(A joint publication by South Centre and ECDPM) - September 2007

Executive Summary

Following from the widespread acknowledgment that developing countries need support to benefit from trade liberalisation, debates on ‘aid for trade’ (AFT) have attracted much attention over the past years. This is not surprising since current AFT initiatives seem unprecedented in their purported geographical scope, thematic coverage and, possibly, resources involved. Aid for trade is discussed under the overarching framework of the World Trade Organization (WTO) but also in the context of regional and bilateral trade talks such as the Economic Partnership Agreements (EPAs) currently being negotiated between the European Union (EU) and the African, Caribbean and Pacific (ACP) countries. Precisely because of this level of ambition, and the possible thematic and geographic scope, the actual operationalisation of AFT initiatives to deliver incremental trade-related aid is a complex exercise that presents many challenges for all involved.

While potential donor and recipient countries discuss issues surrounding the demand side and the supply side of AFT, it is important to have clear ideas on what is already working (and what is not) at the multilateral, regional and national levels. To make concrete proposals for moving forward with AFT, donors and recipients have to take stock of existing programmes and identify financing gaps and needs for improvements of delivery mechanisms. Therefore, the current study aims to inform the ongoing debates by highlighting lessons learnt from existing trade-related aid schemes. These lessons are informed by an exploration of the European Commission (EC) trade-related assistance (TRA) (in the framework of ACP-EU relations) as a significant example of regional and bilateral schemes, as well as the multi-agency Integrated Framework (IF) and the International Monetary Fund (IMF) Trade Integration Mechanism (TIM) as major multilateral aid schemes.

The analysis provided may be beneficial in assessing whether existing trade-related aid mechanisms can play a key role in channelling AFT, as there is no need to reinvent the wheel. Indeed, a comparative assessment of existing aid instruments on the one hand and AFT mandates and objectives on the other will be a precondition for the identification of possible gaps in thematic and geographic coverage between the two as well as to extract best practices in delivery mechanisms and procedures. It is also hoped that this study will be useful in terms of translating some elements of the overall debate on aid effectiveness into the language of trade, as a first step in bridging the two separate worlds of the ministries of trade and ministries for development cooperation, as these two often lack sufficient exchange of information and interaction, both in developed and developing countries.

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