Trade and Development-The Role of Aid for
Trade in Promoting Growth and Development in
East Africa
DR. Halima Noor Abdi
CPA, Commonwealth Secretariat
Regional Workshop for East African Parliamentarians
27-28 2010 Arusha Tanzania
Outline
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Introduction
Objectives of AfT and Development
Rationale of AfT
Scope of AfT Initiative
AfT Progress in EAC Countries
Trade Related Bottlenecks in EAC Countries
Recommendations and Way Forward
Introduction
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Trade and Economic Development
Empirical results show a mixed picture. There
are cases where trade expansion has helped a
country grow faster (China) and on the other
hand there are countries that have experienced
poor economic and social conditions after
trade liberalization (SSA)
Flanking measures and trade liberalization
Introduction (2)
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The direct impacts of trade are at least threefold (i) employment (ii) income and revenue
(iii) prices.
Indirect impacts have to do with how changes
in trade and export promotion measures affect
the informal and household sectors.
Objectives of AfT and Development
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Expansion of developing countries trade is the core
objective (WTO, 2005)
Philosophy of AfT initiative is not to support trade
per se but trade in as much as it contributes to growth
and poverty reduction
According to the WTO Task Force on AfT (2006b)
“effective aid for trade will enhance growth prospects
and reduce poverty in DCs, as well as complement
multilateral trade reforms and distribute the global
benefits more equitably across and within DCs”
Rationale for AfT
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Global crisis has strengthened the rationale-The
quantity and quality of aid and including AfT are now
more important than ever for economic growth and
human welfare
Provides an essential stimulus in the short term
creating employment and reinvigorating growth
Address long term competitiveness
Fear that OECD might reduce AfT because of the
global crisis
Scope of Aft Initiative
Trade is a diverse and complex activity, AFT is broad and not easily
defined and it includes:
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Technical assistance: helping countries to develop trade strategies,
negotiate more effectively, and implement changes
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Infrastructure assistance: Building the roads, ports, telecommunications
that link domestic, regional and global markets
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Productive capacity assistance: investing in industries and sectors so
countries so countries can build on their comparative advantages to
diversify and add value to their exports
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Adjustment assistance: helping with the costs associated with tariff
reductions
* AfT initiative is reviewed 2 to 3 years at the global level. The 2nd Global
Review (July 2009) evaluated progress and scrutinized how the initiative is
being implemented on the ground. The next global review is scheduled for
2012.
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AfT Progress in EAC Countries
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Regional Integration is a powerful catalyst to
economic growth
The WTO Task Force recommended that AfT “assist
RI WTO 2006b
EAC capacity constraints in capitalizing on the full
potential
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Poor cross border infrastructure and transport infrastructure
Export Bans
Customs procedures, taxes, delays and bribes
Lack of awareness and understanding/limited capacity at
regional and national level
Poor implementation of food safety standards
AfT Progress in EAC Countries (2)
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The logical framework to assess whether progress is
being made towards the desired aid-for-trade goals
consists of the following four elements.
Mainstreaming and prioritising trade (Demand)
Trade-related projects and programmes (Response)
Enhanced capacity to trade (Outcome)
Improved trade performance and reduced poverty
(Impact)
AfT Progress in EAC Countries (3)
AfT has made progress
 Activities in the area of TRTA/CB at the country level has
been prolific
 EAC countries have mainstreamed trade in their development
strategies and clarifying their needs and strategies
 Donors are improving AfT delivery and scaling up their
resources
 Trade policy analysis, negotiation and implementation suggest
that training and workshops have been particularly useful in
helping officials to better understand the function, structure
and rules of MTS (Kenya)
 However concern that programs risk officials turning into
“rule takers” rather than “rule makers” by focusing too
narrowly on rules, rather than development or PPP-may bring
importance increases in customs revenues and increased trade.
AfT Progress in EAC Countries(4)
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Trade Facilitation
This is the 2nd most frequently identified area where
AfT is seen as effective. Simplification of customs
procedures and improvements to ports authorities
(Kenya and Tanzania)
Customs reforms-often supported by TA programmes
and financial assistance
Infrastructure development
North-South Corridor as an example of an AfT
programme being implemented
AfT Progress in EAC Countries(5)
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Productive Capacity
It is difficult to address productive capacity
building at the regional level (since it is better
dealt with at the national level) and the
regional strategy focuses upon trade-related
infrastructure and trade related adjustments
AfT Progress in EAC Countries(6)
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EAC region has made a lot of progress in identifying projects
for AfT
EAC partnership Fund established in addition to EC support,
EAC receives financial and technical assistance from a number
of EU Member States including Germany, Finland, France,
Sweden, Denmark and the United Kingdom.
EAC key priorities under 9th EDF support have been the
environment (notably Lake Victoria), institutional capacity of
the EAC institutions, information technology and conflict
prevention activities
10th EDF-Regional Integration-update EC assistance to take
account of EAC’s strategic priorities (in its development plan)
and to address “Aid for Trade” issues (i.e. EAC Development
Strategy 2006-2010, EAC Agriculture and Rural development
Strategy 2005-2030).
Trade Related Bottlenecks in EAC
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Shortcomings (from a trade perspective)
Trade ministers are rarely at the table in AfT
discussions
Intra and Inter ministry consultations
Cabinet may not focus on improving
competitiveness and promoting exports
RI-lack of co-ordination between donors and
partners
Trade Related Bottlenecks in EAC
(2)
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High transport costs
Complicated and cumbersome customs
procedures
Inadequate usage of information and
communication technology
Payments, insurance, and other financial
requirements, and
Non-tariff barriers in export markets
Recommendations and Way Forward
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EAC’s growth potential depends upon
marketing its existing degree of integration at a
global level, upon creating economies of scale,
and at the same time upon addressing some
critical constraints, notably in infrastructure,
services and institutional capacity.
Recommendations and Way Forward
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Donor Side
Need for donors to strengthen their capacities to
respond to rising AfT demand by bolstering in-house
expertise
Raising awareness among policy makers and
practitioners at headquarters and in the field
Alignment of donour and partner countries
procedures and systems and undertaking joint
initiatives (Need to keep track of who is getting
what, how much and for what activity)
Recommendations and Way Forward
(2)
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Beneficiaries
RI -Further coordination on regional AfT
activities is needed (EAC regional strategy)
Broadening the AfT dialogue to engage
parliamentarians, CSOs more effectively.
Without broader engagement and outreach
initiative AfT is likely to be only of interest to
bureaucrats and remain divorced from political
landscape in which it must be carried forward.
Recommendations and Way Forward
(3)
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Inclusive dialogue is important especially
given the political sensitivities of many trade
reforms
Importance of monitoring AfT and national
Parliaments and EAC Parliament can play a
crucial role
Need for an organized database at the level
of EAC on AfT activities, projects and
funding.