Meeting Summary [All speakers spoke in their
personal capacity]
Welcome & Introduction
Simon Maxwell (ODI) introduced the workshop by commenting
that it is remarkable how quickly Aid for Trade (A4T) has
moved up the agenda in the negotiations of the Doha Development
Round (DDA). He said that the weight being put on A4T makes
it necessary to ask a big question: How do we relate A4T to
the big debates taking place about aid more generally, i.e.
will it be additional, how will it be managed, etc?
Dirk Willem te Velde (ODI) then stressed that the
meeting had two aims - to look at the role of A4T in the WTO
negotiations and then to look at long term implications of
A4T for development at the national and international level.
He also provided an overview of the information on the topic
available for participants.
Session 1: Aid for Trade - Role in Current WTO Negotiations
John Hancock (WTO), who chaired the discussion, said
that the discussion on A4T should always be preceded by three
caveats. First, that this is a new subject for the WTO and
remains controversial within the WTO. There was little idea
10 years ago that it would become part of the organisation
and therefore it has raised debates about the organisation's
core competencies. Secondly, that the WTO has no intention
of allowing mission-creep to occur and has no interest in
becoming a development or finance organisation. Third, he
stressed that while A4T is not directly linked to the DDA,
insiders believe that the issue is of great importance.
Mia Horn-af-Rantzien (Ambassador to WTO, Sweden) provided
an overview of the progress that the A4T task force has made
on the topic. She reviewed how the Task Force came into existence
and stressed that to date the task force had been gathering
information and brainstorming on gaps in current provision
of A4T.
The two major objectives of aid for trade are to enable developing
countries to use trade to promote growth and poverty reduction
and to facilitate trade liberalisation and provide support
for costs arising from implementation. The initiative should
reflect the needs that countries identify through a bottom
up process. Therefore national level evaluation mechanisms
are needed. A list of categories of A4T needs to be generated.
One major gap that has been identified is a lack of resources
for funding regional A4T. On scope, Ambassador Horn said that
the initiative should include adjustment costs, supply side
and infrastructure constraints, the costs of implementing
WTO negotiations and assistance in generating trade policy.
This could include strengthening needs assessment and trade
related adjustment. She also highlighted problems in mainstreaming
trade into development programmes, including encouraging the
participation of the private sector. She said that diagnostic
exercises to date (through the Integrated Framework) have
not led to new funds.
She specified the following characteristics as critical for
any A4T mechanism: simple, user friendly and speedy; true
meeting of demand and supply; flexible to deal with differences
in national situations; promoting country ownership; well
monitored and evaluated; 'trustful' in delivery; ensuring
additionality; not creating a burdensome bureaucracy; learning
from past experiences (IF) and building on the principles
of the Paris Declaration.
Martina Garcia and Frans Lammersen (OECD) presented
a paper looking at the challenges to making A4T effective
and well monitored. Ms. Garcia stressed that the main need
was not to increase available funds, but to make trade related
development funds more effective and coherent amongst others
through improved monitoring and evaluation.
Without suggesting a specific definition for A4T, three categories
could be identified: trade related technical assistance and
capacity building (most narrow), trade related infrastructure
(which is really economic infrastructure as it only excludes
water which is a 'social' infrastructure) and money for meeting
supply side constraints to build productive capacity. On the
basis of OECD/DAC statistics, they calculate that 20-25% of
total ODA at present fits into the three broad categories
above, of which 16% goes to infrastructure. Additionally,
they modelled two scenarios to examine future A4T ODA. In
the first, A4T increases proportionally with new G8 pledges
to increase aid to 2010. In that case, A4T reaches a substantial
additional $11 billion. In the second scenario, A4T doubles
in volume, reaching almost $30 billion. This will create problems
of absorption capacity and 'Dutch' disease. The paper consequently
argues that the real value added of the task force is not
getting more money, but making sure it is better spent.
