WORLD TRADE  
ORGANIZATION  WT/AFT/W/2 
21 April 2006 
 (06-1843) 
Aid for Trade Task Force Original:   English 
  
 
COMMUNICATION FROM THE WORLD BANK 
  
 The following communication, dated 17 April 2006, is being circulated to the Aid for Trade 
Task Force at the request of the World Bank. 
 
_______________ 
  
RESPONSES TO WTO TASK FORCE ON AID FOR TRADE
1 
 
 
I. WHAT IS THE CURRENT SCOPE AND CONTENT OF YOUR AID FOR TRADE 
PROGRAMMES?  
A. BROAD OBJECTIVES OF THE BANK'S TRADE PROGRAMME , WITHIN WHICH AID FOR TRADE IS 
FRAMED  
1. At the international level , the World Bank advocates changes in the world trading system to 
make it more supportive of development, especial ly in the poorest countries and for poor people 
across the developing world.  This includes colla borating with the WTO, other multilateral agencies, 
governments in developing countries, and donors to  support a "pro-development" outcome in the 
Doha Round, while also working with partners to  maximize the development impact of regional 
trading agreements.  We view aid for trade as an  essential complement of the Doha process and of 
North-South regional trading arrangements, such as, for example, CAFTA and the proposed EPAs. 
2. At the country level , the Bank supports developing countries in their efforts to improve their 
internal policies, institutions, and infrastructure (e.g ., roads, ports, telecommunications) to help make 
trade an effective lever for growth and poverty reduc tion.  This work includes strategic assistance to 
clients in support of pro-poor trade-related reforms,  with special attention to low-income economies.  
All of the Banks' work at the country level in  these areas can be described as aid for trade. 
B. SCOPE OF CURRENT WORLD BANK COUNTRY WORK  
3. In addition to an extensive research progr amme, which addresses many aspects directly 
related to aid for trade (e.g., research on the impact of trade facilitation or the impact of sanitary and 
phytosanitary standards) the Bank's country programmes include:   
• Diagnostic work.  This diagnostic work unde rpins all our trade programmes and policy 
dialogue.   
                                                      
1 This document was prepared by the International Trade Department, The World Bank.  It addresses 
questions posed to the World Bank and other development agencies by the chair of the WTO's Task Force on Aid for Trade, Ambassador Mia Horn af Rantzien. This note relies on Nielson (2005), IMF and World Bank 
(2005) and World Bank (2006). WT/AFT/W/2 
Page 2  
 
   
• Investment lending and technical assistance for trade.  This covers a wide variety of areas 
such as infrastructure, support to private sect or development, and strengthening of trade-
related institutions.  For a large group of deve loping countries, including all the LDCs, these 
programmes are financed through I DA, with highly concessional terms. 
 
• Budget support lending for programmes of trade reforms, including adjustment to shocks.  
For a large group of developing countries, in cluding all the LDCs, these programmes can be 
financed through IDA, with highly concessional terms. 
 
• Capacity Building.  Capacity building is often ca rried out in the context of larger investment 
operations, or is delivered thr ough the World Bank Institute.  
 1. Diagnostic Work 
4. Over the last three years the Bank has stepped up very considerably its trade-related 
diagnostic work.  Trade related diagnostics range from comprehensive diagnostics such as the DTIS 
carried out under the Integrated Framework, to Tr ade Chapters in Country Economic Memorandum or 
Development Policy Reviews (which are the key vehicles for our overall economic policy dialogue), 
to Regional studies, to more focused specialized  analyses such as Trade and Transport Facilitation 
Audits or Standards and Conformity Assessments.   
5. Our most recent diagnostic work covers more th an 90 developing countries.  This work is also 
complemented by a growing body of analysis fo r the private sector through Investment Climate 
Assessments and new country data from Doing Busi ness Reports.  Knowledge of trade issues is no 
longer the major constraint to engage with countri es on policy dialogue, to inform country developing 
strategies, or to integrate trade into operational programmes.  All together, this work is already 
helping to intensify our policy dialogue.  Progress in  integrating trade as a part of country growth 
strategies and country assistance strategies is taki ng place, albeit at a gradual pace, as has been 
highlighted in the recent IEG Review on trade.
2  We are working towards ensuring that in the future 
this trend will accelerate.  
2. Investment Lending and Technical Assistance 
6. Bank trade related lending continues to increase when compared to the late 1980s and 1990s.  
New trade-related lending at roughly US$1.5 billion pe r year now accounts for about 6 per cent of all 
new Bank operations, roughly double what it was duri ng the 1990s.  Within this context, there are 
areas where progress has been quite substantial.  Firs t, there has been a significant incorporation of 
trade-related issues into infrastructure projects, and transport projects account for almost half of all 
trade-related lending.  Another salient feature has been the substantial increase in lending to meet 
trade standards in agriculture (and industry), partic ularly in East Asia and Europe-Central Asia.  
While the scale of this work is still relatively sm all, the Bank's lending portfolio for standards has 
grown from US$44 million (in 7 projects) in 2003, to US$150 million (in 25 projects) in 2006, and is expected to reach US$300 million in 2007.  It is im portant to note, that for these figures do tend to 
underestimate the Bank's trade-re lated lending since many progra mmes geared to strengthen the 
production capacity and productivity of the private sector  can have an important bearing on trade, yet 
are often are not classified as trade-related in our systems.   
                                                     
