Emergence of global value chains strengthens Aid for Trade Initiative, OECD says
Aid for Trade is helping developing countries reduce trade costs, improve competitiveness and plug into the regional and global value chains that are increasingly important to the world economy, but much more can be done, according to a new joint report from OECD and the WTO.
Aid for Trade at a Glance 2013: Connecting to Value Chains says that the emergence of value chains strengthens the rationale for trade-related assistance and should reinvigorate the aid-for-trade debate. As developing countries seek greater participation in value chains, aid for trade programmes are helping them achieve their economic growth, employment and poverty reduction objectives, according to the report.
“Aid for trade works, and it is making a difference,” OECD Secretary-General Angel Gurría said during a plenary address before the 4th Aid for Trade Global Review, at the World Trade Organisation in Geneva. “Mobilising aid flows to boost trade and help connect developing countries to global value chains is a good investment. The challenge is maintaining momentum, fulfilling commitments, boosting results and making value chains accessible to all. An important next step would be the agreement of a comprehensive package of trade reforms, with a focus on trade facilitation.”
The new OECD/WTO monitoring study assesses the tangible results of the Aid for Trade Initiative, including aid flows and the outlook for future funding. It also analyses the strategies, priorities, and programmes developed and developing countries are using to connect their suppliers to value chains.
Donors have disbursed more than $170 billion in aid for trade since 2006, and annual commitments in 2011 reached $41.5 billion, 57% above the 2002-05 average baseline. Aid to private sector development programmes has continued to grow, reaching $18 billion in 2011. Debt pressures and sluggish growth continue to affect many donors, but providers of South-South development assistance, such as China and India, have scaled up their efforts, complementing the efforts of donors participating in the OECD-DAC Creditor Reporting System.
Aid for Trade flows result in lower trade costs and improved trade performance. OECD-WTO analysis shows that $1 in Aid for Trade funding increases exports from richer developing countries by $8, and by as much as $20 from the poorest countries. The impact of Aid for Trade funding is even higher for exports of parts and components, underscoring the benefits value chains offer to developing countries.
To take full advantage of the development opportunities afforded by trade, the report suggests that future aid for trade flows be directed at programmes to improve trade-related infrastructure and improve the business environment. Donors and developing countries should also put in place frameworks for results-based management of aid for trade programmes, based on a menu of trade-related targets, as well as indicators to measure their performance.
Source: Organization for Economic Co-operation and Development
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