The Aid for Trade (AfT) initiative was launched in 2005 at the 6th WTO Ministerial Conference in Hong Kong with the aim of helping developing and least developed countries (LDCs) build trade related capacity to overcome trade barriers, and in turn raise their participation in international trade. With the Agreement on Trade Facilitation being finalized at the 9th WTO Ministerial Conference in Bali in December 2013, there has been a renewed interest in the AfT program. The Trade Facilitation agreement calls for all WTO members to strengthen the implementation of GATT Articles V (Freedom of Transit), VIII (Fees and Formalities) and X (Publication) with the aim of streamlining trade procedures and expediting the movement and clearance of goods among all countries. At the same time the agreement accounts for “special and differential treatment for developing and least-developed countries” which includes opting for repeated extensions in implementing commitments through a flexible timeline and acquiring technical assistance and capacity building support wherever required. The provision of this assistance comes under the purview of AfT.
Aid is a transfer of resources, voluntarily provided as loans or grants by developed countries or international organizations (such as IMF, OECD, World Bank) to developing countries and LDCs for various developmental activities: which in the case of �trade facilitation’ would include a county’s trade related policies, procedures, institutions and infrastructure.
The impact of aid on the growth and development of a nation has intrigued researchers for the past many years, but has also raised the issue of whether aid has been ‘effective’, i.e. whether aid has been successful in helping achieve the desired objectives. Direct unconditional funding from the donor’s perspective, and misaligned domestic policies from the recipient’s perspective have been pin-pointed as the major causes of aid ‘ineffectiveness’. Considering that the positive impact of aid has not been ascertained in the literature and many donor organizations have been asked to revise their aid programs in recent times: does the Trade Facilitation agreement include provisions that ensure the effectiveness of AfT in developing countries and LDCs? What must be the aid disbursement agenda in order to prevent fallout of the AfT program?
The Paris Declaration on Aid Effectiveness (2005) underlines five core pillars to ensure the effectiveness of aid disbursements:
Ownership: Developing countries set their own strategies, improve their institutions, and tackle corruption.
Alignment: Donor countries align behind these objectives and use local systems.
Harmonization: Donor countries coordinate, simplify procedures, and share information to avoid duplication.
Results: Developing countries and donors shift focus to development results, and results get measured.
Mutual accountability: Donors and partners are accountable for development results.
These pillars are further strengthened by the Accra Agenda for Action (2008) which emphasizes on the role of ownership of development targets by the recipient country: building more inclusive partnerships and coordination between different donors, and donors and recipients: and achieving and accounting for results. Capacity development, in terms of building the ability of recipients for future development, is an integral principle of the Accra Agenda.
In order to notify the WTO nominated Trade Facilitation (TF) committee of phasing the TF implementation schedule, the developing countries and LDCs are required to categorize provisions of the agreement on the basis of their requirement for assistance. This is indicative of a strong ownership component since the target is set by the recipient country. The donor countries too are required to pitch in AfT for the desired objective of the recipient country, making the aid flows aligned between the donor’s and recipient’s objectives. These pillars are further supported by the “targeted assistance and support” on “mutually agreed terms” necessitated by the agreement in order to help recipients “build sustainable capacity to implement their commitments”. Along with prior targeting of AfT, steps to raise the transparency and accountability of assistance have been taken by setting down stringent review procedures of the aid disbursed and making all information publically available. The donors are required to provide information on aid disbursements every twelve months including the intended use of funds, procedures for disbursement, and the beneficiaries. The beneficiary country too is required to provide information on the agencies responsible for coordinating the donor support. In this regard, the WTO designated TF committee shall hold atleast one session every year to discuss problems regarding implementation of commitments, and review progress on provision of assistance and inadequacy of support, if any.
However the agreement is not binding on the pillars that stress upon harmonization and coordination of activities between the parties involved, considering that the members are to only “endeavour to apply” and hence only attempt to take into account the overall developmental framework of the recipient country / region, and the ongoing technical assistance programs of the private sector or other donors in case there may be an overlap or duplication of activities. Moreover, the agreement is less stringent towards promoting internal coordination between trade and development officials of the members in the capitals and Geneva regarding the implementation plan: and towards the use of roundtables, consultative group discussions and other coordination structures to coordinate and monitor implementation activities.
Overall, even though the Trade Facilitation agreement does account for most of the principles of aid effectiveness, it is imperative to ensure coordination and harmonization of assistance activities for positive results that can be measured in the years to come. In addition, it is important to specify the route through which assistance can be provided, since the agreement invites assistance either bilaterally from donor countries or via “appropriate international organizations”. Considering that bilateral aid can be biased towards certain developing countries and objectives – thereby being less effective – the AfT program can encourage, or rather necessitate, the flow of aid through non-partisan international organizations in order to promote a fair disbursement of funds and assistance towards global trade facilitation.