Aid for Trade is an initiative of the WTO designed to help the least developed countries to improve their trade related skills and infrastructure needed to implement and benefit from the WTO agreement and to consequently expand their trade.
What is Aid for Trade?
Aid for Trade (AfT) is the World Trade Organization’s (WTO) initiative for supporting the Least Developed Countries (LDCs) to increase their capacity in trade. AfT helps LDCs to benefit from the WTO agreements to expand trade by supporting with trade related skills and infrastructure. Further, AfT emphasizes its
support in the export of goods and services, in LDCs’ integration into the multilateral trading system and in LDCs’ benefitting from liberalized trade and increased market access.
The WTO during the Hong Kong Ministerial Conference in December 2005 initiated AfT by forming a task force. In July 2006, the task force recommended AfT to focus on the needs of the recipient countries. In addition, the task force also suggested AfT to act as a bridge between recipient countries and donors.
Further, the task force also recommended establishing a monitoring body in the WTO for periodic review based on the information from stakeholders.
The Enhanced Integrated Framework (EIF) of the WTO is the mechanism for the LDCs to access AfT. The EIF was established at the WTO in 2005 after reviewing the Integrated Framework (IF) which was set up in 1997. The EIF, a multi-donor programme, supports the LDCs to improve their supply side capacity to make them more active in the global trading system. Currently, the EIF is supported by a multi-donor trust fund, the EIF Trust Fund, with contributions from 23 donors to benefit 47 LDCs.
The WTO plays a vital role in mobilizing AfT by encouraging additional flows of Aid for Trade from bilateral, regional and multilateral donors. The WTO also encourages the mainstreaming of trade into national development strategies of the LDCs.
Cooperating Partners
The AfT Task Force, in 2006, recommended the Director General of the WTO to form an Advisory Group. Next, the Directorate General established an Advisory Group comprising of development partners at the WTO to coordinate among the key players in the AfT initiative. The Advisory Group members are: the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, the IMF, the Inter-American Development Bank, the Islamic Development Bank, the ITC, the OECD, the UNCTAD, the UNDP, the UNECA, the UNIDO and the World Bank.
Implementation of Aid for Trade
Based on the recommendation of the task force in 2006, the AfT initiative moved into its first stage of implementation in 2007. Further, the WTO established a system of monitoring AfT at the global, the donor and the individual recipient country level to track down the implementation. The AfT task force recommended reviewing AfT at the regional and the global level based on the information from stakeholders.
Regional reviews offer a better understanding of AfT as well as encourage the implementation plans. That reviews help to identify priorities and is a mechanism to best balance them with plans. The WTO conducted regional reviews on AfT together with the regional banks and the governments in Peru, the Philippines and
Tanzania in 2007, and in Zambia, Jamaica and Cambodia in 2009.
The Monitoring Body conducts Global Review on AfT twice a year. The global review is a sharing of the profiled-up information of the previous regional reviews. The purpose of the Global Review is to strengthen the Monitoring and Evaluation of the AfT to provide a strong incentive for both the donors and the recipients in advancing the Aid-for-Trade agenda.
In addition, the global AfT review takes stock of what is happening, identifies what should happen next, and improves the WTO monitoring and evaluation. The WTO has conducted AfT global reviews in 2007, 2009 and 2011 in Geneva.
How AfT can help LDC?
Economic growth is the most powerful tool to reduce poverty. In fact, trade is a major driving force to boost economic growth in any country. The importance of trade for development of LDCs was emphasized by the international community at the 2002 ‘UN Conference on Financing for Development’ in Monterrey,
Mexico. However, the discussion on AfT at the WTO started much earlier during the Uruguay round. Later, in 2005 the United Nations (UN) Millennium Project Task Force on Trade concluded that the AfT was an essential part of the package and that such a funding is additional to the current aid flow.
