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The effectiveness of Aid for Trade: some empirical evidence

Briefing/policy papers

Written by Massimiliano Cali, Dirk Willem te Velde

Aid for Trade (AfT) has moved up both the aid and trade agendas. Several studies have emerged describing the rationale of aid for trade, but it is now time to move beyond the descriptive stage and into analysing the needs and designing the implementation process. This trade hot topic is based on a recent Commonwealth-ODI study that attempts to provide some empirical evidence on the effectiveness of Aid for Trade. A key motivation of the study is a lack of good quantitative evidence on 1) actual aid for trade in-country flows and 2) the possible effects of aid for trade.

In the multilateral trade negotiations under the World Trade Organisation (WTO), Aid for Trade was incorporated as a new concept in the Hong Kong Ministerial Declaration, as special and committed assistance to developing countries aimed at fostering trade. A WTO Task Force was established which identified six categories of AfT, building on the definitions used in the WTO-Organisation for Economic Co-operation and Development (OECD) trade related and capacity building database: trade policy and regulations, trade development, trade-related infrastructure, building productive capacity (including private sector development), trade-related adjustment (including support for adjustment associated with changes in international trade regimes), and other trade-related needs.

While AfT has now become a widely used terminology at the WTO, arguing for additional and better aid towards trade, the categories of aid falling under the Task Force definition has existed for decades.2 The OECD has been reporting data on the types of aid that are considered to be helping countries in promoting international trade.The Commonwealth-ODI makes use of this data in a novel way to examine the effects of these types of aid on trade-related outcomes.

Massimiliano Cali and Dirk Willem te Velde