WORLD TRADE  
ORGANIZATION  WT/COMTD/AFT/W/25 
30 November 2010 
 (10-6456) 
Committee on Trade and Development 
Aid for Trade Original: English 
 
 
 
COMMUNICATION FROM THE COMMONWEALTH SECRETARIAT 
 
Presentation by the Commonwealth Secretariat  
 
17th Session on Aid for Trade, 26 October 2010 – Item 2.B(III)  
 
  The following communication, dated 11 N ovember 2010, received from the Commonwealth 
Secretariat, is being circulated to delegations for information.
1 
 
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I. THE COMMONWEALTH AND INTERNATIONAL TRADE 
1. The Commonwealth Secretariat wishes to place on record its gratitude to the WTO 
Committee on Trade and Development for granting it the opportunity to deliver this presentation.  
Many of you know the Commonwealth, but those who do not, we are an association of 54 countries, 
constituting almost one quarter of the world's gove rnments, one-third of its population and accounting 
for one-fifth of global trade.  Our members are a diverse community of nations comprising rich and poor, large and small, as well as islands, landlocked and coastal states with a shared inheritance of 
language, institutions and culture.  The Commonwealth  is committed to improving the performance of 
developing countries in international trade and thei r fuller and more beneficial participation in the 
system.  This is an essential component of the Commonwealth's commitment to sustainable 
development and poverty eradication.  Its programm es and policy analysis are widely recognized as 
independent. 
2. Trade policy relations within the Commonwealth are determined by the multilateral, regional 
and bilateral commitments made by individual members as well as non-Commonwealth countries.  
Economic cooperation among our members is not based on any Commonwealth-wide regulatory or 
preferential trading system and, as such, the Co mmonwealth does not exert any trade diversionary 
effects on non-members. 
3. Democracy and development being its two pillars, the Commonwealth is committed to 
supporting pro-poor policies for econom ic growth and sustainable deve lopment in member countries.  
It maintains that international trade can make an indispensable contribution to economic growth, 
which particularly when equitable is one of th e most important factors in reducing poverty and 
achieving social progress – some of which has been captured under the Millennium Development 
Goals (MDGs).  The organization is committed to promoting a development-friendly global trading 
system that creates greater trading opportunities fo r developing countries and ensures that they have 
                                                     
