preference erosion and aid for trade (a4t): a south asian perspective (?)
DESCRIPTION
Preference Erosion and Aid for Trade (A4T): A South Asian Perspective (?). Janaka Wijayasiri Shihana Samad Institute of Policy Studies of Sri Lanka. Objectives of the study. Identify non-reciprocal preference programmes of major developed countries and assess their importance to SA - PowerPoint PPT PresentationTRANSCRIPT
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Preference Erosion and Aid Preference Erosion and Aid for Trade (A4T): for Trade (A4T):
A South Asian Perspective (?)A South Asian Perspective (?)
Janaka WijayasiriJanaka Wijayasiri
Shihana SamadShihana Samad
Institute of Policy Studies of Sri LankaInstitute of Policy Studies of Sri Lanka
22
Objectives of the studyObjectives of the study
Identify non-reciprocal preference programmes of Identify non-reciprocal preference programmes of major developed countries and assess their major developed countries and assess their importance to SAimportance to SA
Identify countries in SA vulnerable to preference Identify countries in SA vulnerable to preference erosion erosion
Summarise results of various simulation exercises Summarise results of various simulation exercises in which the impact of preference erosion has been in which the impact of preference erosion has been estimatedestimated
Discuss possible solutions (trade and non-trade Discuss possible solutions (trade and non-trade related) to the problem related) to the problem
33
Today's presentation …Today's presentation …
Define what is meant by preference erosionDefine what is meant by preference erosion
Background to the problem of preference erosionBackground to the problem of preference erosion
Overview of GSP schemes, namely EU and US GSP schemes Overview of GSP schemes, namely EU and US GSP schemes and assess their importance to SAand assess their importance to SA
Indicators to assess vulnerability to preference erosionIndicators to assess vulnerability to preference erosion
Assess SAs vulnerability to preference erosion in EU and US Assess SAs vulnerability to preference erosion in EU and US and sectors/products using a set of indicators and sectors/products using a set of indicators
Overview of measures to address preference erosionOverview of measures to address preference erosion
44
What is meant by preference What is meant by preference erosion?erosion?
Refers to a decline in competitive advantage that Refers to a decline in competitive advantage that preferential beneficiaries enjoy in foreign markets as a result preferential beneficiaries enjoy in foreign markets as a result of loss of preferential trade treatment…this can happen of loss of preferential trade treatment…this can happen when preferences granting countries:when preferences granting countries:
1) 1) eliminate preferenceseliminate preferences
2) 2) expand the no. of preference beneficiariesexpand the no. of preference beneficiaries
3) 3) lower their Most Favoured Nation (MFN) tariff without lower their Most Favoured Nation (MFN) tariff without proportionately proportionately lowering their preferential tariffslowering their preferential tariffs
55
BackgroundBackground
Erosion of preference is an important issue in Erosion of preference is an important issue in efforts to negotiate a multilateral trade round efforts to negotiate a multilateral trade round
Tariff reductions under agriculture and NAMA Tariff reductions under agriculture and NAMA negotiations are expected to lead to lowering of negotiations are expected to lead to lowering of MFN tariffs…adversely affecting beneficiaries of MFN tariffs…adversely affecting beneficiaries of preferential arrangements preferential arrangements
In HK Ministerial Declaration preference erosion In HK Ministerial Declaration preference erosion was identified as an issue that needs to be was identified as an issue that needs to be addressed on a priority basisaddressed on a priority basis
66
Background (cont.)Background (cont.)
Preference erosion has become a divisive issue among developing Preference erosion has become a divisive issue among developing countries in the WTO - between those who are beneficiaries of countries in the WTO - between those who are beneficiaries of preferential treatment (ie) LDCs, ACP group and those who have preferential treatment (ie) LDCs, ACP group and those who have less preferential access to markets abroad less preferential access to markets abroad
Currently most developing countries enjoy preferential access to Currently most developing countries enjoy preferential access to markets in industrialised countries under the various non-markets in industrialised countries under the various non-reciprocal trade preference schemes, namely the Generalised reciprocal trade preference schemes, namely the Generalised System of Preference (GSP) scheme System of Preference (GSP) scheme
Preferential schemes have had beneficial effects (investment, job Preferential schemes have had beneficial effects (investment, job creation, poverty reduction) but they can also have perverse creation, poverty reduction) but they can also have perverse effects and suffer from a number of shortcomings effects and suffer from a number of shortcomings
… … but they remain valuable for recipient countriesbut they remain valuable for recipient countries
Preference erosion is not a new concern…Preference erosion is not a new concern…
77
Background (cont.)Background (cont.)