 
2 Independent Evaluation Group (2006).  WT/AFT/W/2 
 Page 3 
 
 
  3. Budget Support (or Development Policy) Lending 
7. Budget (or programmatic) support lending (also known in the past as Adjustment Lending) 
once constituted the mainstream of the Bank's trade- related lending.  Bank engagement in support of 
trade policy reforms waned in the 1990s, while at the same time there was a big shift in the focus of 
budget support lending from macro policy reforms to deliver y of social services.  Over the last year or 
two, there has been renewed attention to the growth  agenda in national develo pment plans and this has 
been reflected in the focus of budget support lending.  It is worth noting that, for many countries, and 
especially the poorest countries, budget support lendi ng now constitutes a very large part of the 
Bank's country programme.  Trade related issues su ch as customs reforms, elimination of domestic 
monopolies in tradable goods, services reforms, and, in rare instances, trade liberalization, are now 
part of reform programmes supported by these operati ons.  As the growth agenda continues to gain 
prominence in future national development plans (e .g., PRSPs), and /or as changes in the world trade 
regime requires special budget support for adjustment, it is also expected that trade will play a more 
prominent role in these operations.   
4. Capacity Building 
8. Strong partnerships with local and regional in stitutions have also enabled the World Bank  
Institute to increase its trade-related capacity building activities, delivering or contributing to 
61 learning events around the world in FY05—up from 12 activities three years before.  New courses 
have been offered on trade in services, trade and poverty, agricultural trade, analytical tools, 
regionalism, and standards.  These are areas in which we expect continuing growth in WBI activities.  
All trade-related lending by the Bank, moreover, includes capacity building components associated 
with training and technical assistance. 
What are the lessons learned? 
 
9. As pointed out in the just published evaluation of the Bank's trade work over the last 20 years 
or so (IEG trade evaluation 1987-2004), realizing the potential of integration requires countries to 
develop a coherent strategy for enhancing compe titiveness and using trade opportunities as an engine 
of growth.  Such a strategy encompasses much more  than building capacity to formulate trade policy 
and carry out commercial diplomacy.  It also re quires streamlining regulations to facilitate the 
reallocation of factors of production, government s upport for infrastructure and institutions that help 
markets work more efficiently, and a programme of public engagement to identify vulnerabilities and 
trade opportunities.  Tariff liberalization in and of  itself is often insufficient to induce growth and 
reduce poverty in the presence of infrastructure bottle necks or cumbersome business regulations.  On 
the flip side, streamlining regulations or building better ports alone, without addressing the incentive 
regime from trade policies, will similarly not yield the expected results. 
10. Trade-related structural adjustment operations  in the 1980s and early 1990s were generally 
part of an overall structural reform programme involving reforms in a number of policy areas that 
were needed to produce growth.  Results were better in those cases where reforms were 
comprehensive and the macroeconomic and business environment was capable of supporting a supply 
side response to the new incentive framework.  Implementation therefore requires moving in a 
concerted manner across several fronts:  trade po licy, behind the border issues that reduce trade 
transaction costs, a business climate that is supportive of new investment (local and foreign), and efficient services to help improve productivity.   
11. These findings of the World Bank' s Independent Evaluation Group, which are re-enforced by 
new research and diagnostic, do point to the fact th at the comprehensive approach now being pursued 
under the Integrated Framework (IF) is a good way to go.  They also highlight the need for very strong coordination across sectors for implementation.  For donors and IFIs, a lesson is that staff WT/AFT/W/2 
Page 4  
 