Mr. Lammersen then added that it is proving difficult to
apply the Paris principles on aid effectiveness to trade related
development. Few indicators have been developed to measure
results and achieving mutual accountability thus remians elusive.
Modelling A4T on the proposals for the enhanced Integrated
Framework risks creating a vertical fund. While this does
not matter much for the enhanced IF, it would not work for
a broadly defined A4T agenda. Improving the effectiveness
of A4T and ensuring that donors deliver on their A4T commitment
requires two accountability mechanisms. Local: strengthen
ownership across all actors and donors locally present in
order to better integrate trade into development strategies.
In addition, monitor disbursements and assess impact at the
local level. This should provide the input for annual implementation
reports. Global: Feedback on annual implementation reports
would be channelled through a global institution such as the
WTO. Other multilateral organisations, donors and recipients
would together serve as a 'knowledge hub' to share experience
and best practice.
Elizabeth Stuart (Oxfam) injected a note of caution
about not overselling the benefits of A4T in terms of outcomes
or potential for the WTO negotiations. She highlighted that
despite the fact that A4T climbed very high up on the agenda
of the Hong Kong meetings, the announcements by major donors
such as the US, EU and Japan were really repackaging of previous
announced aid increases. She also stressed that some of these
donors were making A4T conditional on getting concessions
out of members in other areas of the negotiations, implicitly
if not explicitly. She also said that there is very little
clarity about what A4T actually is, and said that the task
force has asked more questions than provided answers. The
debate to date had been characterised by agency 'bun fighting'
whereby each multilateral agency wanted to control A4T budgets.
In conclusion, Oxfam was interested in seeing an A4T initiative
which conformed to the characteristics that had been mentioned
by others: predictable, additional, coherent, consultative,
demand driven, etc.
Sheila Page (ODI) said that Aid for Trade is on the
Aid agenda because some believe that trade has not been given
enough precedence in ODA. The discussion takes for granted
that 1) donors can be constrained to provide money for a particular
purpose and that 2) recipients can be constrained to spend
aid on donors' objectives.
A problem with past trade-related aid has been predictability.
She used the IF as an example of unpredictable funds - the
diagnostics were supposed to attract further aid and investment,
which has not happened. Members want a new A4T initiative
to be more secure than this.
A4T is the WTO negotiations because there are three types
of developing countries: those with not much to gain from
the DDA, those with something to lose and those with much
to gain. The A4T negotiations create money on the table, which
makes it possible to ensure that the round will have something
for everyone, and therefore that the large gains will happen.
On the legal form of A4T, developing countries would like
it to be as binding as any responsibilities arising from the
DDA. Politically it is too difficult to build this money into
the WTO. That may not be necessary as countries can sign firm
commitments with their donor agencies alongside trade commitments.
The difficulty will be making sure that these are in step.
On the topic of the scope, she thought that lists are important
but that things should be defined as 'trade related' in the
context of each individual country. In this respect, there
are lessons to be learned from the Global Environmental Fund.
There are gaps in current aid for trade. Regional gaps are
not easy to fund because of the country based nature of development
agencies. Further, there are things that are A4T that do not
fit within traditional aid budget lines (e.g. the EU Sugar
Action plan). There may have to be budget lines which are
akin to 'funding of last resort.' On monitoring and evaluation,
the Committee on Trade and Development of the WTO needs to
monitor total spending and the direction of the programme
on an ongoing basis, not just once. The Trade Policy Review
Mechanism could help with M&E but more resources to increase
analysis capability and data are needed. A final problem is
trying to link two very diverse communities - trade and aid.
The two don't work easily together and there is mistrust.
Discussion
Monitoring and Evaluation: There were several questions which
sought more detail on the OECD proposal and how it improved
the current problems of lack of M&E and whether complex
procedures would be a (non-aid) barrier to aid for trade.
Garcia and Lammersen suggested that it would improve discussions
and that it would not be a barrier but would rather incorporate
the principles of the Paris Declaration in the debate.
