Aid for Trade
Aid for Trade (AfT) is assistance provided to support partner countries' efforts to develop and expand their trade as leverage for growth and poverty reduction.
Aid for Trade in a nutshell
Aid for Trade is part of Official Development Aid (ODA) related to improving countries’ capacity to trade and is categorised according to the following six areas:
- trade policy and regulation
- trade development
- trade-related infrastructure
- building productive capacity
- trade-related adjustment, and
- other trade-related needs.
This can include support for building new transport, energy or telecommunications infrastructure, investments in agriculture, fisheries and services, as well as assistance in managing any balance of payments shortfalls due to changes in the world trading environment.
Categories 1, 2 and 6 correspond to core trade issues and are designated as Trade-Related Assistance.The other three categories include capacity building and infrastructure. Together, they are referred to as ‘the wider Aid for Trade agenda’, designed to benefit trade in a broader sense.
Aid for Trade – and more particularly Trade-Related Assistance – can help partner countries take advantage of opportunities created by unilateral, bilateral or multilateral trade openings and hence it is an important tool to facilitate trade reforms or adjustments.
Why Aid for Trade is relevant
Many developing countries face internal constraints such as a lack of productive capacity, poor infrastructure, poor trade diversification, inefficient customs procedures, excessive red tape and difficulties to meet technical standards in high value export markets. This has a negative impact on their ability to trade and on the competitiveness of their exports.
Aid for Trade – and more particularly Trade-Related Assistance – can help partner countries take advantage of opportunities created by unilateral, bilateral or multilateral trade openings and hence it is an important tool to facilitate trade reforms, improve the business environment, support regional integration and provide opportunities to integrate into global value chains. It is an important part of a long-term strategy for global poverty reduction, alongside debt relief and general development aid.
The contribution of trade for achieving inclusive growth and sustainable development is also emphasised in the EU development policy, notably the Communication on "Increasing the Impact of EU Development Policy: an Agenda for Change" issued in October 2011.
EU trade policy and Aid for Trade
The EU and its Member States are collectively the world's leading providers of Aid for Trade. The European Commission produces an annual monitoring report on EU Aid for Trade The 2014 edition, reporting on figures from 2012, notably highlighted that:
- The collective EU Aid for Trade accounted for around 32% of total aid for trade flows in 2012, reaching an all-time peak of €11.6 billion, up 20% from 2011. EU Member States provided 70% of the EU's total.
- The EU and its Member States accounted for almost 60% of total global commitments of Trade-Related Assistance, or a total of €2.5 billion. Thus, the EU exceeded for the fifth consecutive year its commitment to annually provide €2 billion worth of Trade-Related Assistance.
- Africa is the main recipient of EU Aid for Trade, accounting for 55% of the total in 2012. Aid for Trade to LDCs has remained stable over the years, increasing slightly to €1.8 billion in 2012 from €1.68 the previous year.
Financing for Aid for Trade
Aid for Trade is part of overall EU Official Development Assistance so aid for different countries is financed through different instruments:
- the European Development Fund for African, Caribbean and Pacific countries
- the Development Cooperation Instrument or its successor, the European Neighbourhood Instrument for other developing countries
- the Instrument for Pre-Accession where it covers developing countries (e.g. Turkey which is the biggest receiver of EU Aid for Trade)
The EU and its Member States have a Joint Strategy on Aid for Trade from 2007 which includes the following key goals:
- Implement the commitment by EU Member States and the European Commission to collectively spend €2 billion annually on Trade-Related Assistance by 2010. This was exceeded already in 2008 and 2009.
- Enhance the pro-poor focus and the quality of EU Aid for Trade.
- Build upon, foster and support regional integration processes through Aid for Trade, including within African, Caribbean and Pacific (ACP) countries.
- Increase EU-wide and Member States' capacity in line with the globally agreed aid effectiveness principles.
- Support effective Aid for Trade monitoring and reporting.
Moreover, the EU and other donors agreed, in the context of the G20 to maintain, beyond 2011, the wider Aid for Trade spending at levels that reflect at least the average of the years 2006-2008 and to work with development banks to ensure the availability of trade finance to low-income countries.
Aid for Trade and WTO
The Aid for Trade Initiative did not aim to create a new global development fund for trade, but to work on the basis of existing development strategies with the aim of ensuring that more resources are devoted to trade.
Keeping Aid for Trade on the political agenda is essential to mobilise additional, predictable, sustainable and effective financing for trade, thus contributing to inclusive growth and sustainable development.
The recent WTO Ministerial Conference (MC9) in Bali in December 2013 produced a ministerial decision which reiterated the need for Aid for Trade and continued the mandate to pursue actions, but without making any specific commitments.
More on Aid for Trade
- Commission Communication on "Increasing the Impact of EU Development Policy: an Agenda for Change"
- EU and its Member States joint strategy on Aid for Trade
- 2013 Annual monitoring report on EU Aid for Trade