… … but it has become a sensitive issue following the granting but it has become a sensitive issue following the granting of duty free and quota free market access by industrialised of duty free and quota free market access by industrialised countries under schemes such as EBA, AGOA, etccountries under schemes such as EBA, AGOA, etc
Canada, EU, NZ, Norway, Switzerland grant duty free and Canada, EU, NZ, Norway, Switzerland grant duty free and quota free mkt access to almost all products from LDCsquota free mkt access to almost all products from LDCs
Japan offers duty free access to about 63% of importsJapan offers duty free access to about 63% of imports
US offers duty free access for all products from some LDCs US offers duty free access for all products from some LDCs from Africa and Caribbean under AGOA and CBIfrom Africa and Caribbean under AGOA and CBI
A number proposals have been submitted to address the A number proposals have been submitted to address the issue – one being Aid for Trade (A4T)issue – one being Aid for Trade (A4T)
88
Background to GSPBackground to GSP
In 1968, UNCTAD recommended the setting up of a In 1968, UNCTAD recommended the setting up of a ‘Generalised System of Tariff Preferences’ (GSP)‘Generalised System of Tariff Preferences’ (GSP)
Overall objectives were toOverall objectives were to Increase export earnings of developing countriesIncrease export earnings of developing countries Promote industrialisationPromote industrialisation Accelerate economic growthAccelerate economic growth
Basic principles:Basic principles: Generality – common scheme to be applied by all preference Generality – common scheme to be applied by all preference
giving countriesgiving countries Non-discrimination – all developing countries should be Non-discrimination – all developing countries should be
covered and treated equallycovered and treated equally Non-reciprocity – beneficiaries do not have to make Non-reciprocity – beneficiaries do not have to make
corresponding concessionscorresponding concessions
99
EU GSP schemeEU GSP scheme
Covers 178 countries Covers 178 countries Most generous of all GSP schemes in placeMost generous of all GSP schemes in place First to implement a GSP scheme in 1971First to implement a GSP scheme in 1971 Implemented for a ten year period, with the most recent being Implemented for a ten year period, with the most recent being
adopted in June 2005 and implemented on 01/01/06adopted in June 2005 and implemented on 01/01/06 Objectives: max. benefits to the most disadvantaged countries Objectives: max. benefits to the most disadvantaged countries
and provide a clearer graduation mechanismand provide a clearer graduation mechanism 3 types of arrangements:3 types of arrangements:
1) General scheme for all developing countries (IN, PK) 1) General scheme for all developing countries (IN, PK) - - duty free for 3300 non-sensitive productsduty free for 3300 non-sensitive products- duty reduction of 3.5 percentage points from MFN rate for 3900 sensitive - duty reduction of 3.5 percentage points from MFN rate for 3900 sensitive
productsproducts- textile and textile articles 20 percent duty reduction rate- textile and textile articles 20 percent duty reduction rate
2) GSP-plus scheme (SL) 2) GSP-plus scheme (SL) - duty free for 7200 products- duty free for 7200 products
3) Everything but Arms (EBA) for LDCs (BG, NP)3) Everything but Arms (EBA) for LDCs (BG, NP)- duty free for 9800 products- duty free for 9800 products
