Aid for Trade: Perspectives from Multilateral Organisations

1. AID FOR TRADE Perspectives from Multilateral Organisations The World Bank Lolette Kritzinger-van Niekerk Senior Economist Africa Region: Regional Integration Department Pretoria, August 23-24, 2006

2. OUTLINE The World Bank in Trade: • A brief history • The programme today

3. Two decades of trade work @ the World Bank Substantial assistance to developing countries in support of trade over last 25 years: • More than 500 lending operations to 117 countries amounting to US$38 billion or >8% of total Bank commitments during period • Supplemented by great deal of ESW, research, capacity building and training activities

4. Two decades of trade work @ the World Bank • 1980s • Support for elimination of quantitative restrictions on imports & tariff reductions through structural and sectoral adjustment loans • Support for macroeconomic reforms • Lending remained relatively high & peaked in FY87 with about 40 approved trade projects • 1990s • Most countries had enacted major trade reforms & WB attention shifted to other impediments to growth • FY93 marked decline in trade-related lending, which was reversed only in 2002 • However, WB core trade research team remained intact & generated studies on trade & poverty, agricultural trade, services, trade facilitation, regionalism, FDI, etc.

5. Two decades of trade work @ the World Bank …but realities of expanding global marketplace → important driver of growth with low-income countries failing to share proportionately in growth due to • undiversified economies / commodity dependence • behind- the-border-constraints (I climate, institutions & infrastructure) & protection of partagricultural in developed countries plus • Emergence of Doha Development Agenda • Explosion of ‘competitive liberalisation’ at regional level & of RTAs

6. Two decades of trade work @ the World Bank • 2001 – WB adopted a new strategy to support trade with 3 mutually reinforcing goals: • At global level – promote a development-friendly trading multilateral system • At regional level – making RTAs & RI work for developing countries • At country level – help integrating trade in growth strategies

7. WB trade programme today • Towards a development-friendly multilateral system • Advocacy - intensify participation in global discussions of trade policy, focusing on the Doha Round • New research & intensified research-policy dialogue link, e.g. Global Economic Prospects reports 2001-2004 devoted to trade-related policy analysis & recommendations • Outreach programme to support developing countries (LDCs) for Doha negotiations, e,g, with NC at WTO & WTO Secretariat – Customs Modernization Handbook, preparation of self-assessment tool

8. WB trade programme today • Making RTAs work for developing countries • Research on design and impacts of RTAs, e.g. Schiff & Winter (2003) & GEP 2005; • Trade reports for 5 of 6 operational regions, focusing on competitiveness, trade reforms, services e.a. behind-the-border issues; • TA for regional trade negotiations EPA & AGOA analysis & Eastern Europe – EU accession program; investment in trade-facilitation projects & regional transport corridors

9. WB trade programme today • Country work: increasing investment in trade • For LDC’s, Integrated Framework for Trade-Related TA, with multi-donor TF managed by UNDP & participation from WB, IMF, WTO, ITC & UNCTAD - 40 DTIS completed or in pipeline (15 in COMESA / SADC). • For non-LDCs, trade diagnostics in 35+ countries • Trade-related lending activities ↑ from US$200m in FY2001 to US$1.6bn FY2006 with content focused on investment in infrastructure & institutional reform

10. WB Instruments to Support Trade • Financial Assistance: Investment lending Development policy lending • Research: Country Competitiveness & Export Growth; Impact of Global Trade Reforms; Trade & Poverty, Trade Facilitation & Logistics; Standards; Trade in Services • Diagnostic / Analytical Support & Policy Dialogue: Country Diagnostic Trade Integration Studies (IF), Country Growth & Competitiveness Reports • Country Economic Memorandum with focus on trade; Trade & Transport Facilitation Audits / Value Chain Analysis; Standards Assessment and Strategy; ICAs, Trade & Services Country Studies • TA / Capacity Building: Support to Trade Facilitation Negotiations; • Support to WTO Accession; WBI Capacity Building events, incl services, trade & poverty, Agricultural trade, Analytical tools (Wits), Regionalism, Standards

11. Evolution of Aid for Trade Agenda @ WB / IMF • At 2005 AMs, WB && IMF submitted joint paper to the DC & IMF Financial Committee on progress in DDA & presented proposals on aid for trade. • Ministers emphasized importance of successful outcome to the Doha Round by end of 2006 & endorsed staffs’ proposal for an enhanced Integrated Framework for Trade-related Technical Assistance for LDCs (IF), and a strengthened framework for assessing adjustment needs. • They asked Bank and Fund to examine further the adequacy of existing mechanisms to address regional or cross-country aid for trade needs and explore new mechanisms as appropriate and urged them to better integrate trade-related needs into their support for country programs.

12. Task Force on the IF • Partly as a follow-up to the DC endorsement of the Bank and Fund staffs’ recommendation for an enhanced IF, a task force of donors and LDCs was established in October 2005 to operationalize proposals based on three objectives: • increased, additional and predictable funding on a multi-year basis; • strengthened in-country machinery, including through mainstreaming trade into national development plans and poverty reduction strategies; more effective follow-up to diagnostic trade integration studies; and improved co-ordination amongst all IF stakeholders; and • improved decision-making and IF management structure to ensure an effective and timely delivery of the increased financial resources and other support.

13. Task Force on the IF • Task Force presented its recommendations to the IF Steering Committee in Geneva, which approved them on July 5, 2006: • creation of a new executive secretariat in Geneva, administratively housed in the WTO Secretariat (with a strong firewall around it) which would take operational decisions, manage the IF trust fund and report to a board consisting of donors, recipients and agencies; • establishment of government implementation units in each LDC recipient country, funded by the IF, which would contract IF agencies for diagnostic work, capacity building, project preparation studies and other activities within the scope of the IF; • a funding target of US$400 million over an initial five-year period; and, • a monitoring and evaluation framework (currently there is no single framework, making it difficult to measure results).

14. Task Force on the IF • …but TF did not agree to include low-income developing countries beyond LDCs • Concerns about the need to establish adequate mechanisms tto provide suport to the countries on the ground – bridging the gap between independent Secretariat in Geneva & implementation of programmes on country level • Transition teams to provide inputs for implementation: institutional issues; defining the in-country approach & programming issues & replenishment

15. Review of Mechanisms for Cross-Country / Regional projects • Submission to DC at 2006 AM • Why regional cooperation matters • Regional Cooperation – the existing situation • Instruments to support Regional Cooperation • A possible way forward