Nepal and many other low-income countries face obstacles in expanding and diversifying their trade. Policies pertaining to trade reforms and liberalization in these countries have not always delivered the expected benefits in terms of trade expansion, growth and poverty reduction. The international community has
agreed to expand and improve aid for trade to help LDCs build supply-side capacity and traderelated
infrastructure. Eventually, this will help LDCs to expand their trade and to benefit from their integration into the world economy.
Aid for Trade in Nepal
Nepal is a candidate for AfT because it is a LDC, a WTO member and has weak supply side capacity. Nepal joined the Integrated Framework of the WTO in 2002 and undertook the Diagnostic Trade Integration Study (DTIS) with the support of the global trade body. Nepal government approved the DTIS in August 2003. Poverty Reduction Strategy Paper (PRSP) incorporated a number of DTIS recommendations on trade issues in May 2003. EIF has AfT funding arrangements as Window I and Window II, also known as Tier 1 and Tier 2. The Window I is a financing arrangement that supports in-country capacity building including human resource of National Implementation Arrangements, providing operational support and updating DTIS. Whereas, Window II finances for priority activities identified in the DTIS, its update, and its Action Matrix.
The DTIS was updated as the Nepal Trade Integration Strategy (NTIS) with the support of the UNDP. Nepal government approved the NTIS in June 2010. NTIS 2010 is the effort of the Government of Nepal to strengthen its ability to coordinate and manage Trade-Related Technical Assistance and AfT by implementing the mechanism of the Enhanced Integrated Framework.
Under the EIF’s support measure, the government launched two Window II projects; the Trade-Related Capacity Building Project and Enhanced Trade Related Capacity (ENTReC) project between 2005 and 2008.
The Nepal government established National Implementation Arrangements (NIAs) in 2008 and 2009. Government of Nepal established the following structures according to the EIF guidelines.
1. The National Steering Committee (NSC)
2. The National Implementation Unit (NIU): based in the MoCS, with associate members in key line Ministries (‘extended’ NIU);
3. Technical Committees of key line Ministries to support the NIU;
4. The EIF focal point to lead the NIU and liaise with DPs and Geneva/WTO/EIF and AfT Initiatives;
5. a donor facilitator
Major donors contributing AfT in Nepal are World Bank, Germany, Japan, Switzerland and Norway. Disbursed amount of AfT in Nepal has almost doubled to USD 173.55 million in 2011 from USD 89.1 million in 2009, according to Organization of Economic Cooperation and Development (OECD).
Aid for Trade Flow in Nepal (USD’000,2009)
Aid for Trade
|
Commitments
|
Disbursements
|
|
2002-05 avg.
|
2009
|
2009
|
|
Trade
policy and regulations
|
84
|
2366
|
494
|
Economic
infrastructure
|
76347
|
227173
|
118959
|
Building
productive capacity
|
93930
|
62963
|
54100
|
Of
which: Trade development market
|
-
|
32540
|
11008
|
Trade-related
adjustment
|
-
|
-
|
-
|
Total
AfT
|
170361
|
173553
|
|
AfT
per capita(USD)
|
6
|
10
|
6
|
Source: OECD, 2011
|
|||
Aid for Trade has been committed to support in Trade policy and regulations, Economic infrastructure, Building productive capacity and Trade related adjustments. In addition, specific sectors covered by AfT commitments are transport, storage, energy generation/supply, agriculture, forestry, fishing, banking, financial
services and industry.
Disbursement of AfT in Nepal (USD ‘000, 2009)
In November 2010, the Government of Germany was selected as the new donor facilitator. At the political level, the German Embassy fulfills this role while at the technical level, the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, through WTO/EIF-Support Project, is responsible for undertaking the role of donor facilitator to facilitate Aid for Trade in Nepal.
Rup Kumar BK, January 2012
This article was originally published in Nepal Trade Magazine, January 2012, Issue 2, GIZ
WTO, Enhanced Integrated Framework,
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