 
1 For further information, please contact the International Trade & Regional Corporation Section 
Commonwealth Secretariat Marlborough House, Pall Mall, London, SW1Y SHX e.laurent@commonwealth.int  
and m.razzague@commonwealth.int . WT/COMTD/AFT/W/25 
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  the necessary national policies, domestic capacity, and secure adequate adjustment assistance to 
enable them to benefit from those opportunities.  The Secretariat pursues this objective via its 
programmes to enhance the ability of developing member countries, particularly small states and 
least-developed countries (LDCs), to function sa tisfactorily in formulating and implementing 
appropriate policies and effectively negotiating at  regional and multilateral levels to secure their 
interests. 
4. An important and helpful feature of most of the Commonwealth Secretariat's activities is their 
global relevance;  they can generally be replicated  and their results applied in non-member countries.  
Issues that are discussed within  the Commonwealth, work programmes that are implemented, and 
ideas that are conceived and disseminated generally ha ve similar applicability to countries both within 
and beyond the Commonwealth.  The Commonwealth Secretariat closely follows the developments 
taking place under the WTO-sponsored multilateral trade ta lks.  It encourages members, particularly 
small states and LDCs, to participate actively in the process and also strives to help them by providing 
informed analysis and technical inputs, fac ilitating discussions and dialogue involving major 
stakeholders and contributing to international consensus-building, particularly on issues that have 
implications for our two most vulnerable constituencies, LDCs and small states.  
II. THE COMMONWEALTH SECRETARIAT'S WORK PROGRAMME ON AID FOR 
TRADE 
A. C
ONCEPTUALIZING THE FOUNDATION OF AID FOR TRADE  
5. Aid for Trade has been a priority area of th e Commonwealth Secretariat's work programme 
on international trade since the issue was firs t formally discussed by WTO members at their 
Hong Kong Ministerial.  Given its importance,  the Commonwealth commissioned a major study, 
undertaken by Nobel Laureate, Economist Professor Jose ph Stiglitz, that triggered further meaningful 
discussions on its various aspects that would ensure  addressing the needs of developing countries.  
The study proposed a set of general principles for an Aid-for-Trade mechanism, identified the areas 
where such assistance would be required, and pu t forward recommendations for better and more 
effective utilization.  The study greatly influe nced the related policy discourse and many of the 
recommendations of the WTO Task Force on Aid for Tr ade, were in line with what was proposed in 
the study. 
B. AID-FOR-TRADE EFFECTIVENESS IN DEVELOPING COUNTRIES  
6. The evidence of the impact of development aid on trade performance is inconclusive and 
consequently the concept of Aid for Trade emerged to clearly establish the need for securing the trade 
result.  Therefore, one important question is whethe r there is any evidence that Aid for Trade actually 
helps developing countries improve their trading cap acity and performance.  Since the establishment 
of the WTO's role in monitoring Aid-for-Trade fl ows, our work in the area, until now, has mainly 
focused on understanding their effectiveness.  An issu e that was explored in this respect was whether 
it would be possible to undertake empirical exercise s using available data to find some evidence on 
how Aid for Trade actually works in developing countries.  
7. In collaboration with outside researchers, we devi sed an analytical framework to carry out the 
quantitative assessment.  It is important to note that while the specific term Aid for Trade is relatively 
new in trade policy, Aid for Trade as is recogni zed by the WTO Task Force definition has long been 
provided and reported.  This allowed examining the overall impact of Aid for Trade and also of its 
various types in order to identify the most eff ective interventions.  The Organisation for Economic 
Co-operation and Development (OECD) has been re porting data that are comparable to the six 
categories of trade-related assistance identified by the Task Force (viz. trad e policy and regulations, 
trade development, trade-related infrastructure, bu ilding productive capacity (including private sector  WT/COMTD/AFT/W/25 
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  development), trade-related adjustment (including su pport for adjustment associated with changes in 
international trade regimes), and ot her trade-related needs.  This allowed examining the overall impact 
of Aid for Trade and also of its various types in order to identify the most effective interventions.  
8. The first stage of analysis covered a set of 120 developing countries for which the relevant 
information was available.  Using cross-country and time-series data, Ai d-for-Trade flows were 
measured against various export performance and tr ade facilitation-related indicators.  The basic 
premise for this exercise is that both the direct and indirect effects of trade-related assistance are 
potentially important to stimulate competitiveness and exports.  We sought to isolate the impacts of 
specific types of aid on specific outcomes.  
9. Amongst others, the results provide some clear-cut evidence of aid to productive capacity 
exerting significant positive impact on the group of developing countries as a whole.  Certain types of 
Aid-for-Trade assistance also help countries achieve  improved trade facilitation performance.  Indeed, 
it revealed that a 10 per cent increase in Aid for Trad e to trade policy and regulation is associated with 
a 1.5 per cent reduction in trading costs associated w ith handling of exports and imports in the set of 
countries under consideration.  This effect is bor ne out even after controlling for other relevant 
factors.  It is, however, found that some of these pos itive effects in Africa are lower than for the whole 
sample, which calls for a closer evaluation of such assistance in African countries.  
10. When aid to different sectors is linked to sect or-specific exports, a robust and positive effect 
of aid to productive capacities on exports is found.   The effects are much stronger in mining and 
manufacturing compared to tourism and agriculture.  The statistical analysis also portrays positive effects of aid to infrastructure on export perform ance.  On the whole, the findings help better 
understand Aid-for-Trade effectiveness and can help derive useful policy implications.  
C. A
ID FOR TRADE IN SMALL AND VULNERABLE ECONOMIES  
11. The discussions around Aid for Trade have tended to treat beneficiaries as a fairly 
homogeneous group of devel oping countries.  However, groups of recipient countries differ according 
to a variety of factors and needs, which are important to acknowledge in devising any Aid-for-Trade 
strategy.  One group of countries that has not received much attention in this respect, despite their 
special and unique development challenges, is th e small and vulnerable economies group (SVEs).  A 
country's smallness imposes economic disadvantages and constraints, in addition to those due to its 
level of development.  They include not only those that are often highlighted, but additional 
challenges such as limited resources, small domestic  markets and high unit pr oduction and transaction 
costs that combine to restrict the ability to  achieve economies of s cale and international 
competitiveness.  SVEs are often very open with excessive dependence on international markets and 
vulnerable to fluctuations in world prices.  Fu rthermore, while they have already experienced 
significant loss of trade preference in the past, these developing countries are set to face further 
preference erosion.2 
12. Given the challenges to the growth of their trade, SVEs and their massive dependence on 
international trade, they need well designed and e ffective trade-related assistance.  As mentioned 
above and found from empirical investigation, incr easing the levels of Aid for Trade available to 
developing countries has positive and significant impacts in reducing transactions costs enabling these countries to gain greater benefits from trade.  Ag ainst this backdrop, the Commonwealth Secretariat 
has undertaken a comprehensive study to highlight the rationale for Aid for Trade to SVEs, to examine the past flows of such aid to these countri es, and evaluate the effectiveness of various types 
of Aid for Trade
. 
                                                      
