Development Co-operation Directorate (DCD-DAC)

Aid-for-Trade: helping developing countries benefit from new trading opportunities (DACNews Nov-Dec 2005)


Pascal Lamy, Director-general World Trade Organisation.

One of the aims of the World Trade Organisation (WTO)  is to help developing countries, and in particular the poorest among them, expand their production and exports of goods and services.  Some countries are succeeding well – but others are not, including a large number of Least Developed Countries where trade is failing to make the contribution that it should be to economic growth and poverty reduction.

The Doha Development Agenda, the WTO round of global trade negotiations launched in Doha in 2001, sets out to address part of this problem by aiming at reducing trade barriers that these countries face in their main developed country export markets and in South-South trade.  Ambitious results there will go a long way towards fulfilling the development promise of the Doha Round.

Market access improvements are a necessary condition for increasing trade opportunities for developing countries, but on their own they may not be sufficient to lift everyone onto the path of sustained trade growth.  An ambitious market access package will need to be accompanied by Aid-for-Trade to address another part of the problem that many countries confront.  This is insufficient human, institutional and infrastructural capacity to participate effectively in international trade and expand the quantity and quality of goods and services that they can supply to world markets at competitive prices.

A comprehensive Aid-for-Trade initiative needs to respond to two sets of concerns.  One is the assistance that some WTO Members will need to help them implement the results of the trade negotiations, and to cope with any economic adjustment costs that may be incurred.  Effective implementation of commitments is in the interest of the WTO membership as a whole.  WTO Members can reasonably expect dedicated and secure assistance, both technical and where necessary financial to meet their legitimate implementation needs.  The Trade Facilitation negotiations, which are part of the Doha Development Agenda, are working explicitly towards that outcome.  Next year we should carry similar exercises in the other areas of the negotiation to address supply-side constraints and build necessary capacity.

The second, broader set of concerns is about the insufficiency of trade-related capacity in many WTO Members to benefit from the opportunities the multilateral rules-based trading system creates to increase investment and expand the production of tradable goods and services.  This covers a wide area – from setting up testing facilities in developing countries that will help ensure their products can meet technical regulations and sanitary standards in their main export markets, through to much larger-scale projects such as improving their transport infrastructure and trade logistics. 

The WTO is not a fully-fledged financing agency, nor does it have any ambition to become one.  But it has a specific know-how in the area of trade which makes it a valuable partner in collaborative efforts that are undertaken to meet trade-related capacity-building needs. These involve beneficiary countries and their development partners – the Bretton Woods institutions, regional development banks, bilateral donors and specialized agencies that have the necessary financing and technical expertise, such as the International Trade Centre.  The WTO can also play a valuable advocacy role, and help clarify the importance of trade infrastructure as a component of the development and poverty reduction strategies of developing countries.  At the end of the day Aid-for-Trade is a crucial complement to trade opening undertaken under the aegis of the WTO.

Further work on Aid-for-Trade, in the WTO and elsewhere, needs to be inspired by three principles.  First, Aid-for-Trade must be a complement to, not a substitute for, ambitious results from the Doha Development Agenda, particularly on market access.  Increasing trade opportunities for developing countries and in particular the Least-Developed among them, remains far and away the most important contribution that the WTO can make to development.  Second, Aid-for-Trade must not have to compete for existing ODA flows with other development and poverty reduction priorities; if more financing turns out to be needed to help build trade infrastructure in developing countries then additional financing will need to be found.  Third, the case for attracting Aid-for-Trade, and for using it to implement WTO agreements to build trade-related capacity more broadly, must have the commitment of trade, development and finance ministers and the support of private business and civil society in developing countries if it is to live up to its promise of catalysing their trade-related investment and production

This is the challenge that the international Community needs to take to translate the potential benefits of the Doha Development Agenda into realities for the millions in developing countries. As a Director-General of the WTO I stand ready to take it.