Aid for Trade is building stronger economies

All countries need  to trade, with their neighbours and  globally, to sustain long-term  economic growth.  Some low-income countries lack the institutions, infrastructure and supply side capacity to benefit from open markets and lift their people out of poverty. The Aid for Trade Initiative, launched in 2005, encourages developing countries to make trade a priority and donors to supply new funds to help them build trade capacity.  

OECD and the WTO have been monitoring the results of the Initiative. The analysis and outcomes of the latest survey are presented in the joint OECD-WTO publication,  Aid for Trade at a Glance 2009: Maintaining Momentum, which will be launched by OECD Secretary-General Angel Gurría at the Global Review of Aid for Trade meeting in Geneva on 6 July.

Mr. Gurría notes that, “More and better aid for trade is particularly important in the context of the crisis. It can help to build the capacity and infrastructure developing countries need to take full advantage of freer trade. Aid for trade should also support the broader development goals we all share, focusing not only on building trade capacities but contributing to a healthier environment and to fighting poverty.”

Since 2005, aid-for-trade flows have grown annually by more than 10% in real terms. Total new concessional commitments reached more than USD 25 billion in 2007, an increase of USD 4 billion over 2005. What’s more, growth is happening where it is most needed. Low-income countries have seen their share of total aid for trade increase from 44% to 54%. And while Asia continues to be the biggest aid-for-trade recipient in overall terms, most of the 2007 additional funding went to sub-Saharan Africa, with an impressive growth of 59% (or USD 2.9 billion) compared to 2005.
Developing countries are using these funds to overcome infrastructure bottlenecks and to build their capacity in trade-related fields: aid targeted for economic infrastructure dominates (53%), followed by productive capacity (43%). Trade-related technical assistance accounts for the remaining 4% of total aid-for-trade flows.

Aid for trade does not come at the expense of other assistance programmes  - it is “additional” aid. Furthermore, OECD calculations show that 9 out of 10 aid-for-trade commitments have resulted in actual aid-for-trade projects and programmes. Finally, funding for global and regional programmes – identified as an area for special attention by the first Global Review – has more than doubled in volume since 2005.

Source: Transportweekly