1010
US GSP schemeUS GSP scheme
First implemented in 1976 under the Trade Act of 1974 First implemented in 1976 under the Trade Act of 1974
Been in operation initially for two 10 year periods and Been in operation initially for two 10 year periods and thereafter renewed every one or two years, with the most thereafter renewed every one or two years, with the most recent renewal in 2002 under the Trade Act of 2002recent renewal in 2002 under the Trade Act of 2002
139 countries are eligible for GSP benefits (98 developing 139 countries are eligible for GSP benefits (98 developing countries, 41 LDCs)countries, 41 LDCs)
Approx. 4,600 articles are eligible for duty-free treatment, Approx. 4,600 articles are eligible for duty-free treatment, and in 1997, LDCs became eligible for an additional 1,783 and in 1997, LDCs became eligible for an additional 1,783 articlesarticles
Products excluded: textiles, watches, footwear, handbags, Products excluded: textiles, watches, footwear, handbags, luggage, flat goods, work gloves, other leather apparel and luggage, flat goods, work gloves, other leather apparel and import sensitive articles (steel, glass, electronic equipment) import sensitive articles (steel, glass, electronic equipment)
1111
South Asia’s exports to the world and the QUAD, 2004South Asia’s exports to the world and the QUAD, 2004
CountryTotal
exports% to US
% to EU
% to Japan
% to Canada
% to QUAD
Bangladesh 5,796,910 25.63 58.38 1.02 3.51 88.54
India 79,846,398 16.51 20.85 2.51 0.22 40.09
Nepal 658,942 23.70 19.19 1.15 1.72 45.75
Pakistan 13,379,015 23.34 29.33 1.20 1.33 55.19
Sri Lanka 5,485,135 34.03 31.59 2.82 1.31 69.76
1212
Code Description BG IN NP PK SL
01 Live animals & products 7.3 2.53 N/A 0.1 0.9
02 Vegetable products 0.02 3.69 0.13 1.05 1.3
03 Fats and oils 0 0.61 N/A 0 0
04 Prepared foodstuffs,beverages,etc. 0.23 0.93 N/A 0.42 0.1
05 Mineral products 0.01 1.87 N/A 0.01 0.08
06 Chemical products 0.38 6.99 0.06 0.02 0.55
07 Plastics & rubber 0.32 1.84 0.21 0.13 7.41
08 Hides and skins, leather, etc. 0.08 1.72 0.49 3.01 0.27
09 Wood & articles of wood 0.02 0.28 0.13 0.03 0.21
10 Pulp of wood, paper, books, etc. 0 0.29 0.6 0.05 0.02
11 Textile & textile articles 86.43 25.73 93.42 88.89 81.69
12 Footwear, headgear, umbrellas,etc. 4.74 0.86 0.42 0.12 0.98
13 Articles of stone, cement, etc. 0.15 2.23 0.02 0.39 0.77
14 Precious stones, etc 0 27.8 1.76 0.55 2.75
15 Base metals & products 0.01 9.61 0.32 0.88 0.09
16 Machinery & electrical equipment 0.02 6.56 0.36 0.19 1.37
17 Transport equipment 0 2.12 N/A 0.06 0.05
18 Optical & precision instruments 0.01 1.03 0.06 1.15 0.05
19 Arms and ammunition 0.24 0.02 0.01 0.19 0
20 Miscellaneous manufact. articles 0 2.4 0.25 2.68 0.9
21 Works of art, etc 0.03 0.13 1.19 0.08 0.01
Imports into the US (% of total imports), HS section-wise, 2004 Imports into the US (% of total imports), HS section-wise, 2004
1313
Code Description BG IN NP PK SL
01 Live animals & products 3.65 2.23 0.06 1.43 1.9
02 Vegetable products 0.28 4.66 0.43 2.51 6.31
03 Fats and oils 0 0.93 0 0 0.01
04Prepared foodstuffs,beverages,etc. 0.33 0.91 5.05 3.43 2.79
05 Mineral products 0 4.27 0.01 0.18 0.2
06 Chemical products 0.26 8.9 0.42 0.19 0.36
07 Plastics & rubber 0.13 2.15 0.03 2.19 11.37
08 Hides and skins, leather, etc. 1.37 5.2 2.54 8.85 0.83
09 Wood & articles of wood 0.05 0.34 0.32 0.02 0.5
10 Pulp of wood, paper, books, etc. 0.02 0.47 3.22 0.06 0.76
