Aid for Trade (A4T) is a multilateral initiative designed to assist developing countries, especially low-income countries, spur growth by integrating into the world economy. The Aid for Trade initiative was lunched formally in 2005, at the Hong Kong Ministerial of the World Trade Organization (WTO). It is designed to help developing countries take fuller advantage of engaging regional and world markets, harness the poverty alleviation potential of trade and address the many obstacles hampering cross-border commerce.
Around the world, A4T assistance has helped developing countries to benefit from market opening by reducing trade costs and overcoming obstacles hampering cross-border transactions Aid for Trade aims to ensure that the benefits trade and investment liberalization and of participating in trade negotiations are inclusive and generate benefits that reach everyone, everywhere.
The WBG’s Macroeconomics, Trade and Investment (MTI) Global Practice deploys its aid for trade expertise worldwide in helping client countries address the trade-related obstacles their economies face, enact the policy and institutional reforms they need, and make fuller use of their competitive abilities.
The trade policy agenda has evolved significantly since the early 1990s, when trade liberalization was the main focus of the debate. Today, countries maintain relatively low import tariffs, but new challenges have emerged. Non-tariff measures have increased sharply as governments strive to protect domestic industries. Restrictiveness in services markets remains pervasive, holding back services-led integration and diversification efforts. Developing countries also face challenges from indirect factors that hinder their access to regional and global markets. These include anti-competitive business practices, regulatory environments that are unfavorable to business growth and investment, or limited infrastructure capacity.
But globalization and technological change also bring exciting new opportunities for developing countries to participate in trade, for example, through regional and global value chains, digital trade or services such as tourism. Developing countries now account for around half of global trade – up from around a third in 2000 – and receive close to half of total foreign direct investment. Aid for Trade seeks to ensure that developing countries reap the benefits of increased participation in world trade.
The World Bank Group (WBG) is the largest multilateral provider of Aid for Trade. Its multi-pronged A4T Program focuses on helping governments and private operators address and overcome obstacles that handicap their connection to regional and world markets. The program targets soft and hard constraints weighing on trade-led integration. This includes concessional lending to low-income countries and non-concessional lending to middle-income countries for trade-related projects. WBG assistance further involves policy advice and technical assistance aimed at helping governments deliver better trade results.
The Bank’s A4T strategy spans operations, research and analysis, advocacy, training, and capacity building. and focuses on four key areas: connectivity, sustainable livelihoods, e-trade, and women’s empowerment.
- Connectivity. No area of A4T support illustrates the WBG’s focus on connectivity better than efforts at helping client countries implement the WTO’s path-breaking Trade Facilitation Agreement (TFA), which calls for stepped-up efforts targeted at further reducing trade costs, scaling up the quality of logistics supply chains and transport infrastructure and enhancing the commercial friendliness of borders. A key component of the WBG’s A4T support in this area has been the Trade Facilitation Support Program (TFSP), launched in June 2014 and co-financed by a group of leading donors. Since its launch, over 60 countries have reached out for technical assistance and support to implement the TFA.
- Sustainable Livelihoods. The World Bank Group and several development partners are involved with WTO’s Standards and Trade Development Facility (STDF), promotes safe trade in foodstuffs, minimizes transaction costs and prevents the spread of pests or diseases among plants and animals. These are areas in which many developing countries possess natural comparative advantages but face recurring difficulties in complying with stringent sanitary and phyto-sanitary requirements in importing markets.
- E-trade. The ongoing digital revolution heralds far-reaching gains in innovation, competitiveness and growth, all of which offer new opportunities, especially for micro, small and medium-sized enterprises to plug into world markets and supply chains. However, even as the digital economy advances at breakneck speed globally, its benefits are not felt equally. Progress towards a digital economy ecosystem relies on three essential pillars: digital infrastructure, skills and an enabling e-business environment. All these are areas to which the Bank’s A4T Program directs attention with a view to laying the infrastructural, regulatory, institutional and human capital foundations of connected economies and societies. Our work shows that governments need to address all pillars of the e-trade environment in a coordinated manner to increase e-trade competitiveness and reduce poverty.
- Women’s Empowerment. Over the past four years, 69% of the WBG lending operations and an average of 25% of all advisory services - provided through the World Bank and International Finance Corporation - have been gender-related. Looking ahead, the Macroeconomics, Trade and Investment (MTI) Global Practice is developing a more systematic approach to gender-sensitive projects.
Due to strong demand from governments, WBG support for trade facilitation has grown from $322 million in 2004 to more than $7 billion today.
In Cambodia, our more than 10-year partnership on trade facilitation has resulted in reforms that improve transparency and strengthen coordination among border agencies. Cambodia cut border clearance times from 6 days to 1.4 days over just a few years, climbing more than 40 places in the Bank’s Logistics Performance Index. This supported Cambodia’s growing export competitiveness in manufacturing, especially in the garment sector, where 85% of the workforce is female.
In Jamaica, A4T assistance directed at implementing the WTO’s TFA is generating development dividends through concrete steps to strengthen the country’s trading environment and improve the ease and ways of doing business in the country. In February 2015, Jamaica formed its Task Force (or national committee) on trade facilitation. During its first year, the Task Force held a series of fruitful consultations with its members in the public and private sectors on how to increase trade facilitation in Jamaica. These consultations laid the foundation for the creation of a Trade Facilitation Project Plan, currently in use as a guide for the execution and monitoring of Jamaica’s trade-competitiveness activities. The Task Force has since implemented ASYCUDA, a computerized customs management system, through the Jamaican Customs Agency, which has established connectivity with all border agencies, making applications for licenses and permits electronic. This has resulted in a paperless environment for trade, faster clearance times, and a more efficient business process.
The Great Lakes Trade Facilitation Project (GLTFP) aims to increase the capacity for commerce and reduce the costs faced by traders, especially small-scale and women traders, at key borders between the Democratic Republic of Congo, Rwanda and Uganda. The GLTFP is groundbreaking in many ways. It is the first large-scale World Bank operation focusing on small-scale trade in a conflict area and moves beyond a traditional focus on trade in goods by also targeting cross-border trade in a number of border-transacted services. Involving collaborative efforts across WBG’s Global Practices (GPs), the project seeks to reduce female harassment by improving a critical measure of trade: the time it takes to cross the border. The project’s early results show that it is helping to reduce the risks faced by women traders by improving access roads that they travel on by adding pedestrian lanes, improving lighting and security at border facilities and providing gender sensitivity training to border guards, the vast majority of whom are men.
In Lao PDR, the Bank Group helped launch a trade information portal in 2012 that helps combat a lack of transparency in trade processes and procedures. Since then, the Bank Group has supported such portals in more than a dozen countries – the latest being Vietnam - using a custom-built software platform, as well as contributing to global knowledge on the topic. The basic function of such portals is publishing all laws, regulations and procedures affecting trade. Increasingly, they also serve other functions, including as enquiry points on trade or repositories of information on trade in services or non-tariff measures. Just as important as the transparency they provide, the process of establishing and maintaining portals also brings together the multiplicity of government agencies involved in trade policy formulation and implementation. Our experience in the field shows that promoting such coordination and helping it run more effectively forms an essential ingredient of sustained reform efforts.