ORIENTING AID FOR TRADE
TOWARD POVERTY REDUCTION
Hugo Cameron
International Lawyers and Economists Against Poverty (ILEAP)
Outline
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Development Prerequisites
Global-level Elements
Domestic-level Elements
Diagnostic Efforts
Prioritization of Aid for Trade:
Way Forward
Development Prerequisites for
Low-income Countries
1.
2.
Favourable Market Access Regimes (Doha, EPAs,
regional, etc.)
Development assistance targeted to enhance growth and
trade
i.
ii.
iii.
Improve competitiveness
Improve ability to meet standards
Improve institutional capacity to engage in trade negotiations
and implement the outcomes
iv. Address poverty reduction by ensuring that the needs of
marginalized producers and groups within countries are taken
into account and that impoverished and isolated segments of
these economies benefit from expanded trade opportunities.
Global Level
WTO/OECD Database groups trade-related aid into three broad categories:
1.
2.
3.
Trade Policy and Regulations
Trade Development (i.e. trade promotion strategy design and implementation
market analysis and development; and business support services and institutions)
Infrastructure
Aid for Trade - Share by WTO/OECD Category (% and US$ 000)
2001
2002
2003
2004
Trade Policy and Regulations
6%
6%
7%
5%
Trade Development
13%
13%
18%
10%
Infrastructure
82%
82%
74%
85%
11,214,732
11,312,734
12,524,404
17,372,650
TOTAL
Source: WTO/OECD database, quoted in ILEAP (2006), “Scale and Types of Funds for Aid for Trade”.
ILEAP Negotiating Advisory Brief No. 15. Prepared by Massimiliano Calì, ODI.
Global Level
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Low-Middle Income countries and non-LDC low-income countries
have received the highest share of trade-related funds over 2001-04.
LDCs received the lowest level of spending in trade-related
assistance relative to total aid among the large aid recipients,
confirmed by the presence of only one LDC (Bangladesh) in the list of
the first ten recipients of Aid for Trade in the period 2001-2004.
Cause for concern since LDCs likely to face the highest relative costs
in the trade integration process.
This allocation by income group seems to have been driven by
determinants other than trade-related needs, including regional and
other foreign policy concerns.
Global Level
Destination of aid for trade by income group
2001
2002
2003
2004
2001-04
LDCs
22%
16%
26%
21%
21%
Other Low Income Countries
25%
24%
29%
28%
27%
Low-Middle Income Countries
28%
35%
23%
35%
31%
3%
3%
3%
1%
2%
21%
22%
19%
15%
19%
11,151
11,216
12,312
17,798
42,507
Upper-Middle Income Countries
Others & unallocated
Total Aid for trade (million US$)
Global Level
Global Level
THREE MAJOR SHORTCOMINGS TO BE ADDRESSED:
1.
2.
3.
Failure to rationalize and prioritize the kind of activities to be supported, and
to mobilize the resources needed for them to be effectively executed. As a
result, minimal resources have been spread wafer-thin over countless activities,
most with an unverified connection to the ultimate objective. For example, the
Integrated Framework, over the last eight years, covering some 30 LDCs, was
allocated only $30 million.
A near total lack of bona fide coordination among donors. Virtually every
international organization and every OECD country has gotten into the act,
apparently with little or no concern for coherence, consistency, efficient
management, or cost and development effectiveness. Direct aid to the production
and export processes is rarely found.
A lack of concern for measurable results.
Recent events point to potential progress in this area:
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Enhanced IF
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Paris Declaration principles
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OECD 2006 methodology for conducting ex-ante poverty impact assessment to
maximize the poverty reducing impacts of development interventions
Domestic Level
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Aid for Trade has concentrated on ‘getting the plumbing
right’ on the premise that those employed in small-scale
agriculture, in rural areas, and/or in the informal sector
will at some point be in a position to take advantage of
any trade benefits that do open up.
Challenge with this approach is that, while trade generally
constitutes a large proportion of total GDP in low-income
countries, the linkages between export-oriented activities
and the rest of the economy are not automatic.
Most jobs and livelihoods in these countries are not
export-oriented. The danger is that export expansion will
not be broad-based.