11 Textile & textile articles 91.42 28.04 80.49 71.47 52.33
12Footwear, headgear, umbrellas,etc. 1.45 4.41 1.23 1.2 1.21
13 Articles of stone, cement, etc. 0.4 1.82 0.24 0.19 1.12
14 Precious stones, etc 0 10.79 2.5 0.39 11.88
15 Base metals & products 0.06 9.08 0.91 1.19 0.65
16 Machinery & electrical equipment 0.07 8.78 1.48 0.9 3.73
17 Transport equipment 0.41 3.8 0.01 0.15 1.15
18 Optical & precision instruments 0.02 0.76 0.29 1.45 0.52
19 Arms and ammunition N/A 0.02 0 0.01 N/A
20 Miscellaneous manufact. articles 0.07 2.45 0.5 4.17 2.37
21 Works of art, etc 0 0.01 0.29 0.01 0.01
Imports into the EU (% of total imports), HS section-wise, 2004Imports into the EU (% of total imports), HS section-wise, 2004
1414
Market access to the US (by tariff lines)Market access to the US (by tariff lines)
0%10%
20%30%
40%50%
60%70%
80%90%
100%
Ban
glad
esh
Indi
a
Nep
al
Pak
ista
n
Sri
Lank
a
MFN duty free access Duty free preference No preferential access
1515
Market access to the EU (by tariff lines)Market access to the EU (by tariff lines)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
MFN duty free access Duty free preference Dutiable preference No preferential access
1616
Some indicators to measure Some indicators to measure vulnerability to preference vulnerability to preference
erosion..erosion..
Product coverageProduct coverage == value of imports eligible for preferencesvalue of imports eligible for preferences value of dutiable importsvalue of dutiable imports
Utilization rateUtilization rate = = value of imports receiving pref. treat.value of imports receiving pref. treat. value of imports eligible for preferencesvalue of imports eligible for preferences
Utility rate Utility rate = = value of imports receiving pref. treatmentvalue of imports receiving pref. treatment value of dutiable importsvalue of dutiable imports
Beneficiaries/sectors with high utilisation & utility rates are more Beneficiaries/sectors with high utilisation & utility rates are more vulnerable to preference erosion and vice versavulnerable to preference erosion and vice versa
1717
Main beneficiaries of the EU-Main beneficiaries of the EU-GSP scheme in South Asia, GSP scheme in South Asia,
20042004 EU received imports from South Asia worth some USD 30 bn EU received imports from South Asia worth some USD 30 bn
in 2004 of which 14bn of imports entered under the GSP in 2004 of which 14bn of imports entered under the GSP schemescheme
Bangladesh22%
Pakistan16%
Sri Lanka4%
India57%
Nepal1%
1818
Coverage, utilisation & utility rates for South Asia under EU Coverage, utilisation & utility rates for South Asia under EU GSP scheme, 2004GSP scheme, 2004
0
10
20
30
40
50
60
70
80
90
100
Bangladesh India Pakistan Nepal Sri Lanka South Asia
Potential Coverage Rate Utilization Rate Utility Rate
1919
Bangladesh
Nepal
Pakistan
Sri Lanka
India
0
50
100
0 50 100
Utilisation
Util
ity
Vulnerability of South Asia to preference Erosion in the EU Vulnerability of South Asia to preference Erosion in the EU (country-wise)(country-wise)
Low vulnerablity
High vulnerablity
2020
Description BG IN NP PK SL
01 Live animals & products X X X
02 Vegetable products X X X
03 Fats and oils X X X X X
04Prepared foodstuffs, beverages, etc. X
05 Mineral products X
06 Chemical products X X X
07 Plastics & rubber X X X X X
08 Hides and skins, leather, etc. X X X
09 Wood & articles of wood X X X X
10Pulp of wood, paper, books, etc.
