I. Introduction

1. The AITIC Forum was held to consider concrete follow-up action on issues raised by stakeholders in four consultative meetings on the Aid for Trade ( AFT) and Enhanced Integrated Framework (EIF) initiatives. The Forum, attended by over one hundred participants was opened by Dr Esperanza Durán, Executive Director of AITIC, who summarised the main points of these discussions. The rest of the speakers at the Forum highlighted the outstanding tasks, the upcoming challenges and the possible way forward. Participants used the discussion to exchange opinions on outstanding matters and to update each other on the status of work on AFT and the EIF.

II. Overview and Progress

2.  In her remarks on the state of play of AFT, Ms Valentine Rugwabiza, Deputy Director-General of the WTO recalled that the initiative was not intended to compensate for insufficient market access or even an eventual failure of the Doha negotiations. Opening markets and a meaningful development outcome remained the top priorities of the negotiating agenda. The main objectives of the AFT initiative were to secure additional resources, mainstream trade into development strategies and improve the efficiency and effectiveness of trade-related assistance and capacity-building.

3.  Ms Rugwabiza discussed ways to operationalise the objectives set forth by the Task Force Recommendations, issued in July 2006 and adopted by the WTO General Council in October 2006. On the demand-side, assistance must be provided to help recipient countries to accurately assess their trade-related needs with country ownership as a priority. On the supply-side, necessary follow-up was continued advocacy to provide additional resources and harmonise donor responses. Finally, a robust link has to be built between supply and demand and a clear system for AFT-monitoring should be created. Ms Rugwabiza informed the participants that the WTO would convene all the stakeholders to gauge the progress achieved on 20-21 November 2007.

4. Patience is a key component to a successful implementation of the initiative. The speaker admonished the audience not to expect AFT to immediately provide significant benefits to recipient countries. As a comparison, she referred participants to the long process that was necessary to develop an appropriate structure for the Integrated Framework (IF). Although a consolidated and enhanced IF was now in place, the issue of better aligning supply with demand in providing trade-related assistance to least-developed countries (LDCs) has been on the WTO agenda since 1997.

5. In conclusion, the speaker highlighted AITIC’s work as a valuable input in making these initiatives successful. AITIC has already set up a number of projects, created a webpage providing information on AFT [note 1] and the EIF [note 2] on its website and has developed an AFT project for the private sector [note 3].

III.  Enhanced Integrated Framework: Making it Work

6.  Mr Mark Gawn, from the Permanent Mission of Canada to the WTO,outlined the accomplishments and shortcomings of the original IF initiative. He described the activities undertaken by a Transition Team, created in 2006 to follow-up on the recommendations of the Task Force on an EIF [note 4], which was established in 2005. Since its inception, the Transition Team held over 60 on-the-record meetings, organised a workshop in Senegal and disseminated questionnaires to various stakeholders seeking consensus around feasible and appropriate ways of enhancing the IF. As a result of its consultations, the Transition Team developed a series of useful devices: a framework compendium and guidance notes for national implementation; a note clarifying the role of the donors and the in-country donor facilitators; and terms of reference for the IF Board, the Steering Committee, the Executive Secretariat and Trust Fund manager.

7.  Mr Gawn explained that some work remained to be completed, mainly on clarifying the relationship between the Trust Fund manager and the overall governing structure. Although the starting date for the EIF and some fundraising issues were still outstanding, the speaker announced that there was enough funding for the first two years of implementation and hoped that the EIF would be operational by Autumn 2007.

IV.   Aid for Trade: Myth or Reality?

8.  Mr Constantine Michalopoulos, AITIC, discussed progress made in operationalising the AFT initiative. As compared to the EIF, where a nearly operational programme was already in place, true progress in AFT cannot be expected in the near future, with many institutional changes yet to be made in-country and within multilateral agencies.

9.  In assessing additionality, the speaker pointed out that according to statistics from the Development Assistance Committee (DAC), 24 per cent of all assistance provided by OECD countries in 2004 was trade-related. Mr Michalopoulos expressed his concern regarding two issues: on the one hand, he was sceptical of the effectiveness of these funds, invoking the argument often raised by developed countries that recipients are not always giving a priority to trade in their national development plans. On the other hand, he considered the OECD data too broad, which resulted in too much assistance being classified as trade-related.

