Aid for Trade: An African Perspective

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Aid for Trade An African Perspective

• Seminar on Mainstreaming Trade in Development
  Casablanca, Morocco, 28-30 May 2006
• Halima Noor-Abdi
• ECA Geneva Advisory Services

2
Background

• The Presentation Draws Significantly from
• Aid for Trade An African Perspective Paper by
  ECA Geneva Advisory Services
• AU in Geneva Minutes of the Retreat of African
  Ambassadors and Stakeholders on the WTO Aid for
  Trade Initiative
• ACP Concept paper on Aid for Trade (28.04.06)

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Outline

• Introduction
• Importance of An African Perspective on Aid for
  Trade
• Rationale for Aid for Trade
• Task Force on Aid for Trade
• Elements of Aid for Trade and Focus
• Nature of the Aid for Trade Initiative
• Aid for Trade Monitoring, Governance and
  Delivery Mechanism
• Aid for Trade Architecture and Funding
• Conclusion

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Introduction

• The Hong Kong Ministerial Declaration mandate
  incorporated Aid for Trade to the Doha Work
  Programme (DWP) in Article 57.
• Objective of Aid for Trade can be extracted from
  Article 57, and is stated
• Provide assistance to developing countries for
  building supply-side capacity and trade-related
  infrastructure
• High political profile for Aid for Trade
  Initiative-genesis in G-8 meeting in Gleneagles
  mandating the WB/IMF African Finance Ministers
  in Abuja
• The Aid for Trade Initiative is expected to be a
  free standing programme, in practice, it is
  likely to be enmeshed with those on the
  Integrated Framework (Paras. 48-51) Trade
  Facilitation (Para. 33 and Annex E) Small
  Economies (Para. 41) LDCs (Para. 47) Technical
  Cooperation (Paras. 52-54) and Coherence (Para
  56).

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Introduction (Continued)

• The Mandate also states that assistance is should
  be such that developing countries
• Implement WTO Agreements
• Benefit from opportunities arising from WTO
  Agreements and
• Expand their trade
• Should not be substitute for the development
  benefits of the Doha Round, but a complement

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Importance of African Perspective on Aid for
Trade

• Africa has the highest number of the poorest
  countries-Most of the sub-Saharan Africa is in
  the World Banks lowest income category of less
  than 765 GNI per person per year.
• Even middle income African countries have
  sizeable sections of the population living in
  poverty
• Marginilization and falling share of world
  tradeshare fallen to 1.1-due to a no. of
  reasons including low productivity, high
  transaction cost, etc.
• Africa was the loser in the implementation of UR
  and will lose from implementation of the Doha
  Round

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Rationale for Aid for Trade

• Recognition that strengthening developing
  countries abilities to trade constitutes a
  potentially powerful mechanism to achieve
  MDGs-support to poor countries to trade their way
  out of poverty
• The need to address supply-side constraints in
  poor developing countries

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Rationale for Aid for Trade (Continued)

• To realize the potential benefit of trade
  liberalization, African countries need assistance
  in
• Adopting and implementing existing and new WTO
  obligations
• Benefit from both existing and new market access
  opportunities
• Addressing supply side constraints that impede
  the capacity of African countries to take
  advantage of market access
• Mitigate some undesirable or detrimental effects
  of trade liberalization (help with transitional
  costs)

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Task Force on Aid for Trade

• The Director General of WTO as per Article 57 of
  Hong Kong Declaration has established a Task
  Force
• Comprises of 13 countries Barbados, Brazil,
  Canada, China, Colombia, the EU, Japan, India,
  Thailand and the USA. Amb. Of Sweden is the
  Chairperson.
• Coordinators of the African Group, LDC and ACP
  are also members of the task force

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Elements of Aid for Trade and Focus

• Montreux Retreat Recommendations
• Aid for Trade should be development-oriented
• Should enhance trade policy and regulatory
  frameworks
• Help countries meet SPS and TBT standards
• Meet implementation costs arising from existing
  WTO rules and the outcome of Doha Round including
  trade facilitation

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Elements of Aid For Trade and Focus (continued)

• Montreux Retreat Recommendations
• Meet adjustment costs arising from preference
  erosion and tariff revenue losses
• Promote public-private partnerships
• Enhance entrepreneurship development and
  competitiveness
• Play a catalytic role and become an engine of
  accelerated growth, development and poverty
  reduction in Africa and help towards a timely
  realization of the MDGs

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Elements of Aid For Trade and Focus (continued)

• Position of the African, Caribbean and Pacific
  States (ACP)
• Deal with Trade-related economic adjustments
• Preference erosion
• End of textile and clothing quotas
• Loss of tariff revenues
• Rising food prices following reform of
  agricultural subsidies
• Export earning shortfalls
• social costs-loss of jobs/livelihoods

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Elements of Aid For Trade and Focus (continued)

• Compliance with commitments, rules and standards
  of the international trading system
• Putting in place domestic regulatory mechanism
  and institutional frameworks to support service
  liberalization
• Putting in place standard setting institutions,
  certification agencies, testing laboratories
• Complying with TRIPs etc

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Elements of Aid For Trade and Focus (continued)

• Trade- related infrastructure
• Physical infrastructure e.g. roads, ports,
  telecommunications, energy and electricity,
  transport systems, water supply and sanitation,
  etc and
• Trade support institutions e.g. customs, trade,
  finance, marketing and distribution facilities,
  etc.