11 Textile & textile articles X X X
12Footwear, headgear, umbrellas,etc. X X X X X
13 Articles of stone, cement, etc. X X X X X
14 Precious stones, etc X X X X
15 Base metals & products X X X X
16Machinery & electrical equipment X X
17 Transport equipment X X X X
18Optical & precision instruments X X X X X
19 Arms and ammunition
20Miscellaneous manufact. Articles X X X X
21 Works of art, etc
Note: *Note: * Utilisation and utility rates over 60 percent
X account for 5 percent or more of total exports
Sectors vulnerable to preference erosion* under the EU GSP scheme, 2004Sectors vulnerable to preference erosion* under the EU GSP scheme, 2004
2121
Main beneficiaries of the US-Main beneficiaries of the US-GSP scheme in South Asia, GSP scheme in South Asia,
20042004In 2004, US imported goods worth approx. US$ 24 billion, of In 2004, US imported goods worth approx. US$ 24 billion, of
whichwhichonly US$3bn were imported under GSP schemeonly US$3bn were imported under GSP scheme
India92%
Bangladesh1%
Sri Lanka4%
Pakistan3%
Nepal0.1
2222
Coverage, utilisation & utility rates for South Asia under US GSP Coverage, utilisation & utility rates for South Asia under US GSP
scheme, 2004scheme, 2004
010
2030
405060
7080
90100
Bangladesh India Pakistan Nepal Sri Lanka South Asia
Potential Coverage Rate Utilization Rate Utility Rate
2323
Nepal Bangladesh Sri LankaPakistan
India
0
50
100
0 50 100
Utilization
Uti
lity
Vulnerability of South Asia to preference Erosion in the US Vulnerability of South Asia to preference Erosion in the US
(country-wise)(country-wise) High vulnerablity
Low vulnerablity
2424
Description BG IN NP PK SL
01 Live animals & products X
02 Vegetable products X X
03 Fats and oils X X
04Prepared foodstuffs, beverages, etc. X X X
05 Mineral products X
06 Chemical products X X X X
07 Plastics & rubber X X
08 Hides and skins, leather, etc.
09 Wood & articles of wood X X X X X
10Pulp of wood, paper, books, etc.
11 Textile & textile articles
12Footwear, headgear, umbrellas,etc.
13 Articles of stone, cement, etc. X X X X X
14 Precious stones, etc X X X X X
15 Base metals & products X X X X
16Machinery & electrical equipment X X X
17 Transport equipment X X X
18Optical & precision instruments X X
19 Arms and ammunition X x
20Miscellaneous manufact. Articles X X X X
21 Works of art, etc
Note: *Note: * Utilisation and utility rates over 60 percent
X account for 5 percent or more of total exports
Sectors vulnerable to preference erosion* under the US GSP scheme, 2004Sectors vulnerable to preference erosion* under the US GSP scheme, 2004
2525
Preference erosion under the Preference erosion under the EU and US GSP schemes? EU and US GSP schemes?
Reduction in tariff rates by US is Reduction in tariff rates by US is unlikelyunlikely to lead to a significant to lead to a significant erosion of preferences for South Asia due to limited coverage of erosion of preferences for South Asia due to limited coverage of products of export interest … some sectors are vulnerable but products of export interest … some sectors are vulnerable but they do not account for significant share of exports except for a they do not account for significant share of exports except for a few important sectors in IN and SLfew important sectors in IN and SL
Tariff reductions by the US are most likely to result in gains for Tariff reductions by the US are most likely to result in gains for South Asia in the form of lower tariffs for its major exports sector South Asia in the form of lower tariffs for its major exports sector (ie) textile and textile articles, which are not covered under US (ie) textile and textile articles, which are not covered under US schemescheme
Compared to the US, the EU scheme is more generous in providing Compared to the US, the EU scheme is more generous in providing market access to countries in the regionmarket access to countries in the region
……. SA is likely to be more exposed to preference erosion in the EU . SA is likely to be more exposed to preference erosion in the EU than in the US…. than in the US….
