursuing the negotiations on the DWP, WTO members remain bound by a continuous requirement to implement existing WTO agreements. For many LACs, this has been a major challenge over the past twelve years. As has been frequently reported in their Trade Policy Review (TPRs), most of them still have a reform backlog to put their domestic laws and regulations in conformity with their WTO obligations. Meeting the requirements of WTO rulebook will not, however, automatically give these countries a coherent trade policy that will support their economic development. Indeed, many LACs still show deficiencies, small or big, in the formulation of such a trade policy. These aspects, which cannot be dissociated, need to form an integral part of the LACs’ efforts to develop and implement a suitable trade policy and to reap the benefits of their participation in the MTS.

Accessions. The list of the countries seeking to accede to the WTO is still considerable. The accession process has proven to be long and arduous for most countries and particularly for the LDCs. It exposes acceding LACs to a multiplicity of challenges: the establishment of institutional mechanisms to manage the accession process itself, analysing and explaining their trade policy to the other WTO members – something that the WTO Secretariat performs through the TPRs for existing WTO members – undertaking major regulatory reforms, devising negotiating strategies to negotiate with all interested members, to name but a few. Having to undertake most of them simultaneously further stretches the limited resources of LACs trying to accede to the WTO.

Enhanced Integrated Framework (EIF). The EIF should also benefit from the AFT initiative. Through the recognition that building supply-side capacity and trade-related infrastructure are necessary to implement and benefit from the WTO agreements and to enhance trade, trade-related ODA to LDCs could be transformed.

18. Effectively operationalising AFT (and the EIF) is a major test for both donors and recipients. AITIC has sought from the launching of these initiatives to contribute to a better understanding of the challenges and to assist potential recipients to identify priorities in this regard. The operationalisation of AFT and the EIF, together with the implementation of the results of the negotiations, will be a tall order for the LACs. The trade-related technical assistance (TRTA) needs of AITIC Members will consequently change dramatically over the coming years compared to what they are today. AITIC’s strategy seeks to meet this challenge successfully.

Acronyms

Note 1: “Aid for Trade: A Moving Target”, AITIC Background Note, April 2006; “Aid for Trade: Keeping up the Momentum”, AITIC Information Note, February 2007. See also AITIC’s Aid for Trade web page: http://www.acici.org/aitic/AidForTrade/index.htm. (return to text)

Note 2: The STDF is a joint initiative of 5 international organisations, the FAO, the OIE, the World Bank, the WHO and the WTO whose aim is to assist developing countries to develop their capacity to implement international sanitary and phytosanitary (SPS) standards and to improve donor coordination and good practice in relation to SPS-related areas. (return to text)

Note 3: Held on 16 November 2007, from 11.00 – 12.00. (return to text)

Note 4: Reply: What we are trying to do is to establish a solid base period for Aid for Trade numbers. And I understand that we will take the 2002/2005 period to do that. First, because of availability of numbers. Second because commitments double [sic] A4T were taken in 2005. (return to text)