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Elements of Aid For Trade and Focus (continued)

• Supply-side capacity building
• Targeted support at enterprise and producer
  levels
• Enhance export-production capabilities and
  competitiveness in commodities, manufactures and
  services sector
• Facilitate entry into new markets (market
  diversification)
• Investment in new activities

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Elements of Aid For Trade and Focus (continued)

• General and long term need to assist low income
  and vulnerable developing countries to expand
  their trade from current low absolute levels
• Immediate need to assist them, particularly those
  already actively engaged and dependent on
  international trade (measures by the share of
  exports in GDP), to avoid or cope with potential
  economic losses, associated with limited
  supply-side capacities to adjust rapidly and
  beneficially to policy-induced changes, arising
  from WTO Agreements

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Nature of Aid for Trade Initiative

• Montreux Recommendations
• National Ownership
• Strengthened in house capacity required
• IF should be enhanced
• DTIS could be used for developing needs
  assessment for non African LDCs
• ((DTIS of the IF serves as an analytical tool
  for diagnosis of the constraints on trade
  competitiveness and increased participation in
  trade)

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AG Continued

• Give NEPAD projects maximum attention
• Be used to strengthen and develop trade policy
  and enhance trade negotiation capacity at
  national, sub-regional and regional level
• Strengthen coordination between the key
  ministries at the national level such as trade,
  finance, agriculture, etc. as well as other
  relevant national institutions

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Nature of Aid for Trade Initiative (Continued)

• The ACP Position
• Country specific approach to needs assessment
  involving
• Diagnostic study at the national level
• An inter-agency technical review of the countrys
  trade related needs and gaps in trade-related
  assistance
• The process should be demand driven

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Nature of Aid for Trade Initiative (Continued)

• complement and not replace existing commitments
• Should be provide for additional resource flows
• Should be substantial, predictable, multi-annual
  and long term to have real impact
• Effective monitoring mechanism

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Aid for Trade Architecture and Funding

• Montreux Recommendations
• Aid for Trade should be in grant form
• Should be non-debt creating
• Encourage development objectives
• Not involve high transaction costs
• Encourage private-public partnership
• Without conditionalities

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Aid for Trade Architecture and Funding
(Continued)

• Draw useful lessons from good practices and
  experiences
• Africa ownership of the process
• No top down approach should be taken on
  decision-making and implementation
• Be based on African initiatives especially NEPAD

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Aid for Trade Architecture and Funding
(Continued)

• ACP Position
• Should be provided primarily in grant form to
  avoid debt burden
• However, for certain physical infrastructure
  development which may be particularly high cost
  such as roads, ports, power supply systems etc
  could be financed with long-term concessional
  loans from regional banks or WB
• Such loans should be on terms no less favourable
  than those of IFAD and IDA

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Aid for Trade Monitoring, Governance and
Delivery Mechanism

• Montreux Recommendations
• Ensure multi-stakeholder involvement
• Coordination and coherence between different
  players
• Inclusion of African institutions such as NEPAD
  Secretariat, AU, UNECA, AfDB and African
  universities

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Aid for Trade Monitoring, Governance and
Delivery Mechanism (Continued)

• ACP Position
• Multilateralize though existing TCB trust funds
  such as the IF
• Joint WTO/ OECD database would be a useful
  monitoring tool
• Might be need for an ad hoc party to oversee the
  collection and processing of information notified
  

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Aid for Trade Monitoring, Governance and
Delivery Mechanism (Continued)

• IF model governance structure
• Consolidate existing multilateral TCB Trust Funds
  under an umbrella multilateral trust fund
  framework
• Scaled up resources (address four categories
  through separate windows
• Resource mobilizations should be modeled on GEF

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Aid for Trade Monitoring, Governance and
Delivery Mechanism (Continued)

• Multi year commitments
• Pledges to be made prior to the conclusion of the
  negotiations
• Pledges should provide substantial down payment
  or front-loading

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The Role of UNECA

• In the AU meeting in Montreux, ECAs comparative
  advantage in providing trade-related technical
  assistance in certain areas was appreciated
• ECA was encouraged to continue to provide such
  technical assistance in research, training, etc

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Conclusion

• Challenges For Africa on outcome of the
  negotiations on Aid for Trade
• Whether it will be owned by recipient countries,
  both in terms of content and delivery
• Whether the outcome will to a large extent
  reflect donor-driven agenda
• Whether it will be used to try and buy
  concessions from developing countries on the Doha
  Round
• Whether it will produce additional resource flows
  to developing countries and
• Whether it will contribute to addressing
  supply-side constraints of developing countries
  and ultimately development of these countries

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Conclusion

• Thank You