WORLD TRADE  
ORGANIZATION  WT/AFT/W/18 
15 June 2006 
 (06-2885) 
Aid for Trade Task Force Original:   English 
  
 
COMMUNICATION FROM BARBADOS 
  
 The following communication, dated 2 June 2006, is being circulated to the Aid for Trade 
Task Force at the request of the Permanent Delegation of Barbados.  
 
 
_______________ 
  
AID FOR TRADE 
 
 I. INTRODUCTION 
1. Ministers at the Hong Kong Ministerial Conference in December 2005 created a mandate for 
Aid for Trade (AFT) as contained in Paragraph 57 of the Hong Kong Ministerial Declaration 
(HKMD).  To ensure fulfilment of this mandate an AFT Task Force has been convened to discuss 
matters relating to the implementation of AFT. 
2. Small, Vulnerable Economies (S VEs) have expressed a strong interest in AFT pursuant to 
their mandate contained in Paragraph 35 of the Doha  Ministerial Declaration and Paragraph 41 of the 
HKMD and this submission by the SVEs is transmitte d for the consideration of that Task Force. 
3. In the discussions in the Committee on Trad e and Development in Dedicated Session 
(CTDDS), the SVEs have defined their specific characteristics and problems as including such elements as physical isolation and distance from main markets, minimal share of world trade, low productivity and insufficient supply, inability to divers ify production, high transport and transit costs, 
difficulties in attracting foreign investment and low competitiveness.
1  SVEs have submitted 
proposals in a number of negotiati ng and other bodies of the WTO to address these characteristics and 
problems with the aim of framing responses to the trade-related issues identified for their fuller 
integration into the world economy in an appropriate and balanced manner.2  AFT is considered as 
complimentary to these efforts in line with the n eed to have a balanced outcome of the DDA.  
4. However, the linking of AFT with the "single undertaking" of the DDA would be impractical 
as assistance is also required in relation to othe r WTO Agreements. Nevertheless, steps should be 
taken to ensure that this would not result in non-binding "best endeavour" commitments on AFT. An 
agreement is possible that could secure commitment s of funds and guarantee their availability at an 
early stage. 
                                                      
1 WT/COMTD/SE/W/12. 
2 WT/COMTD/SE/W/10-13. WT/AFT/W/18 
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  5. AFT should also not be tied to liberalization co mmitments and be used to force commitments 
from developing countries. It should instead ensure that all countries are able to benefit equitably 
from WTO Agreements by helping those developing countries in greatest need.  
II. TRADE CHALLENGES OF SVES 
6. SVEs face many competitive challenges to successf ully integrate themselves into the world 
economy and AFT should pay atte ntion to the following: 
• Transportation and insurance-re lated payments can amount to a large proportion of total 
exports of goods and services for SVEs, thus el iminating the potential benefits of tariff 
reductions in target markets;  
 
• High transport and transit costs due to re moteness from the main maritime shipping 
lanes, or being landlocked, are additi onal barriers to many SVEs achieving 
competitiveness, regardless of their resources;  
 
• SVEs in general have extremely low rates of  FDI inflows due mainly to the small size 
of their markets and other natural constraints; 
 
• Material shortages and high wages of skille d workers (and in some cases also semi-
skilled)  in small countries act as major constraints to diversification; 
 
• Higher utility cost is a key negative factor  on competitiveness. These costs are largely 
associated with internationa l telecommunication services, higher marginal electricity 
costs given the economies of scale inherent in  electrical generation, higher retail fuel 
prices, and high airfares and longer durati on of travel which affect both business and 
leisure travel; 
 
• Limited technology transfer and low absorptive capacity; 
 
• Greater reliance on exports due to the small size of their domestic markets and higher 
market entry costs due to a lack of production and marketing economies of scale of their small- and medium-sized firms; and 
 
• The high cost of infrastructure generally due to the indivisible nature of such 
infrastructure. 
 