2626
Measures to deal with Measures to deal with preference erosionpreference erosion
Two broad measures:Two broad measures: Trade based solutionsTrade based solutions Aid based solution (A4T)Aid based solution (A4T)
2727
Trade based solution to Trade based solution to preference erosionpreference erosion
Objective – partly compensate for Objective – partly compensate for immediate losses from preference erosion immediate losses from preference erosion in short run while preparing countries to in short run while preparing countries to survive without preferences in long runsurvive without preferences in long run
Include measures to:Include measures to: Increase preference utilisationIncrease preference utilisation Extend product coverage of preferential Extend product coverage of preferential
schemesschemes Extend preferences in other marketsExtend preferences in other markets Protect preference dependent countriesProtect preference dependent countries
2828
Measures to increase Measures to increase preference utilisationpreference utilisation
Number of factors affecting utilisation of trade preferences: Number of factors affecting utilisation of trade preferences: lack of security of accesslack of security of access insufficient coverageinsufficient coverage lack of understanding/awareness of preferences availablelack of understanding/awareness of preferences available lack of capacity to supplylack of capacity to supply non-trade related conditionsnon-trade related conditions stringent rules of origin (RoO)stringent rules of origin (RoO)
Measures to improve utilization of preferences : Measures to improve utilization of preferences : relax RoOrelax RoO increase predictability of preferential trade arrangements. increase predictability of preferential trade arrangements. harmonizationise requirements of various preferential schemes harmonizationise requirements of various preferential schemes improve understanding/awareness of the preferences available improve understanding/awareness of the preferences available address supply side capacity constraintsaddress supply side capacity constraints
2929
Extending product coverage & Extending product coverage & scope of preferencesscope of preferences
Negative consequences of preference erosion could be partially addressed Negative consequences of preference erosion could be partially addressed through efforts to provide duty free and quota free market access to through efforts to provide duty free and quota free market access to products of interests to LDCs products of interests to LDCs
There are number of ‘sensitive’ products of interest to LDCs such as There are number of ‘sensitive’ products of interest to LDCs such as textiles and clothing and agricultural products that still attract relatively textiles and clothing and agricultural products that still attract relatively high tariffs and currently are partially or not covered by preference high tariffs and currently are partially or not covered by preference schemes schemes
In the case of the US, there is still great scope to extend duty free In the case of the US, there is still great scope to extend duty free treatment to BG and NP - about 27 percent of the tariff lines do not receive treatment to BG and NP - about 27 percent of the tariff lines do not receive any preferential treatment… but the prospects of this happening is unlikely any preferential treatment… but the prospects of this happening is unlikely
The scope to extend similar treatment in the EU is very limited as it The scope to extend similar treatment in the EU is very limited as it already extends duty free and quota free market access to both BG and NP already extends duty free and quota free market access to both BG and NP under EBA initiative under EBA initiative
Extend scope of preferences beyond trade in goods to services (ie) mode 4 Extend scope of preferences beyond trade in goods to services (ie) mode 4 which will have larger positive effects than preferences for goodswhich will have larger positive effects than preferences for goods
3030
Compensating through Compensating through preferences in other markets preferences in other markets
Part of a solution to preference erosion from MFN liberalization Part of a solution to preference erosion from MFN liberalization could be addressed by obtaining preferential treatment in other could be addressed by obtaining preferential treatment in other markets (ie) South-south trademarkets (ie) South-south trade
In the case of Bangladesh, this is not promising with over 80 In the case of Bangladesh, this is not promising with over 80 percent of exports directed to the QUAD countries and to a lesser percent of exports directed to the QUAD countries and to a lesser degree in the case of Sri Lanka (70 percent) degree in the case of Sri Lanka (70 percent)
