WTO AID-FOR-TRADE INITIATIVE GETS A BOOST FROM REVIEWS IN LIMA, MANILA

The WTO-led 'aid-for-trade' initiative is supposed to help give developing countries the financial and technical assistance they need to boost their capacity to take part in international trade.

However, since the initiative was launched nearly two years ago, few concrete signs have emerged on how this goal would be accomplished, apart from a high-level task force report last year identifying a range of organisational and monitoring priorities. The donor community has not come forward with new funds for implementation. Nor, for that matter, have would-be recipients clearly articulated how they would spend money on trade-related reforms and infrastructure.

This appears set to change. Conferences held in Lima and Manila during the past two weeks called on donors and recipient countries in Latin America and Asia to get organised at the national, regional, and multilateral levels: developing nations were asked to identify a few objectives that would help them boost exports and remove bottlenecks to growth; donors were urged to commit stable financing to the projects thus developed.

The two "regional reviews," along with one in Dar es Salaam in October, are building towards a "global review" of aid-for-trade efforts at WTO headquarters in Geneva scheduled for 20-21 November.

The WTO co-organised the12-13 September meeting in the Peruvian capital with the Inter-American Development Bank; the Asian Development Bank was its partner for the Manila gathering the following week. The principal purpose of the meetings was to encourage policymakers, donors, and the private sector to cooperate on constructing and implementing a comprehensive trade-led growth strategy at the national and regional levels.

Both conferences were attended by trade and finance ministers from the respective regions. Officials from poorer countries and small island states were particularly well represented. Also present were private sector groups, bilateral and regional donors, regional development banks, and institutions such as the Organisation for Economic Cooperation and Development (OECD) and the World Bank.

In both Lima and Manila, WTO Director-General Pascal Lamy stressed that in order to take advantage of the developmental opportunities presented by the current global economy, countries "need access to the basic infrastructure that drives globalisation": modern telecommunications and transport networks to connect exporters to markets, rapid and efficient customs facilities, testing labs to ensure that exports meet international standards, 'safety nets' to deal with trade-related economic adjustment, and "the sophisticated expertise and institutions needed to navigate a highly complex trading system." Lamy stressed the importance of national 'ownership' of aid-for-trade plans as well as the need for coherence among government ministries, donors, and business.

Participants repeatedly emphasised that donors should respond to recipients' priorities, rather than vice versa, according to sources who attended both meetings.

Major donors expressed willingness to increase funding for trade-related assistance. However, they stopped short of explicitly repeating promises of some $15 billion made by the EU, Japan, and the US at the WTO's Hong Kong Ministerial Conference in December 2005, where the aid-for-trade initiative was launched.

In an op-ed piece in The EastAfrican newspaper, Lamy and African Development Bank President David Kamberuka described some of the infrastructural shortcomings that aid-for-trade efforts could target: freight costs in Africa that amount to 13 percent compared of total import value, compared to 8.8 per cent for developing countries elsewhere and 5.2 per cent for industrialised countries; or per kilometre operating costs in Tanzania that are two and half times those in Indonesia or Pakistan. They quoted World Bank estimates that a US$20 billion road network linking Africa's capitals could boost trade by US$250 billion within 15 years, with great benefit to the rural poor.

Potential gains notwithstanding, participants were emphatic that aid-for-trade efforts could not substitute for smart domestic policy or a successful conclusion to the struggling Doha Round global trade talks, which were initiated to rebalance multilateral rules to make them more development friendly. The Associated Press reports that Filipino President Gloria Macapagal Arroyo told the Manila that the multilateral talks offered developing countries the best opportunity for poverty reduction, with the growing number of bilateral and regional trade accords a "second-best solution."

The aid-for-trade initiative is distinct from the Doha Round, but some officials suggest that momentum is likely to falter if the talks fail.

ICTSD reporting; "Philippine leader says bilataral trade agreements '2nd-best solution' next to WTO deal," ASSOCIATED PRESS, 20 September 2007; "Why we must improve our trade capacity," THE EAST AFRICAN, 24 September 2007.