Reflections on the Global Review of Aid for Trade Conference

Reflections on the Global Review of Aid for Trade Conference (Geneva, WTO, July 3-5, 2019)

Jim Redden Visiting Fellow Institute for International Trade 

Introduction 

Since the Aid for Trade (AfT) initiative was launched just over a decade ago, over USD 409 billion has been disbursed, reaching 146 countries or territories. The aim has been to assist developing countries to participate fully in and benefit from the Multilateral Trade System (MTS) by improving their ability to implement reform, develop supply-side capacity and build trade-related infrastructure.  AfT has therefore become a vital complement to the participation of developing countries in more open markets.

Every two years the role and effectiveness of AfT in achieving these aims is reviewed in Geneva at the World Trade Organisation (WTO), with most major donors and recipient partners of AfT participating.  This year I was able to attend the seventh Global Review of Aid for Trade entitled “Supporting Economic Diversification and Empowerment” which wrapped up on 5 July, 2019.  Director-General Roberto Azevêdo acknowledged upfront the very high level of engagement (more than 1,500 people took part, including many ministers and trade leaders) and called for the Aid for Trade initiative to keep adapting to the changing global economic environment. 

Over the three day review, I was involved in a significant number of the workshops and plenaries, and held meetings with donors and recipient partners of Aid for Trade (AfT) gaining insights into a range of  themes and issues that have emerged as high priorities for the next 2-3 years.  Below I have attempted to summarise a number of those priorities.

Gender and trade

The Buenos Aires Declaration on Women and Trade was the first time that the WTO members and observers agreed to support measures to remove barriers to, and foster, women’s economic empowerment.  The mood in Geneva was to move beyond these good intentions and get down to practical ways in which AfT could assist in this objective, also enshrined in the UN Sustainable Development Goals for 2030.

Donors and partner countries have already been paying greater attention to gender dimensions through their various Aid for Trade programs. Both groups have gradually and increasingly integrated gender into their Aid for Trade objectives. The WTO’s 2019 Aid for Trade Monitoring and Evaluation report revealed that 84% of donors' aid-for-trade strategies and 85% of partner countries’ national or regional development strategies now seek to promote women's economic empowerment.

Not withstanding this progress there is still a long way to go.  Women are still often relegated to low-paid employment and lower value-added roles, or concentrated in informal and small-scale services sectors. Women tend to be more engaged in low productivity, traditional services typically associated with informal and vulnerable employment. For example, in the ICT sector, women are mostly concentrated in data processing, while men dominate better paid, high-skilled positions such as programming.  As such, many donors and recipients were keen to see more work on how all stages of AfT programs – including design, planning, consultation, implementation and evaluation – could assist with the development of trade agreements and trade policy which is able to more fully integrate gender equality and women’s economic empowerment. 

Trade in services

The role of trade in services and how AfT can best assist the development of more inclusive trade in services for those on low incomes, was also seen as a major priority, complementing the aim of  bringing the benefits of trade to more women and young people.

The latest report from the Asian Development Bank (ADB) on AfT in the Asia Pacific region noted that transport and storage, communications, energy, banking and finance, business and other services as well as tourism, have become the predominant and fastest growing sectoral targets of AfT.  Since 2005 a total of $106 billion was disbursed to services AfT, almost five times higher than AfT allocated to agriculture, forestry, and fishing and 18 times higher than that flowing to industry sectors. (ADB, 2019)

The importance of the services sector for women as business owners and managers was also highlighted with the Pacific (63.8%) and East Asia (61.6%) having the highest percentage of firms with female business owners in the services sector, meaning donors such as Australia and New Zealand can play an important role in directing AfT to support the capacity of women entrepreneurs as well as Micro, Small and Medium Enterprises (MSMEs) in our region to engage in international trade.

While many regulatory barriers remain, donors and recipients agreed that AfT has a particularly useful role to play in assisting governments to target regulatory reform and regional integration so as to continue to reduce the cost of services trade.

Small Firms

Building the capacity of the private sector, in particular MSMEs, was a constant theme running throughout the conference.  While not neglecting the significance of multinational companies (MNCs) and the strong contribution they can and do make to investment, jobs and technology transfer, it was felt that MNCs were able to stand on their own and contribute in their own right.  Aid for Trade is better spent on targeting MSMEs for the vital role they play in employing vulnerable and marginal groups particularly in the informal economy.

MSMEs in both the formal and informal sectors in the Asia Pacific region total about 266 million firms of which approximately 27% are female-owned, while overall employment in MSMEs accounts for around 46.8% of total employment. (ADB 2019)  As such the economic potential of advancing inclusive development in MSMEs is enormous given they:

• play an important role in boosting employment growth and providing decent work;
• comprise a significant number of female owned enterprises, and are often major employers of women;
• typically operate in more local markets and areas often neglected by larger firms; and
• are well-placed to create economic opportunities for more vulnerable population segments.