In the case of India, Nepal(?) and Pakistan, a substantial of portion In the case of India, Nepal(?) and Pakistan, a substantial of portion of their exports goes to countries other than the QUAD, so there is of their exports goes to countries other than the QUAD, so there is a possibility of addressing the problem by entering into a possibility of addressing the problem by entering into preferential agreements with these countries or strengthening preferential agreements with these countries or strengthening existing ones existing ones
Possibility of addressing the problem within the region remains Possibility of addressing the problem within the region remains doubtful given the past track recorddoubtful given the past track record
3131
Multilateral trade concessions Multilateral trade concessions designed to protect preference designed to protect preference
dependent countriesdependent countries Delaying liberalization of sensitive sectors and accelerating Delaying liberalization of sensitive sectors and accelerating
liberalization of goods that beneficiary countries of preferential liberalization of goods that beneficiary countries of preferential arrangements have a comparative advantage arrangements have a comparative advantage
No convergence on this issue…countries which are non-beneficiary No convergence on this issue…countries which are non-beneficiary of non-preferential agreements, having graduated from these of non-preferential agreements, having graduated from these schemes are unlikely to support such a move schemes are unlikely to support such a move
… … and it will involve a substantial welfare loss from a global and it will involve a substantial welfare loss from a global perspective perspective
A more pragmatic solution woul address the problem of A more pragmatic solution woul address the problem of preference erosion while adhering to the overall purpose of trade preference erosion while adhering to the overall purpose of trade round – that is to liberalize trade by bringing down trade barriers…round – that is to liberalize trade by bringing down trade barriers…
… … which seems to be offered under A4T which seems to be offered under A4T
3232
Non-trade Solution - Aid for Non-trade Solution - Aid for TradeTrade
Not a new concept… but became a part of international discourse Not a new concept… but became a part of international discourse only in 2005only in 2005
A4T was officially put on the WTO agenda at HK ministerial in Dec. A4T was officially put on the WTO agenda at HK ministerial in Dec. 2005:2005:’’
... ... Aid for Trade should aim to help developing countries, Aid for Trade should aim to help developing countries, particularly LDCs to build supply capacity and trade-related particularly LDCs to build supply capacity and trade-related infrastructure that they need to assist them to implement and infrastructure that they need to assist them to implement and benefit from WTO agreements and more broadly to expand benefit from WTO agreements and more broadly to expand their trade…’their trade…’
In showing their support for A4T, the EU, Japan and the US all In showing their support for A4T, the EU, Japan and the US all announced increases in resources for A4T prior to and at and after announced increases in resources for A4T prior to and at and after Hong KongHong Kong
3333
What is A4T?What is A4T?
Trade policy and regulationsTrade policy and regulations - to help countries - to help countries negotiate, reform and prepare for closer negotiate, reform and prepare for closer integration in multilateral trading system integration in multilateral trading system
Trade developmentTrade development - to help enterprises engage - to help enterprises engage in trade, reinforce business support structures in trade, reinforce business support structures and develop the business climate and develop the business climate
InfrastructureInfrastructure - trade related infrastructure such - trade related infrastructure such as transport, communications, energy. as transport, communications, energy.
Building productive capacityBuilding productive capacity – improve capacity – improve capacity of a country to produce goods and servicesof a country to produce goods and services
Trade related adjustmentTrade related adjustment Other trade related needsOther trade related needs
3434
Trends in A4TTrends in A4T
Significant scaling up of trade-related technical Significant scaling up of trade-related technical assistance and capacity building to developing assistance and capacity building to developing countries since 2001countries since 2001
Volume of trade related commitments for Volume of trade related commitments for trade trade policy & regulationpolicy & regulation and and trade developmenttrade development rose rose by 50 percent during 2001-2004 to reach USD3bn by 50 percent during 2001-2004 to reach USD3bn in 2004in 2004
In 2004, about 4.4 percent of total worldwide aid In 2004, about 4.4 percent of total worldwide aid budget was devoted to trade-capacity building, budget was devoted to trade-capacity building, with infrastructure accounting for a 25 percent with infrastructure accounting for a 25 percent share. share.