  working on trade policy issues, infrastructure, priv ate sector development, agriculture, and the like 
need to establish mechanisms to coordinate themsel ves and, in the process help government in this 
coordination as well.   
12. Budget support programmes that have a strong fo cus on trade could be ideal mechanisms to 
move this agenda forward in this concerted manner.  Yet that will require clearer and stronger trade 
strategies in national development plans and a long term commitment to financing.  An opportunity 
exists given the anticipated increases in ODA.   
13. Finally, it is very important to make good use of the tools that have been developed to analyze 
the impact of policy reform programmes on the urban and rural poor, and measures proposed to 
alleviate negative effects.  However, such analy ses and actions should not focus exclusively on trade 
policy reforms, but be a regular feature of country analysis and response to what is an increasingly 
changing environment, especially in this era wh ere trade liberalization tends to be implemented 
gradually. 
II. ARE THERE, IN YOUR VIEW, IMPORTANT OUTSTANDING TRADE-RELATED 
NEEDS THAT ARE NOT MET TODAY? 
14. In February 2005, the G-7 Finance Ministers called on the World Bank and IMF to develop 
proposals for additional assistance to  countries to increase their capacity to take advantage of more 
open markets ease adjustment to trade liberalizati on and.  The call was reinforced by the Bank's 
shareholders in April and again by the G-8 in July 2005.  The Bank and the IMF concluded that the existing instruments and delivery mechanisms (mu ltilateral and bilateral) on Aid for Trade could 
provide the policy guidance and financial support required for countries who wanted to make trade 
integration and growth an important element of their national development strategies.   
15. Having said that, the Bank and the IMF identif ied three areas where a stronger engagement 
and perhaps new mechanism would be desirable.  
1. Enhancing the Integrated Framework 
16. Built on sound principles — country ownership,  donor coordination, and mainstreaming of 
trade into national development strategies — the IF has lacked the scale to bring about real 
transformations at the national level.  Challenges have included weak in-country capacity, lack of 
systematic follow-up at the country level, and insufficient donor response to identified priorities.  The Bank and the IMF have recommended an  enhancement of the IF with a larger Trust Fund to support 
multi-year programmes of capacity building that would lead to more effective incorporation of trade 
into PRSPs, strengthen in-country capacity for im plementation, and provide resources to finance 
project preparation to accelerate implementation of pr iority actions.  Establishment of a larger Trust 
Fund would be subject to improvements in country ownership as well as en hancements in the IF 
structure and governance.  Accountable management , and reduction in coordination costs are in our 
view essential prerequisites to the success of the enhan ced Integrated Framework.  While the IF is a 
programme for LDCs, the Bank and the IMF reco mmended its extension to other low-income 
countries on the understanding that benefits for LDCs should not be diminished.   
2. Regional and cross-country issues  
17. The Bank and the IMF analysis highlighted th e possibility that cross-cutting issues may be 
insufficiently addressed by the single country focus inherent in national development strategies.  
Cross-country issues may be particularly important  for small, poor, or landlocked countries that are 
dependent on action by neighbors or can more effectively address issues in a collective manner.  For 
example, cost effective regional machinery for tr ade, such as regional laboratories for standards  WT/AFT/W/2 
 Page 5 
 
