id for trade” refers to flows of development finance aimed at enhancing developing countries’ participation in the global trading system. Bilateral donors and international financial institutions (IFIs) have long provided aid for trade, but the term has gained new prominence in the context of the Doha Development Round. Several developed countries have pledged to increase their trade-related assistance in order to help developing countries —including those in Latin America and the Caribbean (LAC)—build the supply-side capacity and infrastructure they need to implement and benefit from WTO agreements and to expand their trade. WTO members increasingly recognize the importance of aid for trade, but there is no universally agreed definition of the term. Narrowly defined, it means trade-related capacity building (to help countries devise and apply trade policy, and to negotiate and implement related agreements) and trade development (including export promotion and trade finance). More broadly defined, the term also covers support for trade-related infrastructure (transport, communications, energy) and other supply-side interventions (in the productive sector, for example) to help a country benefit from freer trade. It also comprises trade-related adjustment programs such as social safety nets and worker retraining. In terms of financing, aid for trade mainly refers to the type of support classified by the OECD as official development assistance (ODA), including grants and concessional lending. Several factors, however, have underscored the need for aid-for-trade discussions to look beyond ODA, and to consider the scope and effectiveness of broader financing to meet developing countries’ trade-related assistance needs. Those factors include the recognition that existing infrastructure and supply-side capacities determine a country’s trade performance; that this is the case not just for the least developed countries (LDCs) but also for most middle-income developing countries; that the latter rely mostly on non-concessional lending to finance these areas of their development agenda; and that their private sectors can play a more active role in setting and implementing that agenda. Discussions of the scope and financing of aid for trade are particularly relevant for LAC. The region is diverse but comprises mostly middle-income countries, many of which no longer have access to concessional financing from IFIs. Most LAC countries, moreover, are excluded from recent trade-related cooperation initiatives that mainly target LDCs. But trade is crucial to their development and, despite significant reform efforts in recent years, LAC countries continue to face serious challenges in this area. Infrastructure and supply-side constraints, in particular, are preventing the region from fully exploiting the opportunities of more open markets.
Published on Sep 14, 2007
this report was prepared by the integration and trade sector (int) as a contribution to the regional meeting on mobilizing aid for trade: la...