Lessons learned from Aid for Trade
in trade-led development
Many developing countries, particularly least developed countries (LDCs), are prevented from fully taking part in international trade due to a range of supply-side and trade-related infrastructure challenges. The multilateral Aid for Trade initiative, launched in 2005 at the World Trade Organization’s (WTO) Ministerial Conference in Hong Kong, was designed to mobilize resources to address trade-related constraints in developing countries and support their integration into the global economy.
The International Trade Centre (ITC) is a 100% Aid for Trade institution with a unique mandate of supporting the internationalization of small and medium-sized enterprises (SMEs) by connecting them to international markets.TECH OPPORTUNITIES
New opportunities abound for assisting SMEs in developing countries to use new technologies and network business models to benefit from globalization. However, the rise of populism, mercantilism and protectionism has imperilled this global effort. In the changing landscape, donors are increasingly demanding that Aid for Trade funds be used more efficiently while at the same time targeting areas where there might be maximum impact. Hence, it is imperative that international development agencies continue to adapt their strategies to use Aid for Trade to address the changing landscape of trade and development assistance.
An analysis of the lessons learned from ITC’s past interventions can offer a strong tool that can help reshape strategies in such a way that they meet the demands of donors, beneficiaries, partners and all stakeholders involved. Through its delivery of trade-related technical assistance for over five decades, there are a number of experiences ITC can draw upon to further the effectiveness of Aid for Trade initiatives.VALUE-ADDED ASSISTANCE
The evolution of Aid for Trade has resulted in a move from providing general assistance with often-intangible results to filling gaps in national development strategies to add real value to beneficiary countries. Specificity has become the hallmark of success. As such, the role of needs assessment and diagnostic studies has gained considerable significance.
While developing countries are more likely to suffer from multifaceted supplyside constraints, it remains unrealistic to be able to address all needs at a given time. A detailed cost-benefit analysis needs to be conducted to select solutions (as there can be many for the same problem) that will have the most impact. Experience has shown that taking sector-specific approaches can not only result in creating a niche by providing more tangible impact, but also help in securing the buy-in of local stakeholders, especially from the private sector.MARKET-ACCESS BARRIERS
ITC used this approach in providing support to the Central European Free Trade Agreement (CEFTA) Secretariat to address market-access barriers affecting intraregional trade. The project focused on the beverages and auto-parts sectors to analyse trade barriers and provide recommendations to enhance intra-regional trade. Since many problems and solutions turned out to be cross-sectoral in nature; the recommendations will help improve the business environment in general and not just for some selected sectors.
There are no one-size-fits-all solutions, nor any guarantees that interventions that worked in one country will work in another. Therefore, continuous engagement with domestic institutions including government departments, business associations, academia and other stakeholders in beneficiary countries can go a long way towards enriching project design, thereby ensuring long-term sustainability of project initiatives, easing the coordination challenges in project implementation and making monitoring and evaluation more effective. It also enables international development agencies to align their expertise with local realities and harmonize trade development strategies with larger national development agendas.COORDINATED ENGAGEMENT
The results of country ownership were at display in Myanmar in 2015, where, following ITC support in development of a National Export Strategy, 75 initiatives funded by the national budget, development partners or private investors were taken to implement the strategy.
Coordinated engagement in systematic mapping and tracking of the projects ensured greater transparency among ministries, private-sector participants and development partners, enabling them to maximize efficiency, minimize duplication in resource allocation and build national ownership of all Aid for Trade projects.
Boosting the capacity of trade and investment support institutions (TISIs) and partnering with them to implement interventions can ensure the long-term sustainability of Aid for Trade initiatives. TISIs should be seen as both enablers and multipliers in the field.
The empowered TISIs provide unity in businesses’ voice while preventing vested interests from hijacking the development agenda. ITC is dedicated to using TISIs as a channel to reach out to SMEs with technical assistance services. The steady expansion of ITC’s SME Trade Academy, which now offers over 80 e-learning courses to more than 5,000 participants, and ITC’s Supply Chain Management Programme, implemented through 80 network partners, illustrate its effective use of local institutions as multipliers of technical assistance interventions.POLICY REFORM
The relative importance of trade barriers resulting from non-tariff measures (NTMs) has risen in recent decades as formal tariffs continue to be reduced or eliminated. Addressing NTMs provides disproportionately greater benefit to SMEs and contributes significantly to their integration into regional and global value chains.
The WTO Trade Facilitation Agreement, which entered into force at the beginning of 2017, has been instrumental in focusing the attention of stakeholders in developing countries on reducing business costs by bringing about efficient cross-border trade procedures. Moreover, the TFA is bound to add and ensure greater impact from the global Aid for Trade initiative.