Legal Framework: Several questions arose as to how A4T could
be made legally binding. The consensus in responses was that
it was unlikely to be legally binding but instead should be
designed to ensure 'trustfulness.'
A4T Role in DDA Negotiations: In connection to the above,
several sought clarification about whether the panel believed
A4T formed part of the DDA negotiations. Some thought that
it implicitly did, if not explicitly. Ambassador Horn-af-Rantzien
thought that A4T forms part of the outcome of the DDA, not
the negotiations itself. Sheila Page thought that it was reasonable
that developing countries seek 'side deals' to ensure that
they receive the guarantees they need from donor countries
that they will get enough A4T before they sign the DDA.
Participation of the Private Sector: There were several questions
about how the private sector should be included in A4T. There
was little consensus about how they could best be included,
but some capacity building to ensure that countries where
business communities were poorly organised is necessary. The
panellists also suggested there were some countries in which
the primary 'stakeholders' were not the private sector but
aid donors and in such countries, motivating the private sector
to participate would be difficult.
Completion of A4T architecture: There were also several questions
about whether there would be more time after the end July
deadline to hammer out the scope of A4T mechanisms. Ambassador
Horn-af-Rantzien reinforced that this issue was not going
off the agenda and therefore that discussions would be ongoing
in the coming years, not just months.
Session 2: Aid for Trade - Possible long-term implications
for developing countries
Susan Prowse (DFID), who chaired the second session,
outlined the questions for discussion: will the new prominence
of trade in aid lead to more support for productive capacity
in development programmes? Will it lead to helping labour
markets to adjust to trade liberalisation? What would national
or regional Aid for Trade programmes look like?
Bernard Hoekman (World Bank) dealt with the gaps he
identified in the A4T agenda and the implications in the long-term
for developing countries. He began by stating that there is
a gap in capacity which means countries are not able to work
satisfactorily on assessing needs for aid for trade or dedicate
enough people to work on trade. He said trade related priorities
need to be identified at country level.
He went on to say that, assuming in the future that countries
have increased capacity to define trade needs, the question
then becomes what the response will be from multilateral bodies.
He identified issues such as responsiveness in terms of making
funds available to address identified trade priorities, aid
effectiveness and partnership and signalled a need for processes
to be country led.
On the question of regional level A4T programmes he said
regional trade agreements are increasingly an important arena
in which the trade policy agenda is discussed and defined
by many developing countries. One implication was that more
needed to be done to ensure that this was recognized in the
allocation of A4T.
He identified a gap in capacity around negotiations on services.
He stressed the importance of the services sector to competitiveness
and the economy and argued that services were likely to be
where money could best be directed to support the trade agenda.
He identified the problem of sequencing in liberalisation.
Governments are concerned about deregulating services before
regulatory bodies are in place. Thus, bolstering regulation
is one potential high payoff use of A4T funds.
On the evaluation of A4T programme impact, Hoekman stated
that the effectiveness of money being spent on capacity building
and other A4T projects needed to be better monitored and its
impacts assessed.
He went on to identify a gap in knowledge about trade policy
in countries. He said there are inadequate information systems,
especially on non-tariff policies, and that some of the additional
A4T funds could usefully be allocated to improving the collection
of such information and making this publicly available.
He concluded with a vision of how the situation would be
in an ideal world. The features he identified were: clear
country trade policies and priorities; the creation of dedicated
bodies with higher levels of expertise in countries; consistency
between what happens at regional, national and multilateral
level; and A4T encompassing low and middle income countries,
not just LDCs.
Miguel Rodriguez Mendoza (ICTSD), began by stressing
that A4T is an important initiative and that the WTO has the
ability to work on it. He pointed out that even the best Doha
agreement will mean little to some WTO members. He reiterated
the sentiment of the first session that a few years ago the
WTO would not have been involved in development issues.
He said A4T should be part of a concerted effort to help
LDCs participate better in international trade. He described
it as a win-win situation but emphasised that it does require
a high level of coherence between multilateral organisations
as well as between ministries at national level. On the relationship
between A4T and the DDA he gave the opinion that A4T strengthens
the development dimension of negotiations.
