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Aid For Trade as finance for the Poor

Author

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  • Jaime DE MELO

    () (Ferdi)

  • Laurent WAGNER

    () (Ferdi)

Abstract

The Aid for Trade (AFT) Initiative was announced at the 2005 Hong-Kong World Trade Organisation (WTO) ministerial. Then, Doha round talks were stalled as developing countries were disenchanted with the world trading system they had signed up to a decade earlier under the Single Undertaking, whereby all members signed up to the same rules even though differential treatment for the Least Developed Countries (LDCs) provided some preferential market access to OECD markets and longer time periods to implement the obligations. So when the AFT was started, market access to OECD countries had not improved because of dirty tariffication in agriculture, technical assistance funding to help implement the WTO agreements (customs valuation, sanitary and phytosanitary measures, trade-related aspects of intellectual property rights) was not forthcoming and for the LDCs preferential access was dwindling as preferential agreements signed by developed countries were proliferating.This paper focusses on channels through which AFT flows might help reduce poverty, the top priority-- under the MDGs (goal 1A is “Halve, between 1990 and 2015, the proportion of people living on less than $1.25 a day”). It does not deal with the voluminous literature covering the aid-growth nexus. At around $30 billion a year, AFT is about 30% of Official Development Assistance (ODA) financial flows to developing countries (remittance flows are more than the combined ODA and FDI flows). So trying to isolate the effects of AFT from other financial flows is looking for a needle in a haystack. Hence the focus is about the channels linking AFT to poverty reduction through trickle down effects and a reduction in trade costs; as well as on multiple rather than single-country studies to emphasize generalizable results.[1]Section 1 reviews briefly the history of the AFT Initiative and the challenges it faces and section 2 discusses how the adding of objectives has complicated the evaluation of AFT. Section 3 contends that the evidence supports the view that trade is the engine of growth rather than the other way around and section 4 gives evidence of the trickle down effects of growth. Section 5 reports the evidence on the obstacles to trade caused by poor infrastructure and on the links between AFT disbursements and reduced trade costs. Section 6 concludes that the recently signed Trade Facilitation Agreement provides the opportunity to direct resources towards countries with the highest trade costs and highest poverty rates. [1] Cadot et al (2014) and Cadot and de Melo (2014a, b, c) provide a critical survey of what we know (and don’t know) about the efficacy of aid-for-trade with a greater focus on lessons from case studies.

Suggested Citation

  • Jaime DE MELO & Laurent WAGNER, 2015. "Aid For Trade as finance for the Poor," Working Papers P125, FERDI.
  • Handle: RePEc:fdi:wpaper:2082
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    References listed on IDEAS

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    1. Romain Wacziarg & Karen Horn Welch, 2008. "Trade Liberalization and Growth: New Evidence," World Bank Economic Review, World Bank Group, vol. 22(2), pages 187-231, June.
    2. Jean-François Arvis & Yann Duval & Ben Shepherd & Chorthip Utoktham, 2012. "Trade Costs in the Developing World:1995 – 2010," Working Papers 12112, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
    3. Matthias Helble & Catherine Mann & John Wilson, 2012. "Aid-for-trade facilitation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(2), pages 357-376, June.
    4. Mariana Vijil, 2014. "Aid for Trade Effectiveness: Complementarities with Economic Integration," The World Economy, Wiley Blackwell, vol. 37(4), pages 555-566, April.
    5. Mariana Vijil & Laurent Wagner, 2012. "Does Aid for Trade Enhance Export Performance? Investigating the Infrastructure Channel," The World Economy, Wiley Blackwell, vol. 35(7), pages 838-868, July.
    6. Brückner, Markus & Lederman, Daniel, 2012. "Trade causes growth in Sub-Saharan Africa," Policy Research Working Paper Series 6007, The World Bank.
    7. Philipp Hühne & Birgit Meyer & Peter Nunnenkamp, 2014. "Who Benefits from Aid for Trade? Comparing the Effects on Recipient versus Donor Exports," Journal of Development Studies, Taylor & Francis Journals, vol. 50(9), pages 1275-1288, September.
    8. Calì, Massimiliano & te Velde, Dirk Willem, 2011. "Does Aid for Trade Really Improve Trade Performance?," World Development, Elsevier, vol. 39(5), pages 725-740, May.
    9. Supee Teravaninthorn & Gaël Raballand, 2009. "Transport Prices and Costs in Africa : A Review of the International Corridors," World Bank Publications, The World Bank, number 6610, January.
    10. Paul Brenton & Erik von Uexkull, 2009. "Product specific technical assistance for exports - has it been effective?," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 18(2), pages 235-254.
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    Cited by:

    1. Van Der Sluis, E. & Durowah, O., 2018. "Aid for Trade and Foreign Direct Investment: Effects on Poverty Reduction," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277307, International Association of Agricultural Economists.

    More about this item

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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