Source:
IFIs Latin American Monitor
Fri Nov 23 2007
"Aid for Trade" initiative is part of a deal struck at the 2005 WTO Ministerial in Hong Kong as an attempt to move the Doha Round of trade negotiations forward by helping poor countries take advantage of all the alleged benefits of a further liberalized trading system. From 19 to 21 November representatives from the World Trade Organization, the World Bank, International Monetary Fund, the United Nations Development Program and trade and finance ministers were meeting in Geneva to discuss this initiative.
This initiative refers to the "flow of funds to developing countries to improve their participation in the multilateral trading system". Bilateral donors and international financial institutions like the IDB have offered this type of assistance for some time. However, this initiative has gained relevance in the context of the Doha Development Round, so that several high-income countries have pledged to increase their financing for trade to help developing countries to "strengthen their supply capacity and the infrastructure needed to implement the WTO agreements in order that they may benefit from them and increase trade".
In the work the WTO has done with the three Regional Banks (ADB, AfDB and the IDB), they have agreed to organize regional meetings (Latin America and the Caribbean; Asia and the Pacific; and Africa) during September and October of 2007, gathering together ministers of economics and trade, all the donors and agencies operating in each region, and representatives from the private sector, with the aim of "finding examples (in existing programs) of how to identify and meet the needs of countries and regions, and how to increase Aid for Trade".
Thus, the Inter-American Development Bank, in conjunction with the WTO, organized in the framework of this initiative the first Aid for Trade regional meeting for Latin America and the Caribbean, on September 13th and 14th, 2007, which, according to the document "Mobilizing Aid for Trade, Focus: Latin America and the Caribbean", set out five tasks:
- Emphasize the importance of trade for development
- Identify the key gaps in capabilities for export growth
- Emphasize the importance of comprehensive marketing strategies (regional and national)
- Highlight the need for greater and more effective funding
- Ensure political commitment to the future agenda
At the conference in Lima, ways to mobilize political and financial commitments to advance the initiative were sought. The starting assumption of this conference was that the private sector should be the center of this initiative and any solution it derives. Because the organizers of the initiative are companies, they are the ones who innovate, invest and trade, and not the governments.
According to Carlos Bedoya, from Latindadd and animator of Hemisphere Working Group on Finance and Trade, "it is necessary to take a critical look at the actions of this initiative. The focus must be aware of the type of development, conditions imposed, location, scope and content of the projects. The analysis must also include the public policy reforms which are promoted in connection with social organizations and other actors of different companies and governments. Also of utmost importance is the impact of the financial and non-financial assistance on the productive economic foundations of our countries, and the enjoyment of the rights of people of the region. Without this analysis, the Aid for Trade Initiative now undertaken by the WTO will be more of the same".
"It is important to keep in mind that in this new scenario, the IDB changes from being a bank which provides technical and financial assistance for development to being a provider of assistance for trade capacity building. In this sense, it is necessary to constantly review the framework adopted in 2005 to improve the effectiveness of development by the IDB, which reduces the conditions for lending to the private sector. What are these reductions and what do they consist of? It appears that under the framework of the Aid for Trade Initiative, there are large amounts of financial and technical resources for foreign trade directed mainly to the private sector. One of the concerns is whether national governments will assume the risks of these operations through guarantees or collateral".
"It is also important for organizations seeking to influence in the area of international trade and finance policies to work for a broad concept of trade that can be discussed and introduced in these debates. We must build on the issues that were highlighted at the conference, particularly by the officials of the IDB, that the most important thing for the trade is not the reduction or elimination of tariffs, but the costs of transport and certifications. This opens a door to introduce aspects of fair trade".
Before the Geneva meeting, Bedoya stated "we must take a position as a global civil society to express our concerns that this initiative will become a new way to implement public policy conditions for our countries that benefit only the multinational private sector".
"We must take this initiative as an opportunity to generate non-reimbursable aid through existing funds such as the FSO or MIF (in the case of the Latin American region and Caribbean States) for investment in technology, worker qualification and infrastructure with criteria of respect and care for the environment and the various forms of cultural organization in our region".
Global Aid for Trade Review
From 19 to 21 November, representatives from the World Trade Organization, the World Bank, International Monetary Fund, the United Nations Development Program and trade and finance ministers are meeting in Geneva to discuss something called "Aid for Trade." The initiative is part of a deal struck at the 2005 WTO Ministerial in Hong Kong as an attempt to move the Doha Round of trade negotiations forward by helping poor countries take advantage of all the alleged benefits of a further liberalized trading system.
Late week, IATP's Trade Information Project (TIP) in Geneva, who has been following the Aid for Trade initiative from the beginning, outlined the status of Aid for Trade and some of the clear shortcomings, including:
* There has been no additional aid offered. Instead money will have to be diverted from other assistance, such as health and education, to accomodate trade. Overall development aid actually declined in 2006.
* It is unclear what conditions will be attached to Aid for Trade and whether those conditions will be used to perpetuate unfair trade rules and the current WTO agenda.
* Donors and agencies use different definitions of what counts as Aid for Trade, making pledges and assessments impossible to monitor.
* Priorities of Aid for Trade have been identified by WTO Director General Pascal Lamy, and significantly influenced by international agencies. Instead, priorities should be defined by recipient countries in consultations with all affected stakeholders.
What about fixing the international trading system itself, which has expanded inequities both within countries and among countries? Last year, IATP's Carin Smaller questioned whether the Aid for Trade initiative was being used as a consolation prize for a failed Doha Agenda. Recent projections and research by the World Bank, the UN and a variety of independent think tanks confirm that the poorest countries would be the biggest losers if the current proposals for the Doha Agenda were adopted. IATP's Steve Suppan and researchers at Tuft's Global Development and Environment Institute among others have written about this.
In a letter to WTO negotiators in July, over 90 civil society organizations from 35 countries criticized the Doha Agenda for being "manipulated to primarily serve the interests of the northern industrialized powers to expand market access for their transnational corporations." The groups called for two-year moratorium to re-think the current model and create "alternative trade regimes that are people, development and environment centered." Some alternatives for a fair trade system have already been proposed through the EcoFair Dialogue.
Read the last CSOs statement on Global Aid for Trade Review (Geneva, November 20-21)
Sources: IATP and Hemisphere Working Group on Finance and Trade.
Related Information:
* Aid for Trade: Harnessing the global economy for economic development
Development Committee (World Bank and IMF)
Attached for the October 21, 2007, Development Committee Meeting as a background
* Mobilizing Aid for Trade in Latin America and the Caribbean
Draft for the September 2007 discussion
InterAmerican Development Bank
Vice-Presidency of Sectors and Knowledge
Integration and Trade Sector
* Aid for Trade: The Experience of the IDB in Latin America and the Caribbean
May 2006
Inter-American Development Bank
Department of Integration and Regional Programs
* Can Aid Fix Trade? Assessing the WTO’s Aid for Trade Agenda
* Policy coherence and agricultural trade liberalization: Lessons for the Doha Round
* Doha is dead, time to rethink the multilateral trading system
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