3535
Trade policy & regulation, USD mn
0
100
200
300
400
500
600
700
800
900
1000
2001 2002 2003 2004
Oceania
Global programmes
Europe
South Asia
Asia*
America
Africa
A4T to South Asia, 2001-A4T to South Asia, 2001-20042004
- Assistance to South Asia has fallen in absolute and relative terms between 2001-2004- Assistance to South Asia in 2004 amounted to USD 22mn
3636
Trade policy & regulations, South Asia, 2001-2004
50%
20%
14%
0%
12%
4%Trade mainstreaming
Technical standards
Trade facilitation
RTAs
Multilateral trade negotiaions andagreements
Trade education/training
Trade policy & regulations, 2001-2004
Bangladesh38%
India40%
Nepal1%
Pakistan12%
Sri Lanka9%
3737
A4T to South Asia, 2001-A4T to South Asia, 2001-20042004
Trade development, USD Mn
0200
400600800
10001200
140016001800
20002200
2001 2002 2003 2004
Oceania
Global programmes
Europe
South Asia
Asia
America
Africa
- Assistance to South Asia has fallen in absolute and relative terms between 2001-2004- Assistance to South Asia in 2004 amounted to USD 39mn
3838
Trade development, South Asia, 2001-2004
16%
6%
1%
46%
24%
7%
Business support servicesand institutions
Public-private sectornetw orking
E-commerce
Trade f inance
Trade promotion strategy andimplementation
Market analysis anddevelopment
Trade development, 2001-2004
Bangladesh21%
India36%
Nepal4%
Pakistan30%
Sri Lanka9%
3939
A4T to South Asia, 2001-A4T to South Asia, 2001-20042004
Infrastructure, USD Mn.
0
2000
4000
6000
8000
10000
12000
14000
16000
2001 2002 2003 2004
Oceania
Global programmes
Europe
South Asia
Asia*
America
Africa
- Assistance to South Asia has increased in absolute and relative terms between 2001-04- Assistance to South Asia in 2004 amounted to USD 1.8bn
4040
Infrastructure, South Asia, 2001-2004
54%
2%
44%Transport & Storage
Communications
Energy
Infrastructure, 2001-2004
Bangladesh22%
India51%
Nepal4%
Pakistan6%
Sri Lanka17%
4141
Existing A4T mechanismsExisting A4T mechanisms
A4T (in a narrow sense) is currently delivered A4T (in a narrow sense) is currently delivered through:through: Bilateral donor programmesBilateral donor programmes Multilateral/multi-donor funded programmesMultilateral/multi-donor funded programmes Individual international organisation programmesIndividual international organisation programmes Regional organisations and regional financial Regional organisations and regional financial
institutionsinstitutions
Determining effectiveness and impact of trade Determining effectiveness and impact of trade related assistance is difficult … but where it was related assistance is difficult … but where it was possible, the impact was mixedpossible, the impact was mixed……
4242
Weaknesses of existing Weaknesses of existing mechanismsmechanisms
Identified shortcomings of existing trade related Identified shortcomings of existing trade related assistance:assistance: Unsystematic/incomplete needs assessmentUnsystematic/incomplete needs assessment Weak project managementWeak project management Fragmented trade related assistance with insufficient Fragmented trade related assistance with insufficient
links to broader development assistance programmeslinks to broader development assistance programmes Weak linkages to poverty reductionWeak linkages to poverty reduction Insufficient donor coordinationInsufficient donor coordination Inadequate internal communications and donor Inadequate internal communications and donor
expertise on trade related mattersexpertise on trade related matters
Will A4T be additional, adequate, predictable, Will A4T be additional, adequate, predictable, recipient driven, coherent, free of conditions?recipient driven, coherent, free of conditions?
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A way forwardA way forward
Some form of trade and aid based solutions to the Some form of trade and aid based solutions to the problem…problem…
Trade solutions would address the problem in the short run Trade solutions would address the problem in the short run by providing foot hold in markets abroad before multilateral by providing foot hold in markets abroad before multilateral tariff liberalisation is completetariff liberalisation is complete
……while aid solution (A4T) would provide a long term while aid solution (A4T) would provide a long term solution to the problem if delivered effectivelysolution to the problem if delivered effectively
Aid solution is considered a better approach to deal with Aid solution is considered a better approach to deal with preference erosion than any trade based solutions, as it preference erosion than any trade based solutions, as it does not further discriminate countries within the does not further discriminate countries within the multilateral system (and thus welfare reducing)… but the multilateral system (and thus welfare reducing)… but the record on trade related assistance has been mixed so far…record on trade related assistance has been mixed so far…