Funding for aid for trade in LDCs is increasing – find out how much, from who, and where investments are going
In 2015, world leaders committed to an ambitious global agenda of action. The plan, aimed at 2030 achievements for people, planet, prosperity, peace and partnership, has the Sustainable Development Goals (SDGs) at its core. And, international trade is helping to facilitate this.
International trade is a key transmitter of goods and services, technology, knowledge and behaviour. But in order to maximize trade potential, developing countries, and particularly the least developed of them, require specific sorts of assistance to compete in international markets.
This assistance, termed aid for trade, is part of SDG 8, aimed at sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all. The goal includes to “increase aid-for-trade support for developing countries, in particular least developed countries, including through the Enhanced Integrated Framework [EIF].”
Central to the WTO-led Aid for Trade Initiative, launched in 2006, is the understanding that trade should be better prioritised in the strategies of developing countries and donor agencies. A review of the Diagnostic Trade Integration Studies undertaken by the EIF suggests progress in this area, and most donor agencies report having specific aid for trade strategies and programmes in place.
The OECD has found that one extra dollar invested in aid for trade generates nearly twenty additional dollars of exports from the poorest countries. Since 2006, the share of aid for trade going to LDCs has increased to 33.3%, or an extra USD 10.3 billion.
So to summarize, investment in aid for trade brings returns, and is on the increase for LDCs.
According to Aid for Trade Task Force recommendations, prioritising trade as a tool for economic growth and poverty reduction should result in securing “additional, predictable, sustainable and effective financing for building trade capacities in developing countries.” To assess and ensure accurate accounting at the global level related to this, WTO members agreed on a set of benchmarks based on donor reporting to the OECD Creditor Reporting System (CRS).
These CRS proxies include:
- official development assistance (ODA) to help developing countries elaborate trade development strategies, negotiate trade agreements and implement their outcomes;
- building roads, ports and telecommunications networks to better connect domestic firms to international markets;
- supporting the private sector to leverage a country’s comparative advantages and diversify trade;
- helping countries pay for the costs associated with trade liberalisation; and
- supporting other trade-related needs if identified as priorities in the national development strategies of partner countries (Figure 1).