7. Many of these economies will not be attractiv e locations for industrial development unless 
they have very specific advantages. AFT can enha nce their prospects by providing support in critical 
areas necessary for build ing competitiveness.  
III. SCOPE FOR AFT  
8. Paragraph 57 of the HKMD provides the basis for the scope of AFT. It refers to building "the 
supply-side capacity and trade-related infrastructure that they need to assist them to implement and 
benefit from WTO Agreements and more broadly to expand their trade." Reference to WTO 
agreements would put the exercise beyond th e DDA and hence include the Uruguay Round 
Agreements.  
9. In general, AFT should cover the following:   WT/AFT/W/18 
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  • Trade Policy and Regulations, (i.e. regiona l and multilateral negotiations, standards, 
implementation of trade agreements, trade policy and planning);  
 
• Trade-Related Infrastructure (i.e. transport and storage, communications, energy, trade 
facilitation, etc);  
 
• Trade Development (i.e. trade  promotion stra tegy and implementation, market analysis 
and development);  
 
• Productive Supply-Side Constraints, (i.e. ba nking and financial services, research and 
development and innovation; bus iness and other services, agriculture, forestry, fishing, 
industry and mining, tourism etc.);  and  
 
• Trade Adjustment (abnormal adjustment resu lting from severe adverse trade shocks). 
 
10. Defining scope at this stage is however problematic as the full implications of the DDA are 
not yet known. This is best seen in attempts at outlining perspectives on adjustment where agreement 
on the size of tariff reduction and associated flexibilities are still to be decided. It is clear that sizeable 
tariff cuts which lead to preference erosion a nd Government revenue loss will result in abnormal 
adjustment costs but that judgment can only be made at the end of the DDA.  
11. However, there is no doubt that too broad or too narrow a definition of AFT could pose 
problems for its successful implementation. Para graph 57 of the HKMD should not lead to an 
interpretation that is too restrictive and therefore re duce meaningful benefits to Members. At the same 
time, certain limits would be expected if AFT a nd development aid are to be separately identified. 
12. In general, the trade needs of SVEs can be e xpected to appear in all aspects of the scope 
however determined. The exclusion of any clearly tr ade-related area, without a proper examination of 
the trade needs of beneficiaries as well as the altern atives, could seriously impa ir the benefits of any 
AFT programme for SVEs. 
IV. PRIORITY AREAS FOR INTERVENTION 
A. TRADE POLICY AND REGULATIONS  
13. Small Economies need to build sustainable capacity for trade policy formulation and 
implementation. Many SVEs lack the human and in stitutional capacity to articulate and develop trade 
policy and implement it successfully over the long term. 
14. In addition, meeting international obligati ons and conforming to accepted standards and 
practices become problematic for many SVEs due the absence of adequate institutional, financial and 
technical support. As a result, SVEs have not been able to take advantage of the trading opportunities 
arising from trade liberalization – and in many cases not even from preferential arrangements. 
15. In many areas of the Uruguay Round such as SPS, TBT, TRIPS and Customs Valuation, the 
costs of implementing these agreements are prohibitive for many SVEs. These costs involve inter 
alia, the establishment of standard setting institutions, certification agencies, and testing laboratories. 
Some SVEs have already made proposals for support in these areas.3 
16. In addition, the DDA is expected to genera te high implementation costs in the Trade 
Facilitation Agreement.  
                                                      