AfT can assist by supporting a more holistic and integrated approach to MSMEs so that women-owned firms, in particular, can realize their potential. Support mechanisms can include paving the way for better access to finance,(MSMEs face a USD $5.2 trillion credit gap globally), fostering more conducive regulatory and institutional frameworks, providing capacity building through business development advisory and training services, and promoting the adoption of new technologies and online platforms.

Digital technology and e-commerce

A major priority, if AfT is to seriously address the issue of more inclusive trade, is support of greater digital connectivity. This can boost economic opportunities and open up export avenues for business services, telecommunications, and information services in addition to supporting e-commerce transactions for manufacturing sectors. By lowering barriers to market participation and improving access to finance, AfT can significantly help MSMEs and women make the most of these opportunities.

However, progress in this area takes time and money. The primary constraint to more widespread adoption of digital technologies is the need for higher quality and more extensive digital infrastructure, particularly for wireless broadband services but also fibre. Complex regulatory and spectrum management issues are a key to rapid service rollout and quality, and the rationale for an AfT focus on digital infrastructure is growing. This could take the form of direct co-investment with the private sector for critical infrastructure. AfT could also focus on capacity building for digital regulators. Australia is playing a leading role in support of e-commerce, trade and development. Australia, Japan and Singapore are the Co-Convenors of the WTO Ecommerce Joint Statement Initiative (JSI), which started at the WTO Ministerial Conference 11 in 2017 and now has 80 WTO Members.  The group is open to all WTO members and more are joining each month.  The JSI group agreed in January this year to launch WTO ecommerce negotiations and Australia’s Ambassador to the WTO, Frances Lisson,  is chairing those negotiations.  The USA is also engaged in this negotiation – a positive signal that the US is keeping the multilateral option open.

Frances Lisson believes that digital trade and e-commerce are the future of international trade and that digital trade is an increasingly powerful economic enabler with enormous potential to promote inclusive trade particularly for MSMEs, women, and people in remote communities.  A special Aid for Trade fund hypothecated for e-commerce and LDCs was suggested in the closing forum of the conference and was noted with interest.  Whether this materializes is still to be decided but in any event it is clear that a major ongoing priority for AfT programs will be to foster the expansion of digital services in low income countries.

Other Issues and Priorities

The role of AfT in building diversification in climate sensitive sectors and promoting adaptation measures that increase resilience to the effects of climate change was prominent in many discussions throughout the review.  Concerns were often linked to agricultural activities and the impact of climate change on fishing stocks of particular concern to most small island states.  Samoan Trade Minister, the Honourable Lautafi Purcel, spoke of the impact of sea levels rising and the associated effects of increasing salinity on agricultural productivity.  He called on AfT donors to support their efforts to preserve agricultural produce and to diversify exports through value addition.

Which reminds me of the strong emphasis placed by many governments on the ongoing implementation of the WTO Trade Facilitation Agreement (TFA).   A number of multilateral donors including the World Bank, the World Economic Forum, and the WTO itself are working with AfT donors and their partners to assist in the smooth implementation of trade facilitation measures such as customs reform and the improvement of supply chain efficiency.  Quality infrastructure – meaning infrastructure, systems and policies to enhance the quality, safety and environmental soundness of goods, services and processes -  is increasingly seen as a vital part of the trade facilitation process and donors such as Germany and the World Bank are placing more and more emphasis on this aspect of their AfT programs.

Last but certainly not least, nearly every donor or recipient of AfT I met with reinforced the importance of AfT in support of building institutional capacity to implement reform and advance participation in the multilateral trading system. The Pacific Islands are once again a case in point.  Some of the smaller islands have a departmental team of 2 or 3 trade officials who not only need to prepare for and negotiate trade agreements (bilateral, regional or multilateral) but then need to develop the legislation, regulations and multiple requirements to implement reforms and market access modalities.  On top of this they also need to identify, negotiate and implement AfT programs.  Representative officials from Vanuatu spoke of the vital importance of human resource capacity building as well as secondments from donor countries.

Conclusion

Much is happening in a busy AfT arena!  Aid for Trade now accounts for about 40% of global official development assistance in the Asia Pacific region, so enhancing its effectiveness is crucial for the future of our region’s economic development.  In my view, Australia is very well regarded not only as it disburses some 23% of its overall ODA as Aid for Trade throughout the Indo-Pacific region, but as an active player in support of developing countries seeking to benefit from a more inclusive multilateral trading system.  The ongoing challenge for Australia and other donors such as the USA and the EU will be to keep AfT focused on major demand - driven priorities and to ensure the maintenance of healthy foreign aid budgets in support of the long term aim of more inclusive and sustainable trade.