 
  testing or even regional infrastructure or regulat ory frameworks to support liberalization in services 
such as electricity or telecommunications, are worth exploring. 
18. The Bank, in cooperation with the Fund, is exam ining the extent to which regional and cross-
country needs are being adequately met by existing mechanisms and whether there is a need for new 
ones.  The outcome of this analysis will be reported during the upcom ing Annual Meetings in 
September 2006.   
3. A Strengthened Framework for Assessing Adjustment Needs 
19. Trade liberalization may create adjustment pr oblems for some countries and, in some 
circumstances, the adjustment coul d be considerable.  As argued in the joint Bank-Fund paper to the 
Development Committee in September 2005, existing instruments to address adjustment needs are 
broadly adequate.  There is a need, however, to stre ngthen the capacity to eval uate adjustment costs, 
as well as to have a clear commitment from all donors  to assist countries where the adjustment costs 
are deemed to be significant.  Staffs of the IM F and World Bank have undertaken to work closely 
with our member countries to:  
• At their request, assess the nature and magnitude of any adjustment need;  
• work with them to design policies aimed at a ddressing key obstacles to trade expansion and at 
managing the impact on affected population groups;  and 
• provide assistance under existing mechanisms (e.g . Bank and Fund lending, including, in the 
case of the IMF, the TIM) and, where a country is found to be suffering particularly severe adjustment costs, to coordinate with other donor s to bring an additional package of assistance, 
in the form of grants or loans as appropriate.  
20. Mauritius is a recent example of a country that has been affected by a double trade shock, the 
elimination of textile quotas and the review of the EU sugar regime, and this has coincided with the 
surge in oil prices.  The Bank and the IMF are work ing with the Government of Mauritius to address 
these issues.  This programme may serve as an im portant pointer for other countries encountering 
similar difficulties. 
III. HAS TRADE BEEN ADEQUATELY ADDRESSED IN COUNTRIES' 
DEVELOPMENT PLANS AND POVERTY REDUCTION STRATEGIES?  IF NOT, WHAT ARE THE MAIN REASONS AND HOW COULD THIS BE CORRECTED? 
WHAT ARE THE LESSONS LEARNED? 
21. A recent analysis carried out by the Bank and the IMF indicated that the likelihood of trade 
being a part of national development strategies is  closely linked to the extent in which economic 
growth is (or is not) a central issue in the strategy.  Countries that give a high priority to growth in their PRSP almost always include trade into the strategy.  The analysis of the Bank and the IMF 
showed that for the 61 countries that had complete d their PRSPS by 2004, seventy per cent of them 
had PRSPs with well articulated growth strategies.  In almost all cases, trade was a part of the strategy.  This trend has been improving with the resurgence of growth in policymakers' agendas.  
Review of the seven PRSPs carried out in 2005 indicat es that growth is a central element in six of 
them, and trade is addressed in all these six cases.  
22. While trade tends therefore to be covered in the majority of cases, very few PRSPs present a 
well defined trade-related operationa l strategy.  Trade policy is largely absent from the discussion and 
there is little in the way of concrete programmes fo r follow-up.  While it is hard to pin-point the 
reason for this shortcoming, one explanation lies with the cross-sector nature that is inherent to a trade WT/AFT/W/2 
Page 6  
 
  integration strategy.  A good articulation of such  a strategy requires strong in-country coordination 
and leadership, which is difficult to achieve unless the Ministry of Commerce/Trade is supported by 
the wider economic cabinet.  Capacity is another c onstraint given the complexity and broadness of the 
agenda.  Finally, donors could possibly play a positive  role in facilitating this coordination, but their 
engagement in trade often is also limited. 
23. One lesson is that engagement by the intern ational community can help improve results.  
While the sample is small, the stylized facts i ndicate that in countries where a DTIS has been 
conducted prior to the PRSP, the quality and coverage of trade in the PRSP tend to be better.  This 
illustrates the potential of the Enhanced IF (and of  eventual similar initiatives for non-LDCs) provided 
that engagement from donors is strong, and that more  effective in-country mechanisms are established 
to ensure that trade-related programmes and project s have wide ownership.  It is important to 
recognize, however, that though trade is likely to be an important component in most development 
programmes, there will always be competition among sect oral priorities and the key is arriving at the 
appropriate trade-offs.  Integrating trade into national development strategies means arriving at a 
balance among the different sectoral priorities, of which trade is one, as well as achieving proper 
coordination and sequencing across di fferent sectors so as to maximize the impact of trade-related 
investments and reform programmes. 
IV. HOW, IN YOUR VIEW, SHOULD TRADE-RELATED NEEDS AND PRIORITIES 
BE IDENTIFIED? 
24. First and foremost, the role of trade as a le ver for growth and poverty reduction needs to be 
identified within the broader context of a growth stra tegy.  Ideally, this analysis should be done in the 
context of growth diagnostics that can help dis tinguish the most important binding (as opposed to 
non-binding) constraints to a country's growth.  In countries where it is assessed  that trade policies or 
trade transaction costs are an important limiting fact or to growth, the analysis would then call for 
specific actions to reduce policy or infrastructure barriers to trade.
3   
25. In the case of LDCs, the IF can play an importa nt role in identifying the menu of critical 
trade-related policies to advance trade integration.  However, the relative importance of trade within a 
country's overall development strategy still needs to  be articulated in a broader country-specific 
context.   
26. For all those countries where trade is likely to be an important limiting factor for growth, a 
DTIS approach can be very helpful in identifying  the best use of scarce resources to support trade 
integration.  Because of that, the joint Bank- Fund Development Committee paper on Aid for Trade 
argues that consideration should be given to extending the IF model, including the DTIS concept to 
                                                      
