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.
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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.
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 the Center 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.
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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