10.  Mr Michalopoulos referred participants to the difficulty in assessing to what extent increasing the productive capacity and improving infrastructure would result in more exports from developing countries. Therefore, he felt that an important first step in the AFT debate on assessing additionality would require the creation of more precise and narrow reporting concepts. This underscored the problems inherent to current donor reporting. In the absence of a vertical fund for AFT assistance, it is problematic to adequately assess the promised additionality relying upon direct funding from bilateral donors.

11.  On monitoring and evaluation, Mr Michalopoulos mentioned that global and in-country monitoring of AFT would be crucial. He agreed that both recipients and donors should promote the use of the current Trade Policy Review (TPR) process to this effect. This would, however, require a change in the TPR culture, to make it more development- oriented . In-country assessments can also play a significant role in tracking the AFT flows, which could be reported by developing countries to the OECD database.

12.  Mr Michalopoulos highlighted the need for greater policy coherence at both national and international levels. Pledges coming from developed countries should be better coordinated between the ministries of trade and development, while recipient countries should ensure that their demands are reflected as priorities. Internationally, both donors and recipients use assistance to promote better integration of developing countries into the multilateral trading system (MTS). Greater coherence is also needed between AFT and trade facilitation negotiations. Keeping these platforms separate, according to Mr Michalopoulos, might prove burdensome for donors and result in less meaningful commitments.

13.  In conclusion, the speaker echoed the call for patience from potential recipients made by Ms Rugwabiza, and advised them to reduce expectations, regarding AFT, as institutional changes and adjustment processes are time-consuming. However, he urged the stakeholders to move forward, taking into account the importance of AFT for developing countries.

V. Building Public-Private Partnerships

14.  Ms Patricia Francis, Executive Director of ITC, explained that a constructive relationship between the public and the private sector can contribute to economic growth in developing countries through increased trade. In order to build a positive dialogue, policy-makers must be mindful of talking “to”, and not “at”, the private sector. However, to date, the private sector has not been sufficiently involved in the discussions on AFT and the EIF. She noted that that the ITC’s AFT activities focused on making developing country companies more competitive; strengthening in-country trade support institutions; and improving policy frameworks for the integration of local businesses into the global economy.

15.  Underlining the importance of public-private partnerships, Ms Francis shared some lessons learned during two recent projects in which the ITC assisted Cambodian silk and Ethiopian leather exporters in finding international markets for their products. According to the speaker, in-country ownership of the process was crucial. Without active involvement of the local stakeholders, the priorities of a particular country cannot be understood. In addition, good coherence among agencies in the recipient and donor countries is necessary, and the private sector should be involved throughout the whole process from the early stage of needs assessment to its implementation.

VI. Aid for Trade: Strengthening the EIF through Supply-Side and Compliance Development

16.  Mr Lalith Goonatilake, Director, Trade Capacity Building Branch, UNIDO, highlighted that the lack of productive capacity, the difficulties in complying with requirements and the need to facilitate trade were the main challenges hampering the effective participation of developing countries in the MTS. He briefly outlined UNIDO’s contribution to AFT by explaining its efforts in strengthening the supply capacity and improving conformity infrastructure in these countries.

17.  As a member of the AFT Consultative Group, UNIDO has a major role to play in implementing the AFT Task Force recommendations. Focussing on industrial capacity, it works closely with the private sector, helping it to become operationally involved in the implementation of AFT and IF projects. Mr Goonatilake presented some AFT-type activities carried out by UNIDO in Bangladesh, Pakistan and the countries of the West African Economic and Monetary Union (WAEMU), which are aimed at improving the productive capacity and quality infrastructure as well as enhancing the competitiveness of local exporters. Another regional programme of technical assistance, designed by UNIDO in collaboration with the African Cotton Association and the International Cotton Advisory Committee, which would focus on 11 cotton-producing African countries, is currently under discussion with various donors.

