RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/COMTD/AFT/M/4 
30 November 2007 
 (07-5254) 
Committee on Trade and Development 
Fourth Session on Aid for Trade  
 
 
 
NOTE ON THE MEETING OF 11 OCTOBER 2007 
 
Chairman:  H.E. Mr. Shree B.C. Servansing (Mauritius) 
 
 
A. ADOPTION OF THE AGENDA .........................................................................................................1  
B. BUILDING PRODUCTIVE CAPACITY ..............................................................................................1  
C. ASSISTANCE FOR ADJUSTMENT , TRADE DIVERSIFICATION AND COMPETITIVENESS ...................4  
D. OTHER BUSINESS .........................................................................................................................8  
 
 
A. ADOPTION OF THE AGENDA  
1. The draft agenda for the meeting as contained in Airgram WTO/AIR/3073 of 
19 September 2007 was adopted . 
B. BUILDING PRODUCTIVE CAPACITY  
2. The Chairman  recalled that the purpose of the meeting was to focus on the issues of "building 
productive capacity" and "assistance for adjustment , trade diversification and competitiveness".  
Under item B of the Agenda, the Committee would hear presentations from representatives of the 
United States Agency for International Develo pment (USAID) and the United Nations Industrial 
Development Organization (UNIDO). 
3. The representative of USAID  said that his presentation would focus on USAID's responses to 
supply capacity constraints.  He defined the probl em of capacity constraints as trade opportunities 
arising and developing countries not being able to take advantage of them.  These opportunities arose 
not only from tariff reductions but also from impr ovements in technology and communications.  In 
this regard, USAID's responses to the problem  focused on the supply side, through improved 
production, improved productivity and im proved investment environments. 
4. One example of improved production concerned Za mbian honey.  He said that although there 
was a strong demand for African honey in Europe and North America, the problem was that there was 
very low capacity.  Honey production in Zambia w as very artisanal with beehives being made of 
straw baskets.  USAID's response to the problem w as to work with the private sector and engage 
3,000 producers and to introduce an improved plas tic hive technology to increase honey production.  
USAID had also introduced improved processing technol ogy to help meet strict foreign standards for 
purity.  The result had been a 700 per cent increase  in exports and a 60 per cent increase in honey 
producer household income. 
5. