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Many developing countries, in particular the least developed, face supply-side constraints that severely limit their ability to benefit from trade. Aid for trade refers to a subset of development assistance designed to help these developing countries address supply-side bottlenecks and boost their capacity to take advantage of expanded trade opportunities. It comprises aid that finances trade-related technical assistance, trade-related infrastructure, and productive capacity building. These categories of aid account for around a fifth of total sector allocable ODA.
The 2005 Hong Kong WTO Ministerial Declaration called for the expansion and improvement of aid for trade and set in motion a process to achieve this: the Aid-for-Trade Initiative. Following OECD recommendations on how to make aid for trade effective, a WTO Task Force on Aid for Trade, set up in 2006, recommended strengthening the 'demand-side' and the donor 'response', and bridging the gap between 'demand' and 'response' at the country, regional and global level. To improve the effectiveness and accountability of aid for trade, WTO members agreed that the WTO, in exercising its coherence mandate, should work closely with partner agencies to monitor aid for trade, formally launching the Aid-for-Trade Initiative.
The global monitoring process set up by the WTO aims to create incentives, through enhanced transparency, scrutiny and dialogue, for providing more and improved aid for trade. It is about sharing information, learning from successes and failures, and applying the policies and approaches that we know to be effective, as embodied in the Paris Declaration on Aid Effectiveness.
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Why is the OECD involved?
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The Development Assistance Committee (DAC) and the Working Party of the Trade Committee are jointly helping to tackle the challenge of how to make poorer countries benefit further from trade. In particular, their work covers the following three issues:
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How much aid do donors already provide in support for trade?
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How effective are these programmes?
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How can aid for trade help developing countries, particularly Least Developed Countries (LDCs), to fully benefit from trade liberalisation and WTO Agreements?
The aim of this work is to make aid for trade more effective by strengthening the integration of trade in development programmes, developing impartial and reliable tools to assess aid-for-trade programmes, and fostering dialogue and knowledge-sharing between stakeholders.
The WTO Task Force on Aid for Trade recommended establishing two accountability mechanisms to track progress in implementing the initiative and to enhance its credibility: (i) at the local level, to foster genuine local ownership and ensure that trade needs are integrated into national development strategies and adequately addressed; and (ii) at the global level, to increase transparency about what is happening, what is not, and where improvements are required.
Following these recommendations, the OECD and the WTO established an aid-for-trade monitoring framework. The objective of the framework is to promote dialogue and encourage all key actors to honour commitments, meet local needs, improve effectiveness, and reinforce mutual accountability. The value of this joint OECD-WTO monitoring framework lies in creating incentives, through enhanced transparency, scrutiny, and dialogue (i.e. putting a "spotlight" on progress), to foster synergies between trade and other economic policy areas in developing countries, as well as to improve the coherence of aid for trade with overall donor strategies - all essential components of effective aid delivery as embodied in the Paris Declaration on Aid Effectiveness.
The assessment of whether progress is being made towards the aid-for-trade objectives consists of four elements that were identified by the WTO Aid for Trade Task Force (i.e. the logical framework):
- Mainstreaming and prioritising trade (i.e. 'demand');
- Trade-related projects and programmes (i.e. 'response');
- Enhanced capacity to trade (i.e. 'outcome'); and,
- Improved trade performance and reduced poverty (i.e. 'impact').
Learn more about how this logical framework for aid-for-trade assessment works.
Reports
OECD/WTO Aid for Trade at a Glance 2009: Maintaining Momentum
This report presents the results of the second monitoring exercise of the Aid-for-Trade Initiative and documents its success so far. It examines trends and developments, and presents a comprehensive analysis of donor and partner country engagement. In addition, it addresses the regional dimension of aid for trade, showcasing three cross-border infrastructure projects, and provides country factsheets that help assess the outcomes and impacts of aid for trade.
OECD/WTO Aid for Trade at a Glance 2007
This report takes stock of the trends and developments in aid-for-trade flows between 2002 and 2005. It also sets out the OECD/WTO monitoring framework and provides an overview of a survey sent to donor and partner countries to collectinformation on their aid-for-trade strategies, pledges and delivery.
Trade Related Assistance - What Do Recent Evaluations Tell Us? (2007)
This report draws on the key findings and recommendations from available donor evaluation reports, assesses factors that have contributed to the success (or failure) of programmes, and provides guidance for enhancing the effectiveness and impact of future trade-related assistance as a complement to the Doha Development Agenda.
Aid for Trade: Making it Effective (2006)
This report contains the OECD's contribution to WTO consultations with international organisations on appropriate mechanisms to ensure additional financial resources for aid for trade. It addresses 3 main questions: i) How much aid do DAC donors already provide in support of trade? ii) How affective are these assistance programmes? and iii) How can aid for trade work as an effective tool for helping developing countries fully benefit from trade liberalisation and the WTO Agreements?
Papers
Trading Out of Poverty - How Aid for Trade Can Help (2009)
Key Element of Best Practice in Aid for Trade (2008)
Binding Constraints to Trade and the Role of of Aid for Trade (2008)
Monitoring of Aid for Trade: A Background Note (2008)
Aid for Trade Global Review 2009, 06-07 July 2009
OECD Policy Dialogue on Aid for Trade, 03-04 November 2008
Global Review of Aid for Trade 2007, 20-21 November 2007
Regional Aid for Trade Practitioners Fora 2007
OECD Policy Dialogue with Non-Members on Aid for Trade, 06-07 November 2006
www.oecd.org/dac/aft
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