Building Capacity to Trade

If agricultural trade reform is to bring widespread benefits to people living in developing countries, the developed world must make a stronger commitment to assist developing countries to take advantage of the opportunities provided by a more integrated global economy. Many poor countries need assistance to improve the roads, ports, and the infrastructure needed to enable producers to transport their products to markets, as well as the institutional regulatory capacity and the expertise to deal with the technicalities of trading in a global system. Building links between trade policy reform and this development assistance is an important element of the coherence agenda.

Whether market access for agricultural products is provided through ongoing multilateral liberalisation or through preferential trade arrangements, many developing countries have difficulty in taking advantage of these opportunities because of supply constraints at home. These constraints can broadly be divided into two categories: policy-induced constraints resulting from trade and macroeconomic policies that have biased the structure of incentives against agriculture and exports, and structural constraints, which are particularly prevalent in Sub-Saharan Africa.

The bias against agriculture is slowly being overcome. The elimination of exchange rate distortions and the ending of the discriminatory taxation of agriculture either explicit or implicit through marketing boards has gradually improved the pricing environment for developing country farmers. However, governments are slow to reverse the urban bias in their investment and public expenditure policies so farmers and rural areas generally still suffer from under-investment.

Trade-related assistance

Typical structural constraints are a high dependence on a limited number of export commodities; weak technological capacities; inadequate legal and regulatory institutional frameworks; limited access of farmers to credit; and inadequate transport, storage and marketing infrastructure. In the donor community, assistance to address these problems is referred to as trade capacity building or ‘aid for trade’ (A4T).

'Aid for trade' comprises a number of different elements. According to the 2006, WTO Task Force on A4T, classical 'trade-related assistance' involves technical assistance to improve trade policy and regulations as well as trade development. The wider A4T agenda includes in addition trade-related infrastructure, building productive capacity, trade-related adjustment and other trade related needs.

For example, 'aid for trade’ measures can help to address some of the non-tariff barriers which can restrict access for developing country food exports to the EU and other developed country markets, such as sanitary and phytosanitary standards. Developing countries often lack the monitoring, testing and certification infrastructure that would make it possible for their exporters to demonstrate compliance with import requirements.

‘Aid for trade’ can support capacity-building, i.e. training officials and equipping negotiators with the knowledge and skills to enable them to be effective in international negotiations, in the WTO and elsewhere.

Trade-related adjustment can help to provide assistance to developing countries where either trade liberalisation or CAP reform results in preference erosion.

EU Aid for Trade

The EU is the largest global provider of development assistance and funding measures designed specifically to increase the capacity of developing countries to trade. In 2005, the EU pledged to raise spending on aid for trade to €2bn a year from 2010. The EU Commission adopted its Aid for Trade Strategy in 2007, setting spending commitments on development assistance specifically target at projects designed to help developing countries develop the capacity to trade.

Other agencies and donors have also increased their aid for trade activities, increasing the importance of ensuring the coherence and delivery of trade-related assistance. For example, the Integrated Framework for Least Developed Countries brings together multilateral institutions with individual donors, including the EU; in a process to support least developed countries in trade capacity building and integrating trade issues into overall national development strategies.

Another example of an ‘aid for trade’ initiative is the Standards for Trade Development Facility, a global programme of capacity building and technical assistance to help developing countries in SPS and trade measures.

Links:

European Commission DG Trade, Aid for Trade webpage
Links to resources, documents and statistics on the EU aid for trade programme

IISD Website on Developing Country Issues / Capacity Building
Website focussing on where trade policy is on conflict with environmental and development policy and how to ensure positive outcomes are achieved.

Integrated Framework for Trade-Related Technical Assistance to LDCs Website
The Integrated Framework for Trade-Related Technical Assistance to least-developed countries (LDCs) is a process that was first established in 1997 to support LDC governments in trade capacity building and integrating trade issues into overall national development strategies

OECD Trade, Development and Capacity-Building Website
Website which reports on the trade capacity-building and development work of the OECD Development Assistance Committee

WTO Website on the Integrated Framework
This website contains a useful checklist for conducting a trade related technical assistance needs assessment which gives a good overview of the kind of structural problems which are likely to hinder the integration of developing countries into the global economy

Resources:

Commission, Aid for Trade Monitoring Report 2010 (PDF)
The third annual report monitoring the EU's commitment to increase aid for trade to €2 billion annually by 2010 has a particular focus on measuring aid effectiveness.

European Commission, Making Trade Work for Development (PDF), 2005
Presents a selections of case studies of EU trade-related assistance from around the world

FAO, Trade in Agriculture, Fisheries and Forestry Capacity-Building, 2004
Reports on FAO’s programme of trade-related technical assistance to stregthen the capacity of developing countries to participate effectively in international negotiations and to derive maximum benefits from international trade

OECD, Aid for Trade at a Glance, 2007
Joint OECD and WTO collaboration developing a framework for monitoring aid for trade. This framework has three levels: global monitoring of aid-for-trade flows, based on the OECD Creditor Reporting System; donor monitoring, in the form of self-assessments; and in-country monitoring, also in the form of self-assessments;

WTO, Changing the Power Balance at the WTO: Is the Capacity Building Agenda Helping? (PDF), 2005
Comprehensive paper that covers the context an key components of Trade Assistance and Capacity Building (TACB) for trade negotiations and policy reform, as well as reviewing the most commonly cited problems with trade-related TACB.