Aid for Trade: Making Globalisation Work for All


Remarks by Angel Gurría, OECD Secretary-General at the "Aid for Trade Global Review" organised by WTO Geneva, Switzerland

20 November 2007
Mr. Lamy, Ladies and gentlemen,

It is a great pleasure to be here with you at this first Global Aid for Trade Review. I want to thank the WTO Director General for having put so much energy and enthusiasm into this highly relevant initiative. I feel we are establishing the foundations of a new dimension of development co-operation. One that can make a huge difference in empowering the poor and in helping them to exploit the opportunities globalisation provides.

Trade liberalisation can be a powerful engine for economic development. It has helped lift millions out of poverty, especially in Asia and Latin America. Since its accession to the WTO, China’s global trade, for example, has been growing faster than in any other developing country, reaching 60% of its GDP in 2005. India has set off on a similar route. Latin America is going through one of its strongest economic expansions ever, based on a central turbine: 1.2 trillion dollars of annual trade-flows; the equivalent to 45% of the regional GDP.

However, many developing countries and regions are still facing difficulties in capturing the benefits of more open markets. In these countries and regions, governments, institutions and enterprises often lack capacities ─such as information, skills, policies, procedures and infrastructure─ to compete effectively in international markets. This uneven capacity to profit from globalisation is producing an unbalanced world where nearly 3 billion people live on less than 2 dollars a day and 1 per cent of adults own 40% of global assets. We all know these disparities are unsustainable.

At the OECD we remain committed to transform globalisation into a more inclusive process, into a more level playing field. This is why we have joined efforts with the WTO on the Aid-for-Trade initiative. This is why we are using all our experience and capacity to establish a joint OECD/WTO monitoring system. The report “Aid for Trade at a Glance 2007” is the first culmination of these efforts. We very much hope it will become a regular “spotlight” on Aid for Trade.

But let me start with a few words about the international aid effort more broadly and the commitments made at places like Gleneagles, the UN or Hong Kong.

The targets set in 2005 to raise ODA from 80 billion dollars in 2004 to 130 billion in 2010, and to double aid to Africa in the same period, are the most specific and ambitious we have ever seen. Additional aid for trade, and the Hong Kong pledges, will come as part of this overall expansion of ODA. 

Some donors have announced very impressive budgetary expansions to meet these targets. Others have yet to do so. But the underlying progress in moving from pledges to disbursements is so far relatively small. The headline numbers for ODA in 2006 show a dramatic increase to some 105 billion dollars, but that includes 20 billion of debt relief, notably to Iraq and Nigeria. So, not very impressive, you might think, in the final analysis.

What we all need to recognise is that scaling up aid is remarkably hard work; both in donor and developing countries. There is a very high degree of forward planning, of discussion, of programme and project preparation involved. Take the case of infrastructure and especially regional infrastructure, with all the political agreements and legal implications, as well as the planning and contracting arrangements that have to be put in place. This does not happen in one go.

We need to push forward on the aid effectiveness agenda to streamline the aid process and thus reduce the time gap between aid pledges and aid disbursements. Our OECD Development Assistance Committee (DAC) has been carrying out a survey on programmable aid to help track what is in the pipeline and where it is going. The OECD is also working with the World Bank, the IMF, the UN and various partner countries on how to make scaling up happen on the ground in developing countries, in a predictable and sustainable way.

Monitoring Aid for Trade

Now, as I said, monitoring Aid for Trade is at the centre of our joint initiative with the WTO. An effective and systematic monitoring of these flows will strengthen mutual accountability and will provide incentives to improve the impact of our assistance.

The creation of this joint OECD/WTO Aid-for-Trade monitoring framework is a major achievement. The report we are presenting here today takes stock of trends and developments in aid flows. It also provides an overview of donor and partner country responses to the survey about their aid-for-trade strategies, pledges and delivery, which was sent to all WTO members during the summer.

Monitoring Aid for Trade is work in progress. But it is already yielding significant insights. Let me share with you some of our findings.

Aid for Trade flows

Putting a figure on the volume of Aid for Trade is not an exact science. Almost every type of economic aid has a potential contribution to trade or trade related activities. How much of a road or bridge or telecommunications network facilitates trade and how much of it contributes to general economic development? And what about ODA for education and health, which helps build up the stock of human capital, an essential factor in making it possible for poor countries to move up the value chain and thus benefit from globalisation? Or investment in governance and commercial justice systems, which underpin the efficient services and complex contracting that trade development involves?

Of course we are not trying to include all this information. We are, however, trying to be comprehensive. In this light, the OECD/DAC database on ODA flows gives us detailed data of individual aid activities in trade policies and negotiations, and it gives us proxies for others such as productive capacity building and economic infrastructure. Not everyone agrees with this approach but it is a start and follows the recommendations of the WTO Task Force on Aid for Trade. On this basis, this is what our data tell us:
Between the start of Doha Round in 2002 and the Hong Kong Ministerial Conference in 2005, donors provided an average annual support of 21 billion dollars on aid categories most closely associated with Aid for Trade. This represents about one third of total sector Official Development Assistance (ODA Of these 21 billion dollars, $11.5 billion was dedicated to Economic Infrastructure and $9bn to promote productive capacities. Just over $0.5bn went to trade policies. 