2 Amongst others, Cali et al. (2010) provide a summary of the loss of trade preference for SVEs. WT/COMTD/AFT/W/25 
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  13. Building on the analytical framework mentioned above, results from the statistical analysis, 
amongst others, suggest that a particular category of Aid for Trade
, that is, aid for trade facilitation, is 
likely to have a significant cost-reducing effect on th e costs of handling exports.  SVEs seem to enjoy 
particularly high returns on aid used for trade fac ilitation, which is consistent with these countries' 
having on average higher unit transaction costs on e xports (as these are spread over smaller volumes 
of exports).  The results further suggest that ai d to economic infrastructure increases overall exports 
for developing countries, and more so for SVEs.  Furthermore, sectoral aid seems to have a positive 
impact on tourism and mineral exports, which is larger  in SVEs than in non-SVEs.  On the other hand, 
food and manufacturing exports by SVEs do not appear  to have benefitted fro m being provided with 
higher Aid for Trade . 
D. AID FOR TRADE IN SUB-SAHARAN AFRICA  
14. The Commonwealth Secretariat is currently  undertaking an empirical assessment of 
Aid-for-Trade effectiveness for Sub-Saharan Africa ( SSA).  The preliminary findings suggest that aid 
to trade facilitation has a positive and significant e ffect on the cost of importing and exporting while 
aid to infrastructure has also similar effects on e xports.  However, aid to productive capacity appears 
to trigger no significant impact.  It is quite interest ing to note that while the returns to infrastructure 
development on exports are much la rger in SSA than in the other developing countries, the opposite is 
true for productive capacity.  Our preliminary results fu rther suggest that part of the beneficial effect 
of infrastructure occurs through the facilitation of intr a-SSA trade.  Finally, the analysis points to the 
relative importance of soft infrastructure investme nts (finance and business services) in developing 
countries and in SSA in particular, but it also suggests that other forms of infrastructure support are 
important as well, especially in SSA, including transport and energy.  
E. QUANTIFYING AID FOR TRADE USING INFORMATION AT THE RECIPIENT COUNTRY LEVEL  
15. There is no denying that despite intense policy focus and attempts to define and measure Aid 
for Trade , there remains significant ambiguity regardi ng what does and does not constitute Aid for 
Trade , particularly given the subjectivity in assigning ai d flows to Aid-for-Trade categories.  This is 
particularly a problem when global monitoring of  Aid-for-Trade flows is taking place with many 
low-income developing country policy makers fi nding it difficult to recognize and record certain 
assistance as trade related.  Given the relatively high  profile of Aid-for-Trade initiative, and the fact 
that many donors have specified commitments to it, the issue of measuring Aid for Trade may not 
only be a technical issue but a political one.  Donors who commit more Aid for Trade may find it easier to honour their pledges, when such flows are defined so broadly.  
16. A Commonwealth Secretariat commissioned analysis  of Aid for Trade, which used Tanzania 
as a case study, found that there are big differences  between the perception of Aid for Trade at the 
donor (using the OECD database) and recipient levels.  This discrepancy can have serious 
implications for the sense of ownership of the projects being implemented and hence its effective 
utilization as some of the support provided may be considered as merely supply driven.  In most 
developing countries, there exists no database on Ai d for Trade and, as such, monitoring flows and 
assessing their effectiveness is not straightforward.  This remains a challenging area where developing countries will have to develop their statistical capacity.  
III. RELATED INITIATIVES 
17. Another area of our research work has been exploring the gender dimension in the delivery 
and management of Aid for Trade.  A substantia l amount of work on mainstreaming gender and in 
trade and development has been carried out by th e Commonwealth Secretariat (including training 
materials on Gender for stakeholders) and we are no w extending our work on Aid for Trade in Gender 
as well.  WT/COMTD/AFT/W/25 
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  18. In addition, the Commonwealth Secretariat is implementing a programme to promote 
democratic oversight of trade policy formulation a nd implementation in developing countries.  As part 
of that, trade policy workshops are being organized  involving the parliament arians.  Amongst others, 
the issues related to Aid for Trade have been di scussed with the participan ts in the recently-held 
workshops (May and June 2010) for East African and Pacific parliamentarians.  
IV. RESULTS AND STAKEHOLDER CONSULTATIONS 
19. The Commonwealth Secretariat disseminates th e findings from its analytical work and its 
research projects to stakeholders through non-t echnical policy briefs, stakeholder consultation 
workshops/meetings, and in various events hosted by other organizations including the WTO.  One of 
our recent consultation workshops took place in J une 2010 in Dar-Es-Salaam, which was organized in 
conjunction with the Government of Tanzania, involvi ng the senior officials of East African countries.  
The two-day long workshop discussed various findi ngs on Aid-for-Trade effectiveness, country 
experiences, regional Aid-for-Trade efforts and st rengthening, and measures to implement the WTO 
Aid-for-Trade Roadmap. 
20. Some of the major issues related to Aid for Trad e that the participants in our workshops have 
