A methodological framework to assess the effectiveness and development impact of Aid for Trade at national level

4 April 2011

As the third global review of Aid for Trade (AfT) draws close, the monitoring efforts of the AfT initiative coordinated by the WTO and OECD have intensified. WTO members, observers, international financial institutions, multilateral and regional organizations, the private sector, civil society, and academic institutions have positively responded to the WTO and OECD call for case story on AfT by submitting more than 200 stories(1). Within this context the case stories are expected to "probe deeper into Aid for Trade objectives, challenges and processes to acquire better knowledge about outcomes and impacts of Aid for Trade(2)". Meanwhile, donors and partner countries have been compiling the questionnaires which, together with the data contained in the OECD Creditor Reporting System(3) (CRS), will provide an important source of information for the next Aid for Trade at a Glance Report and Third Global Review of Aid for Trade - the focus of which will be on outcomes and impacts.

The monitoring process has contributed in generating a lot of data and information on AfT. It has strengthened the ownership of developing countries in designing and implementing AfT projects and has made the initiative process more transparent. Donors have identified and reported their trade-related aid projects more systematically. Furthermore, it has contributed in "keeping the momentum high" by increasing the international community attention on AfT, as indicated by the important increase of financial flows. Indeed, according to the OECD, the total amount of Aid for Trade provided attained US$41.7 billion in 2008, which represents a 62% increase compared to the 2002-2005 baselines. However, we believe that it is not only the quantity of resources on the table that makes the AfT Initiative a success but rather the quality of investment made. Finally, both the WTO and OECD have made considerable progress in refining the data, conducting analytical works and presenting them in the AfT global and regional reviews.

Need for specific assessment

Despite this progress, the current monitoring process remains "global" and does not allow gauging the effectiveness and development impact of the AfT at the local and sectoral level. Moreover, it is largely "top-down" since it does not fully bring the process down to the country level and does not foster a dialogue among national government agencies and other stakeholders, particularly the private sector. This is particularly problematic since the design and implementation of AfT often suffers from a lack of coordination between implementing authorities and other relevant actors in partner countries.

As affirmed by Bernard Hoekman, the Director of the International Trade Department at the World Bank, "a Geneva-based process of annual summaries and scrutiny of aid delivery can only be of limited utility if it does not engage national government agencies, local donor representatives and private sector [...]. The payoffs to such scrutiny will be at the national level, suggesting that monitoring and evaluation needs to take place locally and feed into the process and deliberations that inform the national prioritization processes(4)." Case stories, which are being currently collected by the WTO and OECD for the inclusion in the next round of AfT at a Glance report,  are certainly a good tool to address some of these problems, particularly if they try to assess the effectiveness and impact of a specific project. Nevertheless, they may not be able to provide a full picture of AfT activities at the macrolevel. As a complement to the work conducted by the WTO and OECD, ICTSD together with the South Asia Watch on Trade, Economics and Environment (SAWTEE), Katmandu have developed an independent methodology framework for assessing the effectiveness and development impact of AfT at the national level. The application of the methodology will allow to keep track of the various steps behind the strategy and implementation of AfT programmes and to gauge their effectiveness and impact by providing new data, information and analysis in addition to those contained in the Aid for Trade at a Glance Report: for instance, at the aggregate level on aid for trade flows, but also at sectoral and at individual project level(5).

Recommendations on the way forward

Some of the recommendations advanced by the task force on AfT constitute the conceptual basis of the methodology framework(6). First, the task force calls AfT stakeholders to provide additional, predictable and effective financing for fulfilling the aid for trade mandate. Moreover, the implementation of AfT programmes should be guided by the principles of the Paris Declaration on Aid Effectiveness. This means that for AfT to be effective, developing countries exercise leadership over their development policies and plans (ownership). Donors are encouraged to base their development support on countries' development strategies and systems (alignment) and to co-ordinate their activities to minimise the cost of aid delivering (harmonisation). Donors and partner countries should tailor their activities to achieve the desired results (managing for results) and are accountable to each other for progresses in better managing aid and in achieving development results (mutual accountability). Finally, the task force recommended that AfT should be rendered in a coherent manner, taking into account, inter alia, the overall goal of sustainable development. In addition, other aspects such as the sustainability of AfT and recipient countries' absorptive capacities, which can be defined as the ability of using AfT in an effective way, will be taken into account to gauge the effectiveness and development impact of AfT.

The methodology comprises four pillars and several components that will be measured by qualitative and quantitative indicators, as summarized in the table below. The indicators will measure the effectiveness of AfT in areas such as additionality, ownership, alignment, predictability, and impact. Sources such as the OECD CRS face-to-face interviews with policy makers and other relevant stakeholders, reviews and analyses of donors and partner countries' development strategies and policy documents such as Poverty Reduction Strategy Papers will be used to build the indicators.