According to our proxies, Aid for Trade commitments are increasing, but not as fast as ODA for health and education. Unfortunately, we only have global data until 2005 and consequently we are not yet able to track the impact of Hong Kong Ministerial and the WTO Aid-for-Trade initiative. However, donors have reconfirmed their Hong Kong pledges on aid for trade. Now if we can take the monitoring exercise even further to develop indicators, we could track progress better and compare performance and results, but I will come back to that in a minute.

Promoting Effective Aid for Trade

Just like in any successful project, the degree of effectiveness of Aid for Trade will determine the size of its future funding. Promoting effective and efficient Aid for Trade programmes that deliver concrete results is crucial to raise awareness and engagement among all the participants.

The basic mechanism to improve Aid for Trade effectiveness is monitoring itself. This round of monitoring was very much focused on process and the application of the Paris Declaration Principles on Aid Effectiveness, a landmark agreement that builds on an unprecedented level of consensus to make aid more effective.

Considering this is the first survey on Aid for Trade, it is too early to tell how much progress we are making in increasing effectiveness. This first monitoring of the Paris Declaration Principles will serve to establish a baseline on agreed indicators, so that next year we can measure progress with these new indicators.

Donors are fully aware of the importance of reducing transaction costs, while partners are calling for further efforts particularly in easy wins such as joint analysis and missions. However, the gap between intentions and implementation is even larger in areas like results’ management and mutual accountability. Both donors and partner countries are aware of the concepts but find it very difficult to set joint objectives and undertake joint evaluations. These are important findings.

Let me tell you what we need to do to increase the incentives to step up Aid for Trade efforts.

The steps forward

We need to start tracking progress. I mean progress in the implementation and impact of Aid for Trade. Not just tracking intentions.

In terms of flows, next year we need to include disbursement data in our analysis. This will give us a much more accurate picture of actual amounts of ODA spending.

In terms of aid delivery, we need to spur greater mutual accountability on the results that Aid for Trade is producing. We need to be able to track progress on trade performance at a local level. This will help us assess the success of this initiative at a global level; and it will also enable us to learn from each other’s successes and failures. To do so we need to agree on indicators that would allow us to compare performance across donors and developing countries, track results and assess effectiveness.

We need additional evaluation methods and indicators that tell us how countries and regions are doing in terms of trade capacity building. And we must produce this information in such a format that leaders can understand at a glance and respond accordingly.  Mr. Lamy has requested OECD support in producing these indicators. I can assure you we will make a solid contribution.

But let’s not lose sight of how difficult the task is.

Politically, we still face important challenges. We need to strengthen the monitoring process of the Paris Declaration to move from evaluating input into measuring outcomes; this will demand getting policy makers and other stakeholders focused on results. The role of partner countries is central here.

Technically, the task ahead is also challenging. Impact evaluation is complex. Indicators have to connect to policies. But there is much that we can draw from the monitoring process itself in terms of sharing concrete success stories and learning from them, especially on a South-South basis. The proposal to establish a Knowledge Network is a practical and promising way forward.

To conclude

The report ‘Aid for Trade at a glance’ is the fruit of an unprecedented collaboration between the WTO and the OECD, and between the trade and the development communities. It is a milestone in making trade work for all. The more we expand this fruitful collaboration to cover a broader range of stakeholders, the more we will achieve in promoting Aid for Trade as a key globalisation improver.

We need to strengthen ties with partner countries, where implementation challenges need to be resolved. We must also strengthen ties with regional authorities and organisations, to ensure that our monitoring efforts reflect the importance of tackling regional constraints to trade. And we need to extend our dialogue to other policy communities that can help us design and implement effective monitoring mechanisms.

Ladies and Gentlemen,

Great trading nations were not built overnight. In most OECD countries, shipping services, railroad networks, export banks and promotional institutions have evolved over centuries. Developing countries cannot wait centuries to develop these tools. They need our help now. These infrastructures and know-how are the minimum conditions to capture the virtuous synergies of globalisation Countries that lack these precious assets will pay a high price in terms of lost markets and investments, in rising poverty, emigration and insecurity. In an interdependent world, these are global problems. We need a global response.

Aid for Trade is not a panacea, it will not produce miracles. It is a complement to a quality market oriented policy mix. Aid for Trade flows alone won’t be sufficient to address all the socio-economic challenges of developing countries, or to generate the critical increases needed in human capital,  but they will definitively contribute to empower their economic actors to reap the benefits of globalisation.

But our efforts to monitor and increase Aid for Trade will not bear their best fruit if we don’t unlock the Doha Development Agenda. Those 21 billion dollars we channel annually to aid developing countries to become competitive exporters cannot do much against the nearly 270 billion dollars we pour every year into agricultural subsidies to keep their products out of our markets. The Aid-for-Trade initiative and the Doha Development Agenda are mutually reinforcing instruments. We might be going in circles if we don’t make progress in both tracks.

I look forward to continuing working with the WTO towards advancing both agendas.

Thank you very much.