discussed and agreed include:  
• There is need for more transpar ency on Aid-for-Trade flows; 
• Significant information gaps exist and curren tly there is no comprehensive database on Aid 
for Trade at the country level.  As a result the evaluation of Aid-for-Trade flows and their 
obligation is not adequately known.  It is th erefore important for countries to develop and 
strengthen databases of different types of Aid for Trade and projects where these funds are being utilized to enable the evaluation and monitoring of Aid for Trade;  
• More interactions between government mini stries and between the government and 
development partners are needed to better understand the effective use of Aid-for-Trade 
funds.  In addition, it was pointed out that the policy discourse on Aid for Trade needs to be expanded to include parliamentarians  and civil society organizations;  
• Institutional weakness is one of the major fact ors constraining the mainstreaming of Aid for 
Trade in national development strategies and its operationalization.  Institutional building is 
also essential to enhance the ownership of Aid for Trade;  
• Research in East Africa has found that th ere are significant gaps between the regional 
approaches to strategies for Aid for Trade and their implementation by national governments.  
Given the relevance of regional development plans and programmes, consistent and timely 
actions by the national governments are very im portant for effective utilization of Aid-for-
Trade support;  
• There is a need for country-specific case studies on Aid for Trade to help recipient countries 
learn lessons and share experiences from el sewhere to provide further insights;  
• Aid-for-Trade flows should be additional to  ODA (Official Development Assistance) 
commitments.  While, until now, both ODA and Aid-for-Trade flows have increased, future 
engagement with development partners should ensure increased commitments on both types 
of support separately;  Harmonization of Aid-for-T rade disbursements at country and regional 
levels is also important;  WT/COMTD/AFT/W/25 
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  • Currently the monitoring of Aid for Trade is primarily a donor-driven initiative.  However, 
recipient countries need to be much more pro active in the monitoring exercise along with the 
evaluation of the Aid-for-Trade support provided;  
• While the Aid-for-Trade support to economic in frastructure is needed , the development of 
productive capacity in the dynamic sectors that could contribute to structural transformation 
and pro-poor growth is also critical.  This is  more so as Sub-Saharan African countries have 
been relatively less successful in utilizing Aid fo r Trade for productive capacity development;  
• There is need for better coordination between national and regional in stitutions implementing 
Aid for Trade.  National Implementation Units  and Aid-for-Trade Co mmittees need to be 
strengthened.   
• There is need to clearly identify needs and prio rities at country and regional levels to avoid 
overlaps and ensure continuity.  Also, there is  need to develop country and regional specific 
Aid-for-Trade indicators for monitoring and evaluation;  
• Aid for Trade should be pegged on country needs and priorities rather than donor priorities.  It 
was stressed that continuity of Aid-for-Tra de projects is important for predictability. 
• There is a need for donor funding to build on existing reviews of similar projects done by 
countries rather than spend more funds to undertake further reviews.  
V. FUTURE WORK PROGRAMME ON AID FOR TRADE 
21. The Commonwealth Secretariat is committed to continuing work on Aid for Trade that adds 
value to the existing knowledge and helps devel oping countries better inform  policy, and above all 
contributes to developing capacity in assessing the effectiveness of such assistance and designing 
projects with a view to promoting trade-led grow th and development.  Given these objectives, we 
intend to extend our Work Programme to c over region/country-specific case studies and 
dissemination of their findings.  From our previous  analytical studies and stakeholder consultations, it 
appears that regional/country-level focus directly  addressing the issues of effectiveness, project 
selection, and analysis of implementation record woul d comprise an effective strategy to help develop 
supply-side capacity in low-income developing countries through Aid for Trade.  Since country 
experiences are likely to differ, cross-country analyses  will shed light on best practices and lessons to 
be learnt.  
22. A further area that needs to be better unders tood is South-South Aid for Trade and its 
effectiveness.  With a rise of rapidly growing developing countries, for many low income countries 
trade-related assistance from their Southern partners can  be significant.  Currently, there is a lack of 
information on its magnitude and, like other typical  Aid-for-Trade flows, not much is known about its 
effectiveness.  
23. The Commonwealth Secretariat is open to ideas and suggestions that can also help devise 
further activities.  Our international trade programme  is flexible which means that we can address 
emerging issues or developments as they arise.  We also actively seek cooperation and collaboration 
from other international organizations and civil so ciety groups in conceiving and implementing new 
initiatives. 
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  Selected recent publications of the Commonwealth Secretariat on Aid for Trade  
  An Agenda for the Development Round of Trad e Negotiations in the Aftermath of Cancun , 
Commonwealth Secretariat, London, by Stiglitz, J. (2004). 
 
