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What is aid for trade?
Many developing countries, in particular the least developed, face supply-side constraints that severely limit their ability to benefit from the multilateral trading system. Aid for trade refers to a subset of development assistance that is 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 aid to develop productive capacity. 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, i.e. the Aid-for-Trade Initiative. Following the OECD advice on how to make aid for trade effective, a WTO Task Force on Aid for Trade, formed 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, the WTO members agreed to monitor aid for trade, formally launching the WTO-led 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 as well as failures, and applying the policies and approaches that we know to be effective, as embodied in the Paris Declaration on Aid Effectiveness.
Why is the OECD involved?
The Development Assistance Committee (DAC) is helping to tackle the challenge of how poorer countries can benefit more from trade. It examines, in particular, the following three issues:
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How much aid do donors already provide in support of trade?
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How effective are these programmes?
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How can aid for trade help developing countries, particularly the Least Developed Countries (LDCs), to fully benefit from trade liberalisation and WTO agreements?
Together with the Working Party of the Trade Committee, DAC is working 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 among stakeholders.
Recent events
Aid for trade is building stronger economies. All countries need to trade, with their neighbours and globally, to sustain long-term economic growth. Some low-income countries lack the instutitions, infrastructure and supply-side capacity to benefit from open markets and lift their people out of poverty.
OECD Policy Dialogue on Aid for Trade, 3-4 November 2008. "Time to make an impact." Over 250 representatives from more than 70 countries met in Paris over two days to discuss key challenges in implementing Aid for Trade strategies and examining what works best in building trade capacity. The Secretary General of the OECD, Angel Gurría, opened the dialogue event and appealed for maintaining Aid for Trade commitments despite the current economic downturn, which in effect, demonstrates why Aid for Trade should receive a high profile in the years to come.
OECD/WTO Aid for Trade at a Glance 2007. The OECD and the WTO have worked closely together to establish a joint aid-for-trade monitoring framework. Their new global monitoring 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 gather information about their aid-for-trade strategies, pledges and delivery. The report was presented by the OECD Secretary-General Angel Gurría (speech) at the High-level segment of the Global Review of Aid for Trade on 20 November 2007.
Regional Aid for Trade Practitioners Fora in 2007. With the aim of improving the impact of the aid-for-trade monitoring exercise, the OECD, in collaboration with the WTO and the regional development banks, organised a series of Practitioners Fora on Monitoring Aid for Trade in Latin America, Asia and Africa in advance of the first Annual Global Review of Aid for Trade in the November 2007 WTO General Council meeting.
OECD Policy Dialogue with Non-Members on Aid for Trade: From Policy to Practice, 6-7 November 2006. The OECD organised a policy dialogue on Aid for Trade in Doha, Qatar which brought together a wide range of stakeholders from developing and developed countries to share experiences and information on how best to support developing countries' trade expansion and make it an engine of economic growth and poverty reduction.
www.oecd.org/dac/trade/aft
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