3 Morocco is an example of a co untry where trade reforms could generate an important boost to 
growth.  The Morocco Country Economic Memorandum (CEM) uses a growth diagnostic methodology to 
distinguish binding from non-binding constraints to growth.  The CEM argues that growth is not limited by 
financing constraints; Morocco enjoys relatively low real return rates and high inflows of foreign investment.  Similarly, inadequate supply of human capital is not the binding constraint;  Moro cco already spends above 6 
per cent of GDP on education, but the demand for skilled labor is missing.  Low growth cannot be explained by 
macroeconomic instability or micro risks.  The CEM points  instead to trade as the limiting factor.  "Given the 
small size of its domestic (and regional) market, and the limited technological capacity of its human and 
physical capital, Morocco cannot depend only on industrial development and its domestic market to accelerate 
economic growth.  The country's potential for accelerat ed growth lies rather in the dynamism of its 
nontraditional, especially higher-value-added, exports, because its  low-value-added products face fierce 
competition in their traditional markets".  The study points to the rich mix of goods and services being produced 
in the Tangier Free Trade Zone (e.g., electric parts, paramedical products, a nd offshore services) as evidence of 
Morocco's potential for greater export diversification.  It recommends a growth strategy based on eliminating 
barriers to diversification.    WT/AFT/W/2 
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  poor countries (e.g. IDA eligible) that are non-LD Cs.  Finally, as broader issues are identified as 
important constraints, there will always be a need to carry out more specific (" ad hoc ") diagnostics.  
The same would apply were the IF model ex tended to other non-LDC poor countries.  
V. IS THE EXISTING SYSTEM OF DELIVERY MECHANISMS FOR AID FOR 
TRADE ADEQUATE? IF NOT, WHERE ARE THE GAPS, AND WHAT OPTIONS 
MIGHT EXIST TO ADDRESS THESE GAPS? 
27. A major gap observed in multilateral trade initiativ es – such as the IF – concerns the lack of 
ownership at the country level (b y both donor/agencies and country authorities), as well as lack of 
accountability in its distributed management structure.   These shortcomings, together with insufficient 
funds, help explain inadequate implementation of tr ade-related diagnostics.  Answers to questions 2 
and 3 above further elaborate on these issues. 
VI. IS THERE A NEED FOR STRENGTHENING MONITORING AND EVALUATION? 
IF YES, HOW CAN THIS BE DONE? 
28. Monitoring and evaluation of aid-for-trade related initiatives can be improved upon.  The 
WTO/OECD Trade capacity Building Database provides a useful point-of-departure for monitoring of 
aid-for-trade flows.  There is a need, however, to  improve the quality of data concerning trade-related 
infrastructure, to extend the database beyond OECD  countries to capture aid-for-trade flows from 
more advanced developing countr ies, and to better capture actua l disbursements (in addition to 
commitments).  One could also explore the introduc tion of "markers" in the database to monitor the 
evolution of activities/projects supported by WT O-related aid-for-trade initiatives from 2005 on. 
29. Arguably, however, the biggest weakness in mon itoring aid effectiveness lies with evaluation.  
While different evaluation approaches exist, impact  evaluation has emerged as the primary way of 
testing the links between interventions and outco mes, comparing intervention outcomes with the 
counterfactual without the intervention.4  
30. In the past, impact evaluations were constrai ned by the lack of data and the technical 
challenges of developing an appropriate counterf actual comparison.  Significant improvements in 
both these areas over recent years have made impact evaluations easier to implement on a systematic 
basis. 
31. Regional units are increasingly engaged in im pact evaluation of Ba nk-supported operations.  
In addition, they are ensuring that project teams and their counterparts in government have effective 
access to high-quality technical expertise — drawn from within the Bank and outside it — and critical 
resources when engaging in an evaluation.  The Bank 's Africa Region, for example, has started work 
on 20 impact evaluations of projects in the areas of  early childhood developmen t, education, health, 
infrastructure, social protection, agriculture and e nvironment, and private sector development, and this 
can be extended.   
VII. WHAT SHOULD BE THE ROLE OF THE PRIVATE SECTOR IN IDENTIFYING 
NEEDS AND IN IMPLEMENTING RESPONSES? 
32. The Bank has made efforts to nurture public-pri vate partnerships as well as private sector 
associations to broaden the support for reform.  Th ese partnerships are needed in a wide range of 
trade-related areas, including trade negotiations, trad e-related investigations and legal actions, trade-
                                                      