Aid for Trade , Commonwealth Discussion Paper, and also pub lished as Chapter 2 in Mbirimi, I. (ed) 
(2007), After Hong Kong:  Some Key Issues for Developing Countries , Commonwealth Secretariat, 
London, by Stiglitz, J. and Charlton, A. (2006).  
Quantifying Aid for Trade:  A Case Study of Tanzania , Economic Paper No. 82, Commonwealth 
Secretariat, London, by Turner, L. (2008).  Towards a Quantitative Assessment of Aid for Trade , Economic Paper No. 83, Commonwealth 
Secretariat, London, Cali, M. and te Velde, D.W. (2008a). 
 
"The effectiveness of aid for trade:  Some empirical evidence",  Commonwealth Trade Hot 
Topics , Issue 50, Commonwealth Secretariat, London, by  Cali, M. and te Velde, D. W. (2008b). 
 "Aid for Trade in Small and Vulnerable Economies" , Commonwealth Trade Hot Topics , 
Issue 59, Commonwealth Secretariat, London, by Cali, M. and te Velde, D.W. (2010). 
 
"Aid for Trade:  Policy Issue for ACP States", Commonwealth Trade Hot Topics , Issue 75, 
Commonwealth Secretariat, London, by Bonapas Onguglo.  Aid for Trade and Integration of Small States into Global Economy , Economic Paper, forthcoming, 
Commonwealth Secretariat, London, by Cali M ., Razzaque, M.A., te Velde, D.W. (2010). 
 Effectiveness of Aid for Trade in Sub-Sa haran Africa:  An Empirical Assessment , forthcoming, 
Commonwealth Secretariat, London, by Cali, M. and Razzaque, M.A. (2010).  
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