He went on to say that LDCs should not be the only beneficiaries.
A4T should be open to all developing countries (although some
will benefit more than others and some countries will have
to exclude themselves).
The scope of A4T should also go beyond current provisions
and declarations. He welcomed the focus on capacity building,
technical cooperation and work on supply side issues but stressed
a need for resources to go towards adjustment, especially
to short term adjustment to the effects of trade liberalisation.
He concluded by identifying a role for regional banks and
financial institutions and a monitoring role for the WTO and
the OECD.
Bede Lyimo (Ministry of Industry and Trade, Tanzania),
focused on the need to address poverty and on how to bring
the poor into the A4T agenda. He said there is a need to use
the rules to help developing countries develop.
He specified that the DDA should allow developing countries
time to get into a position where they can compete with major
exporters. He gave the example of when tariffs are suddenly
cut leaving developing countries vulnerable and unable to
compete with major industrial countries.
He raised the harmfulness of political conditions attached
to reforms, stating that they may prolong an unsatisfactory
situation and that more resources are needed to enable developing
countries to compete. He welcomed the idea that the logic
of A4T means that countries could be given periods of, say
10 years, during which to develop their ability to compete.
He concluded with the points that it is necessary to make
conditions for countries to access EDF less complex; that
A4T should have a broader and longer term focus that just
getting a deal at the WTO negotiations in December 2006; and
that more resources could be spent on A4T.
Discussion
Definition of trade related: The point was raised that developing
and developed countries differ in their ideas of what should
be included in the definition of trade-related aid. It was
said that political will is lacking and that developing countries
sideline trade in their development plans. One of the speakers
challenged the assertion that political will was lacking,
saying that in his experience decisions on policy that come
from the Cabinet may take longer to agree but should have
fewer problems at the implementation stage.
Dedicated resources for A4T: Questions were raised on whether
dedicated resources are needed for A4T and whether these would
be more effective if disbursed through a dedicated fund. Dedicated
resources for trade were identified as necessary because donors
do not currently focus on trade as part of the broader picture.
The proposed US fund for trade capacity building was mentioned.
There was disagreement on whether dedicated resources would
actually increase or decrease the likelihood of donors focusing
on trade. Tensions between increased aid, bringing an appreciated
exchange rate, and increased exports were identified. It was
argued that aid directed at helping countries to export would
increase a country's absorptive capacity to deal with increased
aid flows and be less damaging to competitiveness than other
aid precisely because AfT would go a county's supply capacity.
Regional initiatives: Questions on regional initiatives focused
on whether there were any A4T funds directed at regional level,
such as joint infrastructure plans.
Instruments / mechanisms: There was a question on mechanisms
for countries to be able to assess their own gaps in capacity
and identify how to improve capacity for trade negotiations.
The point was raised that there are too many reporting mechanisms
which place a heavy burden on developing countries. The Global
Trade Facility, proposed by Stiglitz, was also raised. This
type of vertical fund does not fit in to with the idea of
a 'bottom up' approach or to the Paris Declaration on Aid
Effectiveness.
Exports and the economy: The point was made that A4T should
take account of the infrastructure needed to build up services
in the economy. To aid export diversification, it was suggested
that A4T could be focused on air cargo improvements so countries
can access foreign markets (although there are environmental
tradeoffs). It was pointed out, however, that investment in
railroads and roads is still pressing.
Long-term implications: The point was raised that A4T should
go beyond assisting only LDCs. It was pointed out that seeing
bigger developing countries as a block in the development
of LDCs could be harmful. A problem still to be addressed
is the need to build better capacity from the use of consultants
rather than lose knowledge and skills when they leave.
The chair closed by remarking that the A4T issue has emerged
in the last 18 months, although the trade debate has been
going on for around 40 years. The focus on market access and
trade liberalisation is not enough - it is necessary to look
at support for developing countries and how to operationalise
it.
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