Looking Ahead: Mobilizing Aid for Trade in LAC
Keeping the key players focused. The very nature of trade-related interventions calls for agreement among a wide range of actors. Because of the multi-sectoral and multi-stakeholder nature of the initiative, coordination failures within governments, and between governments and donors, have to be addressed. Endorsement of the initiative at the highest political level, both nationally and multilaterally, is important to creating momentum. But for the initiative to produce results in the short to medium term, the process must produce pay-offs and incentives so that key players remain engaged. Promoting early harvests. The lag between costs and benefits is a problem in trade-related adjustment and development interventions. Adjustment costs and needs arise in the short to medium term, while gains from trade and returns on trade-related investment materialize only gradually, often beyond the time horizon of national political cycles. To sustain the momentum of the aidfor-trade initiative, it is important to implement “quick-win” projects that yield short-term results and offer incentives for longer-term development interventions. This is particularly important in LAC, where trade-related assistance has been provided for some time but at insufficient levels, and where there is a risk of assistance fatigue. 3.7. Providing Incentives for Regional Projects Building on LAC’s rich integration experience. LAC has a long tradition of functional cooperation associated with regional trading agreements. More recently, governments have begun to devise regional approaches to trade-related infrastructure and private-sector development, and towards addressing the asymmetric distribution of integration’s costs and benefits. Some IFIs have been pioneers in providing assistance through regional programs, and the aid-for-trade initiative may give new impetus to this trend. Donors and recipients could collaborate in devising a response to the lack of regional financial instruments, by creating common frameworks for the coordination of national sovereign guarantees. Similarly, in coordination with national governments and with the support of regional financial institutions, regional agencies could explore triangular support, whereby external resources are used to fund south-south cooperation. Finding joint solutions to regional issues necessarily involves the provision of grant funding to regional projects. Such funding could absorb the costs of coordination, and thereby address coordination failures that partly explain the limited provision of regional public goods in LAC. Fostering regional approaches in donor agencies. Regional projects have received only scant attention from some donors. Some agencies will have to set up regional programs alongside country programs, and devise ways to coordinate them. This will be complicated because the appropriate “region” will vary for different types of project (membership in a free trade agreement or customs union may determine the beneficiaries of a joint trade facilitation project; geography may determine a transport region; common traditions or legal systems may determine the members of a joint standards or training region). Agencies might have to specialize in particular types of assistance in order to offer the most appropriate help at all levels. This approach could complement or modify the recent trend for national donor agencies to focus on a limited number of countries.
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