4 In areas where the evidence base  is already strong, simply monitoring implementation and tracking 
outcomes may be sufficient – but in practice, such ar eas appear to be more the exception than the rule. WT/AFT/W/2 
Page 8  
 
  related research and extension, compliance with nor ms and standards, local market regulation, export-
oriented investment promotion, and export market linkages.   
33. There are many examples of private sector engagement in trade-related Bank projects.  In 
Senegal, for example, where Bank assistance has been targeted at the private sector, as in the case of 
the Agricultural Export Promotion Project (AEPP), the effects on export supply response and 
institutional capacity have been quite positive, albe it limited in scope to specific product categories.  
In Burundi, the Agribusiness Promotion Project was designed to accelerate a private sector supply 
response to the government's more liberal policies in the area of agro-processing.  Its objectives were 
to increase and diversify agricultural exports and in duce greater efficiency in agricultural production, 
processing and marketing.  The project included (i ) the privatization of government-owned agro-
industries in the tea, sugar, cotton, and rice subsec tors, and (ii) the establishment of an agribusiness 
development fund to finance professional training and commercial services to private entrepreneurs 
and professional organizations, for market development, on a matching fund basis. 
34. The private sector can also play a critical role in providing relevant information on trade-
related variables (as illustrated by the Doing Bu siness Report and the Global Logistic Indicators, 
currently under development, to measure progr ess in key areas such as customs, regulatory 
environment, and port performance).  These indicators,  in turn, can be quite helpful in identifying aid 
needs and guiding technical assistance delivery.   
35. One advantage of the IF/PRSP Model is that it makes explicit provision for including the 
Private Sector both at the diagnostic preparation phase, and in the identification of priorities as part of the Country Workshop.   
36. There may be unexploited opportunities to draw on the expertise of international enterprises 
in capacity building, for example, encouraging s upermarket chains to provide training on meeting 
sanitary standards.  There may also be unexploi ted opportunities to tap private foundations as 
contributors to technical assistance trust funds.  
VIII.  HOW SHOULD AID FOR TRADE REINFORCE THE PRINCIPLES OF AID 
EFFECTIVENESS AND COHERENCE, AS AGREED IN THE PARIS 
DECLARATION AND AS EMBODIED IN INDIVIDUAL POVERTY REDUCTION STRATEGIES? 
37. The World Bank supports an aid for trade initiativ e that has a complementary role to trade 
reforms and to a successful conclusion of the DDA.  The rationale for paying special attention to aid 
for trade (for example through vehicles such as the Integrated Framework), lies in the positive 
externalities of the Doha process and more generally of trade-related reforms and projects, since the 
latter tend to promote the welfare of all trading part ners, and not just of the country effecting them. 
38. However, the aid for trade initiative should not become a substitute for DDA reforms. In other 
words, the focus of the Doha process, and more broadly of the WTO, should be on improving market 
access and the rules governing the world trading system , and in this endeavour, working together with 
aid agencies to enhance aid for trade can only provi de a complement, albeit an important one.  Aid for 
Trade should never be, or be perceived to be, "com pensation" for a failure to remove market access 
barriers or subsidies in donor countries.   
39. In this regard, it is worth noting that the feasi bility of demonstrating "a dditionality" of the aid 
for trade initiative in strict terms remains an open qu estion.  In practice, the aid allocation decision by 
donors is done in the general context of their own budget setting, and increasing aid for trade is very 
likely to require some trade-offs vis-à-vis  other uses of aid even in a scenario of increasing overall 
Official Development Assistance.  Given the inhe rent difficulties of demonstrating "additionality"  WT/AFT/W/2 
 Page 9 
 