VII. Discussion

18.  During the ensuing debate, several participants questioned the effectiveness of existing funding mechanisms for AFT. Ms Rugwabiza felt that creating a new vertical fund for AFT would generate increased red-tape while what was needed was rather a better partnership between the existing elements of the puzzle. Responding to a question on eligibility for AFT, Mr Michalopoulos pointed out that the list of eligible countries, in his opinion, should cover a larger group of low-income developing countries, including those that the World Bank had classified as International Development Association-Only (IDA-only) countries and small island developing states with special trade needs.

19.  Some participants were confused about the best method for assessing additionality in AFT. One of them noted the plethora of data available in the OECD database and the difficulty with making a relevant quantitative assessment with regard to assistance provided under this initiative. In response, Ms Rugwabiza pointed out that there must be a common reporting system, in which the OECD, acting as a central point, should cooperate with multilateral and bilateral donors, regional development banks and aid recipients. On the other hand, it will make little sense to increase the funding without developing in-country capacity to absorb additional resources. Mr Michalopoulos reiterated that under the current reporting system, which still needs a baseline and clear definitions of what constitutes AFT, it will be extremely difficult to determine whether, and to what extent, additional trade-related assistance is actually being provided.

20.  Coherence between the EIF and AFT was also a concern for confusion for some participants. Mr Gawn explained that AFT represented a broader conceptual framework, which included the EIF. Having limited resources, the EIF focused on mainstreaming trade-related development strategies and smaller seed projects for LDCs. The completion of the EIF structure should be followed by a dialogue among the various donors, regional development banks, and private sector lenders, participating in AFT. Mr Gawn recognised that the original IF was not always coherent and sometimes inappropriately sequenced with in-country processes, thus causing unnecessary delays and confusion in recipient countries. He supported the idea of building the EIF upon existing processes and cited the example of Zambia, where an already existing private sector development strategy was supported through the IF.

21. The IF Focal Point from Senegal sought clarification on how the funds would be used under the EIF and whether disbursements would be made on a first-come, first-served basis or if a predetermined amount would be made available for eligible countries. Mr Gawn explained that new activities would be funded under the IF, but was not certain whether there would be a cap under Tier 2 or not. These issues as well as the starting date would have to be addressed by the future IF Board.

22. Mr Edward Brown, First Secretary, Permanent Mission of the United Kingdom, said that the most interesting and challenging phase of the EIF was yet to come. Progress has been made on enhancing ownership of the LDCs and a political consensus has developed on the need to more actively involve the private sector. This stakeholder group had important value to add in the process of updating the Diagnostic Trade Integration Study (DTIS). Unfortunately, the level of awareness of the IF in the business sector of many LDCs was still very low. The EIF would seek the collaboration of other non-IF agencies, such as the Food and Agriculture Organization (FAO) and UNIDO. He expected that AFT stakeholders would analyse the effectiveness of working processes under the EIF in greater detail, given that to date no such mechanism for the coordination of assistance existed under general AFT.

23. The Secretary-General of the Chamber of Commerce, Industry, Mining and Crafts of the Central African Republic, intervened to highlight progress made so far in raising the profile of trade in the international development agenda. African ministers of finance had underscored their commitment to integrating trade into development strategies at a ministerial-level meeting in Addis Ababa in early April 2007. Due to the DTIS process, African LDC governments are more actively seeking to incorporate private sector needs into development strategies but the Secretary-General also noted that it remained extremely difficult to secure funding for such programmes. She hoped that donors, including regional development banks, would adjust their policies so as to facilitate the participation of this most important stakeholder group.

24.  On the WTO monitoring role of AFT, some participants felt that third-party monitoring could be a valuable tool, both in-country and at the global level, but it had yet to be adequately coordinated with the WTO. A participant from the Overseas Development Institute (ODI) argued that the current TPR structure would not be sufficient for monitoring purposes because the private sector is not always involved in the process.

Acronyms

Note 1: See AITIC’s Aid for Trade Page at http://www. acici.org/aitic/AidForTrade/index.htm (return to text)

Note 2: See AITIC’s Enhanced Integrated Framework Page at http://www. acici.org/aitic/EIF/index.htm (return to text)

Note 3: See Aid for Trade and the Private Sector at http://www. acici.org/aitic/AidForTrade/PS.htm (return to text)

Note 4: See An Enhanced Integrated Framework, WTO, WT/IFSC/W/15, 29 June 2006. (return to text)