Domestic Level
3 types of enterprises in LDCs:
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Stratum A: a few large-scale enterprises, either domestically or
foreign-owned, which have commercially viable assets, which provide
regular full-time jobs for skilled labour, and which are linked with
global markets.
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Stratum B: domestically owned enterprises which are medium-sized
and may have some degree of involvement in export activities.
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Stratum C: a mass of micro and small enterprises in which the
majority of the unskilled labour is employed in informal ways,
including casual wage labour. These enterprises are generally
oriented to the domestic market, providing services or producing
goods which are affordable for the poor.
Domestic Level
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If producers under Stratum C are to take part in more
formalized economic activities, they require targeted and
sustained support to help households ‘make the switch’
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Extension services, access to credit, and investments in
infrastructure (especially roads). OECD report on Promoting ProPoor Growth targets private sector development, agriculture
and infrastructure as key priorities in pro-poor growth – areas
that were neglected by many donors during the 1990s but are
currently receiving renewed attention in the international
development agenda.
Must be supplemented by wider Aid for Trade improvements in
ports, customs, regulatory capacity, access to finance, telecoms
and power and business services
Support capacity of CSOs and private sector organizations to
articulate and prioritize immediate and longer-term needs clearly
to governments and donor groups.
Diagnostic Efforts
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As policy is manoeuvred through the national political
economy environment, it is critical to consult the informal
layers of power when designing a coherent trade policy –
including delivery of Aid for Trade – in order that it support
broad-based development and poverty reduction.
A wide consultation, i.e. PRSP process, can bring new
ideas to the table and lend legitimacy.
Research institutions and civil society organizations can
be helpful by pointing out gaps and outlining common
ground between different interest groups.
They are the ‘connective tissue’ between policy and
poverty reduction
Diagnostic Efforts
Integrated Framework Evaluation
World Bank:
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Insufficient focus on improved trade outcomes rather than on the
process alone, and the shortage of resources to meet the mounting
demands for technical assistance in developing countries.
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Divergence in expectations between the intended beneficiaries and
donors designing programs results in insufficient ownership.
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Industrialized countries want to improve the domestic policy and
regulatory framework; developing countries want more resources for
technical assistance to meet the domestic training, institutional and
procedural gaps, and investment resources to address internal supply
constraints.
Donor cooperation or awareness of the IF at the country level are
weak. The program provides for very few resources to ensure the
development of understanding and cooperation at the country level,
and it cannot substitute for the lack of developing country ownership.
Diagnostic Efforts
Integrated Framework Evaluation
Netherlands Ministry of Foreign Affairs:
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DTIS processes in Ethiopia and Yemen did not actively
involve the private sector or civil society. The IF
programs in these countries further lacked high-level
political commitment and as a result their impact on
informing national trade policy was also severely limited.
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Conversely, in Cambodia, close coordination between
affected areas of government, the private sector, and civil
society organizations under the aegis of the IF allowed
that country to develop a well-informed trade strategy
based on in-country economic realities.
Diagnostic Efforts
JITAP
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Useful model for addressing government-level aspects of trade policy development and
participation in rules making.
Not an appropriate tool to handle an Aid for Trade package in its entirety, particularly in
the areas involving infrastructure, private sector support or more complex adjustmentfunding mechanisms.
Modest volumes of funds: on average, beneficiary countries have received
approximately US$1.5 million over five to eight years.
Training approach of workshops and seminars provides very limited capacity for
handling the practical aspects involved in implementation of trade policy. In the long run,
TRTA needs to build long-term human and institutional capacity; ensure local ownership;
and create a framework for laws and legal regulations.
Dutch assessment found that the JITAP processes in Burkina Faso and Tanzania to be
“diverse and included setting up organizing committees, information centres, workshops,
reports and studies. However, use of the output was not impressive. The impact of
JITAP in contributing to formulation of national trade policy was found to be zero.”
Due to JITAP’s specific focus on trade policy training, in its current form it is not
particularly well-suited to designing or delivering Aid for Trade at the private sector level,
though participation of producer groups could help to bring more of a wide-reaching
development focus to its activities.