 
  beneficiary countries would be well advised to avoid placing great emphasis on aid for trade as part 
and parcel of trade negotiations.   
40. Above all, we have stressed the importance of pur suing such an initiative in the context of the 
"Paris Declaration on Aid Effectiveness" adopted at the High Level Forum on Aid Effectiveness of 
March 2005, reflecting recommendations of a work ing group co-chaired by the World Bank and 
OECD-DAC.5  In particular, the issue of country ownership should be at the core of these efforts.  In 
this context, it is also important to reflect on the s hortcomings of dedicated vertical funds that operate 
in isolation of broader development strategies.  In short, a legitimate additional criterion to judge the 
effectiveness of aid for trade should relate to its cl ear integration with country  development strategies.  
If the national authorities decline to see trade-relate d reforms and projects as priorities for their scarce 
aid resources then aid for trade should not be promoted artificially. 
IX. ARE THERE OTHER IMPORTANT GAPS IN THE DELIVERY OF AID FOR 
TRADE? 
41. The issues identified in IMF and World Bank (2005) and summarized in the answer to 
question 2 above cover the main gaps in the delivery of aid for trade. 
42. Realizing the potential of integration requires countries to develop a coherent strategy for 
enhancing competitiveness and usin g trade opportunities as an engine of growth.  Such a strategy 
encompasses much more than building capacity to formulate trade policy and carry out commercial 
diplomacy.  It also requires streamlining regulatio ns to facilitate the reallocation of factors of 
production, government support for infrastructure a nd institutions that help markets work more 
efficiently, and a programme of public engagement to identify vulnerabilities and trade opportunities.  
Tariff liberalization in and of itself is often insu fficient to induce growth and reduce poverty in the 
presence of infrastructure bottlenecks or cumberso me business regulations.  On the flip side, 
streamlining regulations or building better ports alone, without addressing the incentive regime from 
trade policies, will similarly not yield the expected results.   
43. Finally, it is worth pointing out that there remain  very large lacunae in the available databases 
of policy barriers to international integration.  Even in the area where information is the best — on 
barriers to goods trade — the focus of data collection (and thus analysis) is mostly on statutory MFN tariffs and explicit quantitative restrictions on imports  or exports.  Data and measures of the types of 
nontariff policy barriers that are increasingly used by countries — such as antidumping and safeguard actions and excessively burdensome product standa rds — are not collected on a comprehensive and 
regular basis by the WTO or other organizations .  Matters are much worse when it comes to 
information on policies affecting services trade, fo reign investment, and the movement of people. 
44. The lack of data has made it difficult to examine the relationship between policies and 
performance, and to identify priorities for domestic reform and international cooperation in key areas 
such as services.  Better data on underlying polic ies are a precondition for better policy advice and 
understanding of the process of globalization.  Better  data are also needed for the more "pedestrian" 
but critically important objective of monitoring polici es.  This is especially relevant in light of the 
global commitment to take action to attain th e MDGs.  Monitoring progress on this front and 
documenting the policies that are implemented by governments — North and South — to pursue the 
MDGs must include trade-related policies.  The la rge gaps in our information hinder comparisons of 
country "performance" and assessments of the di rection and magnitude of policy changes on an 
annual basis.  Accordingly, this is  an area in which aid for trade could help in promoting a critical 
global public good:  better quality information on po licies affecting international integration.   
                                                     
 
5 See OECD (2005). WT/AFT/W/2 
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  REFERENCES 
  
IMF and the World Bank, 2005, "Doha  Development Agenda and Aid for Trade", paper submitted to 
the Development Committee, DC2005-0016 (Wash ington, D.C.: Development Committee, 
September). 
 Independent Evaluation Group, 20 06,  Assessing World Bank Support for Trade, 1987-2004:  An IEG 
Evaluation , (Washington, D.C.:  The World Bank). 
 
Nielson, J., 2005, "Aid for Trade", in R. Newfar mer, ed., Trade, Doha, and Development:  A Window 
into the Issues , (Washington, D.C.:  The World Bank). 
 OECD, 2005, "The Paris Declaration on Aid Effectiveness".  
World Bank, 2006, "Trade Progress Report - The D oha Development Agenda and Aid for Trade: 
Hong Kong and Beyond", (Sec M 2006-0119).   
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