For aid for trade advocates, the Addis
Ababa Action Agenda of the third International Conference on Financing for
Development is likely welcome news — it mentions trade 53 times
and includes a section on the importance of trade in reducing poverty.
When
many of those working on aid for trade issues gathered at the start of this
month in Geneva, Switzerland, for the fifth Global Review on Aid for Trade, it
was seen as a critical moment to rally people behind the issue and carry that
momentum through to the summits in Addis Ababa, New York and Paris. Addis seems
to have been an important next step.
“It’s
important in a way go back to basics,” said Arancha Gonzalez, the executive
director of the International Trade Center. “Trade is a
bit forgotten in the big discussion. … What I sense is people all of a sudden
realized here we have a great means of achieving this goal of eradicating
poverty” in a way that is fiscally responsible and can combine traditional
official development assistance with the private sector and domestic resource
mobilization.
When about 1,000 government, donor, NGO,
private sector and other representatives gathered in Geneva for the Global
Review, the goal was not to create an outcome document but rather to share best
practices and lessons learned to tackle the challenge of trade barriers and
find ways to unleash some of that income. It was also set to serve as something
of a rallying moment and reactions to the events seem to be mostly positive.
“Clearly,
to travel along the path of inclusive, sustainable growth, we must do more to
bring down high and excessive trade costs,” World Trade Organization Director-General
Roberto Azevedo said.
And
why are trade costs important?
The Organization for Economic Cooperation and Development estimates
that trade costs are up to 17.5 percent higher due to poor or inadequate border
procedures that restrict trade. According to OECD estimates, even a 1 percent
reduction in global trade costs would increase worldwide income by more than
$40 billion, most of which would go to developing countries.
Outcomes
While
the goal wasn’t a negotiated document, the Global Review did play host to
several announcements and donor commitments.
Australia released its newest aid for trade strategy,
which included a commitment to spend 20 percent of its aid budget over the next
five years on aid for trade.
The U.S. Agency of International Development and
the Office of the U.S. Trade Representative meanwhile announced that it would
help form the Global Alliance for Trade Facilitation — an international
public-private sector coalition designed to streamline border management in
developing countries as part of the implementation of the new WTO Trade
Facilitation Agreement. Concluded at the ninth WTO ministerial conference in
Bali, the TFA was amended late last year to allow members to “formally accept”
the agreement through domestic legislative processes.
The
alliance will formally launch in December at the 10th WTO Ministerial
Conference in Nairobi, Kenya.
The
United Kingdom, Germany, Canada, UPS, Samsung and the Borderless Alliance
have all signed on, and the International Chamber of Commerce, the World Economic Forum and theCenter for International Private Enterprise will
host the alliance in its early stages.
“WTO
member governments cannot implement the TFA alone,” USAID Associate
Administrator Eric Postel said in a statement. “They need to forge new
approaches to fully deliver on the vast potential of streamlining border
management. One critical new approach to this is partnering with the private
sector.”
The
alliance will create a framework for international and local businesses,
especially small and midsize businesses, to partner with government to create
and implement trade facilitation reforms.
The
WTO launched a new phase of the Enhanced Integrated Framework, with help from a
donation from Norway, that will allow the body to continue to support the
least-developed countries. A pledging conference for the EIF will be held in
Nairobi at the start of the ministerial.
The
bolstering of the EIF is important because there has been “huge” interest from
LDCs to invest more into trade capacity building and develop their trade
potential, Gonzalez said. When the first Global Review was held, LDCs were much
less aware about the role of using trade as a tool to tackle poverty than they
are today.
In
following the discussions, several key themes emerged — a greater focus than
ever before on women’s economic empowerment and reducing trade barriers for
women, and as Gonzalez indicated, an emphasis on improving trade in the
least-developed countries.
The
conference “was granular, which is good because we need to make sure the
palette of options ahead of policymakers and companies is varied,” Gonzalez
said.
Work ahead
Trade
has often been a contentious issue for the development community in the past,
especially when it comes to dedicating public monies to what some have said is
the purview of the private sector. But it seems a shift in attitudes is
underway, with trade likely to play a key role in the post-2015 agenda planning
and implementation.
However,
there is still a lot of work to do not only to change attitudes and prove the
worth of aid investments in trade, but also to ensure implementation of the
policies on a local and global level.
In
his remarks at the Global Review, World Bank President Jim Yong Kim
said promoting freer and more inclusive trade is a critical part of the bank’s
plan to end extreme poverty, a policy perspective that marks a personal shift
for him.
“I
say this knowing that, for some, the argument that trade helps the poor has
been controversial,” he said. “Yet our best evidence suggests that, when
countries are effectively integrated into regional and global markets, their
poorest citizens can reap substantial benefits.”
The
two critical objectives that must be included to ensure that the poor benefit
are expanding opportunities for low- and middle-income countries to participate
and reducing trade costs. Among the lessons the community has learned is that
trade benefits countries when it creates ways for their poorest citizens to
connect to global markets.
It’s
not only about global markets — regional markets can present significant
opportunities. But nontariff barriers often slow business or make trade
prohibitively expensive for small enterprises.
The
Borderless Alliance, which works to increase trade across West Africa by
harmonizing trade rules, reducing delays and lowering costs of doing business
across the region, is working to tackle nontariff barriers and encourage implementation
of existing policies.
Its
co-founder and re-elected president, Ziad Hamoui, said that while economic
communities in West Africa often have a set of common policies and directives,
these aren’t implemented in practice.
The Borderless Alliance has found that bringing together businesses and
government representatives helps push progress forward. It also runs
initiatives to reduce nontariff barriers, including border information centers
and tariff barrier-reporting websites. Recently, it has been working on
professionalizing the trucking industry, which Hamoui said should reduce some
of the existing challenges as well.
A
lot of the future investment, policy changes and government commitments hinge
on the implementation of the TFA at the December ministerial. Two-thirds of WTO
members must ratify the agreement for it to go into force, and while efforts
are underway, it appears too early to know if the target will be met.
The
ITC is supporting 40 countries that have requested help to move forward with
ratification to implement the agreement.
“Aid
for trade is delivering, but as with any such initiative, we need to remain
flexible and open-minded about how it can do more, and what the future
priorities should be,” WTO’s Azevedo said in a statement at the Global Review.
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