3 WT/COMTD/SE/W/15/Rev.1;  WT/COMTD/SE/W/16/Rev.1;  WT/COMTD/SE/W/18/Rev.1. WT/AFT/W/18 
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  17. SVEs would also have to establish domestic  regulatory mechanisms and institutional 
frameworks to support services liberalization.  
18. The needs of SVEs in the area of trade policy formulation and implementation which 
stemmed from the Uruguay Round, and those that w ill result from the DDA, should therefore attract 
some assistance from the AFT programme. 
B. T
RADE ADJUSTMENT  
19. One area in which there is a deficit is adjust ment. The task ahead is to determine how to 
operationalize adjustment assistance by examining what  adjustment costs now exist and later what 
emerges in the final DDA agreement. Existing mech anisms may have a specific non-trade focus and 
may carry onerous conditionalities not considered appropr iate for the treatment of adjustment costs.  
20. Adjustment costs that would stem from the implementation of WTO agreements relate 
essentially to preference erosion, loss of tariff re venues, end of MFA quotas, rising food prices for 
NFIDCs in the wake of reform of agricultural s ubsidies, and loss of employment due to increased 
import competition in the domestic sector a ffecting sensitive import-competing industries. 
21. Arguments against the inclusion of adjustment costs in the scope of AFT on the grounds that 
it would be too costly represent a rush to judgment. At present there is ongoing adjustment arising 
from the elimination of the MFA, fiscal adjustment to  meet liberalization plans, etc. An assessment of 
this and other adjustment costs is essential for SVEs. 
C. TRADE -RELATED INFRASTRUCTURE  
22. Trade-Related Infrastructure (TRI) constraint s abound in SVEs and improvements in a range 
of trade-related infrastructure are therefore required.   
23. Trade-related infrastructure needs to be better de fined into suitable sub-categories in order to 
determine what could best fit AFT. Caution has to be exercised since too restrictive a definition could 
lead to the exclusion of infrastructure that would be  directly pertinent to trade development. A balance 
has therefore to be struck that ensures some bor der between trade-related infrastructure and general 
infrastructure but with the scope for an individual country that can show the greater relevance of 
investing in a particular type of infrastructure for its trade development needs to make the case and 
have access to that infrastructure aid. 
24. The main advantage of this approach is that  it would focus on the more directly-related 
aspects of infrastructure necessary for trade develo pment and so allow meaningful programming and 
an established budget without necessarily closing the door  to certain requests that could be justified 
under prescribed conditions. 
25. Trade facilitation is included in AFT but it should compliment the support for capacity 
building in the coverage of the DDA Trade Facilitati on Agreement which is confined to three articles 
in Annex D of the July Framework and does not cove r all possible Trade Facilitation needs. In reality, 
Trade Facilitation is a much broader agenda and has both a trade-related and infrastructure aspect. 
These two processes should be kept separate.  
26. Emphasis should also be placed on sustainable trade-related infrastructure. SVEs are 
particularly vulnerable to high infrastructure cost s and the difficulties in developing and maintaining 
infrastructure. These developing countries will conti nue to rely on the international community to 
assist in this regard. AFT should therefore be made available.   WT/AFT/W/18 
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  D. TRADE DEVELOPMENT  
27. There is a wide range of support services in this area that would be of special significance to 
SVEs. Many of them fall in the production and marketing fields where Sm all- and Medium-Sized 
Enterprises (SMEs) experience specific difficulties. Important trade-related needs in this category 
would include formation of strategic alliances and partnerships, product desi gn and quality assurance, 
effective use of information and computer technol ogy and marketing intelligence. These are excellent 
options for private sector to private sector capacity building relationships.  
E. PRODUCTIVE SUPPLY -SIDE CONSTRAINTS  
28. SVEs would have a special interest in this type of support, especially since many of them face 
preference erosion and the end of MFA quotas. Th ey would need assistance to build new production 
and export capacity in agriculture, industry and ser vices. Marketing would be a particular challenge 
for their SMEs that lack scale and could benefit significantly from participating in global supply networks. Credit on appropriate terms for SMEs would also be critical to stimulating new investment. 
Generally over the value chain, from competitive cost inputs through technology acquisition and to 
export marketing, a range of services would ha ve to be supplied to build export product 
competitiveness at the level of the firm.   
V. A PRIVATE SECTOR AID FOR TRADE PROGRAM 
29. A special effort should be made to ensure th e involvement of the private sectors in both 
developed and developing countries and to connect them to each other. 
30. The scope of a Private Sector Aid For Trade Programme should re late to activities capable of 
supporting private sector efforts to export. The identi fication of gaps in current Official Development 
Assistance in the trade-related field would be an appropriate starting point. 
31. The delivery and monitoring of Private Sector  AFT programmes should be vested in an 
organization agreed between interested multilatera l and bilateral donor agencies and sector specific 
representative institutions on a country basis or, where appropriate, on a regional basis. 
32. AFT participants should aim for a feasible programme of assistance that is based on 
professional diagnostic studies and needs assessments and on arrangements for a monitoring system 
using mutually agreed benchmarks. Improving c oherence and coordination of action among multiple 
donors should also be part of this approach.  
33. An existing international trade-related organiza tion that has a comparative advantage in this 
field, and also enjoys the confidence of devel oping countries, should be given responsibility for 
