I am a confessed skeptic of the idea of aid-for-trade. To me, trade deals should be sold on their own merits and not on some other grounds--like tossing in aid, for instance. If developing countries believe that they are not yet sufficiently prepared to handle the challenges of trade, why should they believe that others will provide them with the tools to become trade competitive? As the old saying goes, look before you leap (and don't rely on someone to catch you at the other end, if I may add). Anyway, just what is aid-for-trade? Let's read some snippets from a speech by WTO Director-General Pascal Lamy about what aid-for trade is about and the major challenges he sees in enabling it:[C]ountries also need access to the basic infrastructure that drives globalization — 21st century transport corridors and telecommunications networks that can connect exporters to world markets; modern customs facilities that can move products rapidly and efficiently across borders; testing labs to ensure that exports meet international standards; and the sophisticated expertise and institutions needed to navigate a highly complex world trading system.
Some of these pieces are already in place in this region but others are not, and the necessary investments cannot be supplied by poorer counties alone. Aid for Trade is about helping to fill these “gaps” — mobilizing and leveraging the required financial resources — and providing a catalyst for the increased trade, investment and growth...
[T]he first step towards mobilizing Aid for Trade is to make trade capacity and infrastructure a national priority shared across government — including trade, finance, planning, agriculture, and other key ministries. And because trade crosses borders, these priorities are often regional in scope — which means finding new ways to finance and implement projects regionally...
Second, we need to focus on the financing that is required, how to mobilize it, and how to deliver it more efficiently and effectively. Yesterday you had a chance to discuss one of the existing programmes providing Aid for Trade in the area of standards. This joint programme is an example of how targeted aid for developing countries to meet food standards can help them access world markets...
Third, we need to focus on the role of the private sector — for the simple reason that it is farmers, businesses and companies that trade, not governments...And because private investment — both foreign and domestic — must be a major part of the answer to capacity and infrastructure building, we need to focus on the incentives that are required to leverage private resources.
Now, the never-ending Doha Round has turned to aid-for-trade to see if it can make a deal more palatable to developing countries. This article comes from New Zealand's One News:
World Trade Organisation (WTO) negotiators have turned their focus to development aid in an attempt to salvage souring talks over a global free trade pact.
The WTO's Doha round was launched in November 2001 with the aim of reducing global poverty by repealing barriers to trade in farming, industry and services that distort prices and make it hard for developing countries to compete.
But despite its lofty ambitions, known as the Doha Development Agenda, the talks have fallen prey to divisions among the WTO's 151 member states over how much developing countries should have to open up their markets under a deal.
Many diplomats see parallel discussions over "aid for trade" - a financial package to help developing nations boost their exports in the wake of a Doha deal - as a way to take the edge off poorer countries' concerns in the broader negotiations.
Argentina, one of the emerging powers who this week angered the United States and European Union with calls for more tariff cut exemptions for developing countries, told a WTO meeting on Thursday that the development funds were vital to making the Doha round palatable to the WTO's least developed members.
"Aid for trade should become an important component of market access for low-income countries, as part of the Doha Development Agenda," Argentina said in a statement.
Diplomats said a November 20-21 global review session on aid for trade may also provide an opportunity for ministers to come to Geneva and breathe life into the sickly Doha talks. A full ministerial meeting is not expected to occur this year.
Still, some observers cautioned that the aid for trade funds, to be channelled through agencies such as the World Bank, may not do enough to address poorer countries' hesitations in the Doha talks, which also include the services sector.
Carin Smaller of the Institute for Agriculture and Trade Policy said it remained unclear which countries would qualify for aid for trade money, and how much donors were willing to cough up for the projects.
And Amy Barry, who leads Oxfam's work on the WTO, said that while many poor nations would benefit from added investments in communications and other infrastructure, they should not be required to accept "potentially devastating" Doha provisions to qualify for the funds.
"Aid for trade should not be used - either as a carrot or a stick - to encourage developing countries to sign a trade agreement that does not promote their development interests. No amount of aid can compensate for fundamentally unfair and harmful trade rules," she said.