Prioritization of Aid for Trade
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Private Sector Development
Enhanced Integrated Framework
Pro-poor Growth Linked to Trade
Prioritization of Aid for Trade: Private Sector
Private Sector Development
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Crucial stakeholder in trade-related activity due to its role as the
primary driver of economic production and diversification.
Producer groups and organizations representing the interests of the
rural poor and the informal economy must be included in
consultations, with a view to bringing them in more fully to the market
economy.
Where lacking, the capacity of these groups to articulate their own
concerns will need to be built.
Support should be directed not at the international private sector but
at building the ability of domestic companies within low-income
countries to produce and export.
Prioritization of Aid for Trade: Private Sector
Example: ITC’s Export-Led Poverty Reduction Progamme
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2 pillars: (i) development of the entrepreneurial capacity
of the poor with regard to exporting; and (ii) linking that
capacity to proven export market opportunities.
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5 sectors:
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Agricultural products (fresh and processed)
Textiles (fibres and clothing)
Animal skins, leather and leather goods
Light manufacturing
Community-based tourism
Prioritization of Aid for Trade: Private Sector
Example: ITC’s Export-Led Poverty Reduction Progamme
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Producers organized in cooperatives through which they can achieve a
sufficient scale to produce, market and distribute their products.
Includes funding for local NGOs to build networks of poor producers, or to
ensure increased participation of producers in an existing grouping, in
addition to facilitating their training in marketing, production and
entrepreneurship.
Ongoing EPRP projects in 15 countries have benefited around 12,300 poor
people by creating additional jobs and higher income. Salaries have
increased by 20 to up to 200 percent.
EPRP projects have generated approximately US$ 1.3 million for poor
communities. 15 recent requests received for EPRP.
EPRP is collaborating with the Integrated Framework process; joint projects
have been prepared for IF Window II funding in Burundi, Djibouti, Guinea,
Rwanda and Senegal.
Prioritization of Aid for Trade: IF
Integrated Framework
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Implement recommendations from Enhanced IF Task Force:
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Raise the current level of funding (US$35 million) to a funding target of US$400 million
over a five-year period;
strengthen capacity in recipient countries to manage the IF process;
Create a new Executive Secretariat in Geneva, housed at the WTO Secretariat; and
Establish a monitoring and evaluation framework.
Better involvement of civil society and producer groups would help to resolve
many of the identified problems, for instance by lending legitimacy to the process,
extending its benefits to the poorer segments of LDC economies, and feeding in new
ideas. Specific funding will need to be set aside for consultation and inclusion of
domestic civil society and producer groups in the IF or Enhanced IF processes.
Results-oriented approach would help in the design of a more responsive and
appropriate program. Monitor results and impacts at the country level in addition to
its current practice of monitoring process and outputs, in the form of number of
studies completed and reflected in PRSPs at the global program level.
More resources for technical assistance to meet the domestic training,
institutional and procedural gaps – areas in which NGOs, think tanks, and countries’
own academic communities are well-positioned to contribute.
Prioritization of Aid for Trade: Pro-Poor Growth
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Avoid ‘enclave-led’ growth in transition to more market-oriented activities.
Inclusive Growth:
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Increases average household incomes substantially through job creation
Facilitated if export expansion is linked to growth in the rest of the economy, i.e.
via positive synergies between exporting enterprises and local suppliers of inputs,
providers of services, and subcontracting relationships.
Export expansion must help strengthen domestic linkages and development
complementarities between agriculture and emerging non-agricultural activities.
Consultation with marginalized producers can help ensure that local
suppliers of inputs are made aware of export-oriented opportunities in order
to pursue possible emerging synergies.
A value chain approach in Aid for Trade can help marginalized segments of
low-income economies – particularly the informal sector – benefit from
export-oriented activities.
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Shift focus of Aid for Trade from the “last loop” of a national value chain towards
more upstream activities. Informal sector is present in the value chains related with
foreign trade, especially in the primary production areas of agriculture and mining.
Assisting the informal sector in these areas can therefore play a win-win role in
improving the competitiveness of related exportables and reducing poverty.