managing the programme. On the recipient side , the executing agency could be the agreed 
representative institution such as regional development banks. 
VI. VOLUME AND NATURE OF FINANCIAL SUPPORT 
A. M
OBILIZING ADDITIONAL FINANCIAL RESOURCES  
34. According to the Paragraph 57  mandate, additional funding is  required. Between 1994-2004, 
development aid has been decreasing as debt relief became an increasing part of ODA. It would be 
important therefore that current aid budgets are not  depleted in order to support AFT but rather 
additional resources would be tapped to  add "new money" to ODA budgets.  WT/AFT/W/18 
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  35. The pledges so far for 2010 are promising but the challenge remains to  realize additionality. 
In this respect, it is essential that in finalizi ng commitments to the provision of these resources that 
long-term sustainability of the AFT process and pred ictability in the provision of funds are assured. 
B. N
ATURE OF AFT  FINANCIAL SUPPORT  
36. In order to avoid an increase in the debt burde n of developing countries, particularly LDCs 
and small, vulnerable developing countries, ai d-for-trade financial s upport should be provided 
primarily in the form of grants. However, for certa in high cost physical infrastructure projects, these 
could be co-financed with long-term concessional loans from other multilateral financial institutions 
(e.g., regional development banks and the World Ba nk).  Such loans should be on terms no less 
favourable than those of IDA or IFAD. 
37. Funding should also not involve any burdensom e conditionalities. The latter should be limited 
to monitoring and governance. 
38. With regard to the financial instruments, there is as much a need for budgetary support that is 
available for sector-wide approaches on a multi-annua l basis, as for specific "project financing". 
Budgetary support in situations of fiscal imba lance and balance-of-payments deficit ensures 
macroeconomic stability through quicker disbursement and a focus on the areas of adjustment most in 
need. It facilitates the development of projects by ensuring the correct macroeconomic environment. 
C. DURATION AND SUSTAINABILITY OF AFT  FUNDING  
39. The problems related to supply-side capacity and trade-related infrastructure must be tackled 
on a sustainable basis. This essentially implies that  projects must be devel oped and implemented over 
many years and be funded on a multi-year basis. AF T funds would therefore have to be replenished 
periodically according to an agreed schedule, and pr ocedures would have to be  established to ensure 
this. 
40. Access to these funds would also have to be gua ranteed and predictable, and to achieve this 
purpose, some agreement between donors and recipients  would be needed to provide such security. In 
this context, some consideration could be given to strengthening the role of multilateral sources in the 
provision of the additional resources. 
VII. MONITORING AND GOVERNANCE OF AFT  
A. MONITORING MECHANISM  
41. The role of the WTO in monitoring and eval uating performance of AFT programmes should 
be paramount, and this responsibility could be assi gned to its highest Counc il and its subsidiary 
bodies (particularly the Committee on Trade and Deve lopment).  The Joint WTO/OECD Database on 
TRTA/CB already constitutes a useful monitoring tool  which could be further enhanced by improved 
supervision of the collection and processing of in formation. In addition, a mechanism would be 
needed to assess the impact of AFT. Monitori ng should permit the involvement of recipients, donors 
and other interested parties. 
B. GOVERNANCE MECHANISM  
42. The wide range of bilateral, regional and multilateral mechanisms now in operation would 
suggest that the AFT governance mechanism shoul d first explore the comparative advantage of 
existing institutions and seek to im prove functioning where gaps exists.   WT/AFT/W/18 
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  43. Several forms of assistance suffer from insuffici ent resources as well as a lack of coordination 
between the institutions managing the projects. These weaknesses should be avoided in AFT. 
44. There is need for credible mechanisms for delivering AFT and ways of improving existing 
national and regional mechanisms must be found. Re gional development banks should play a key role 
in this area. 
45. Any governance structure should ensure WTO i nvolvement as well as provide for adequate 
coordination where gaps have been observed. The effective participation of WTO Members or their 
representatives – which again could be the regional development banks should  be assured. It should 
also draw into the process international and regiona l financial agencies, the private sector, bilateral 
donors along with experts, and other interested pa rties. There should be an agreed administrative 
framework with agreed principles of management and allocation of funds. Institutional 
conditionalities should be avoided. 
C. ELIGIBILITY  
46. In terms of country coverage, AFT should address the relevant needs of all WTO developing-
country Members with priority to LDCs, SV Es and acceding small developing countries. 
VIII.  PROCESSES TO IDENTIFY TRADE-RELA TED NEEDS AT THE INDIVIDUAL 
COUNTRY LEVEL 
47. In view of the wide variation in country s ituations, a country-specific approach to needs 
assessment will be necessary in orde r to identify both the priority needs of individual countries and 
the additional assistance required in  each case. This effort should take  into account the needs of the 
private sector. 
48. For countries that are part of a regional inte gration scheme and would wish their national 
approaches to be complimented by a regional need s assessment approach, the latter should also be 
undertaken. 
49. Aid for trade should allow policy flexibilities a nd national ownership as mandated in the Paris 
Declaration of June 2005. Adopted at the High- Level Forum on Aid Effectiveness (March 2005) the 
Paris Declaration on Aid Effectiveness has been pr epared with broad partic ipation from development 
practitioners, through a process coordinated by the High-Level Forum Steering Committee. The 
declaration outlines a set of joint commitments a nd targets for governments and multilateral donors to 
reach over the next five years. 
 
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