The application of the methodology will generate country-specific data on some internationally recognized parameters such as the one contained in the Paris declaration on aid effectiveness and the task force recommendation. Moreover, to assess the effectiveness of AfT programmes at country level, indicators will go beyond tracking financial flows. They will contextualize trade-related development assistance within the overall economic situation, with a focus of poverty strategy priorities, trade and development policies, and other development financing mechanisms, such as climate change financing schemes. Indeed, it is widely acknowledged that to maximize the development effectiveness and impact of aid for trade programmes, they should be implemented in a coherent way with other development policies and programmes. Non-DAC development programmes, to the extent they are relevant for AfT, will be also assessed through a "South-south cooperation coherence parameter". In order to assess whether government agencies have a full ownership of the aid for trade initiative, qualitative methods of analysis will be used to evaluate the extent to which trade is mainstreamed in the national development plans and also at sectoral level and at lower level of governance structure (such as state, province, county, districts etc.).

Impact assessment of AFT is fraught with challenges because of the lack of credible data, attribution problems and above all an absence of counterfactuals. To measure the impact of AfT, the methodology proposes two levels of analysis: a macro-level analysis, to assess the overal impact of AfT on export capacity; and a micro-level analysis to measure the impact at the project level. The macro-level analysis is affected by several factors such as sectoral policies, good governance, regulations, supply-side constraints, market access barriers, preferential trade schemes and other international market access conditions, international and national economic trend, to name only a few. Despite these limitations, there are quantitative techniques which can isolate the impact of other factors and measure the impact of AfT programmes. For the project-impact analysis both quantitative and qualitative methods will be used and the required information for analysis will be obtained from the projects logical frameworks.

Conclusion

To have a full and clear picture of the effectiveness and impact of aid for trade at country level, it is important not only to have data on total flows. It is in fact crucial to have country-specific information on how project are designed and implemented, to what extent government agencies both at national and lower levels are involved, the role of the private sector, and so on. It is necessary to mention that the methodology, which is necessarily evolving in nature and intended to be implemented in select developing countries, is just a humble beginning of what could potentially become a much more challenging task when it is actually implemented in the national contexts.
Authors:

Ratnakar Adhikari is the General Secretary of South Asia Watch on Trade, Economics & Environment (SAWTEE) in Kathmandu.

Paolo Ghisu is Aid for Trade programme officer at ICTSD.

This article is based on a longer paper "A Methodological Framework for Conducting Independent Evaluation of the Effectiveness of Aid for Trade" by Ratnakar Adhikari to be released on ICTSD and SAWTEE websites at the beginning of April 2011.  This paper is a joint ICTSD-SAWTEE collaboration. Based on the independent methodology, ICTSD, together with other partner institutions, has been conducting a series of country-studies to assess the development effectiveness and impact of AfT in Nepal, Cambodia, Malawi, Mauritius, Peru and Jamaica. The studies will be published on ICTSD website in the second half of 2011. For further information visit www.ictsd.org/programmes/a4t/

For more information, see related articles in Trade Negotiations Insights; Lichia Yiu & Raymond Saner (2011) "An Evidence-based Monitoring System for an effective Aid for Trade", TNI, Volume 10. No1,  http://www.ictsd.org/bridges-news/trade-negotiations-insights/news/an-evidence-based-monitoring-system-for-an-effective and Wilson, M (2010) "Aid for Trade: Is it working? We want to know", TNI, Vol. 9. No 10. http://www.ictsd.org/bridges-news/trade-negotiations-insights/news/aid-for-trade-is-it-working-we-want-to-know-matthew

Notes

1 WTO Document WT/COMTD/AFT/W/22 , available at: ww.wto.org/english/tratop_e/devel_e/a4t_e/call_case_stories_e.pdf

2 Ibid

http://stats.oecd.org/Index.aspx?DataSetCode=CRSNEW

4 Hoekman, Bernard. "Aid for Trade: Helping Developing Countries Benefit from Trade Opportunities." In Aid for Trade and Development, by Dominique Njinkeu and Hugo Cameron (eds.), 27-44. New York: Cambridge University Press, 2008.

5 ICTSD is currently applying this methodology to conduct aid for trade assessments in Malawi, Mauritius, Jamaica, Peru, Cambodia and Nepal.

6 WTO Document WT/AFT/1, available at:

www.docsonline.wto.org/imrd/directdoc.asp?DDFDocuments/t/WT/AFT/1.doc

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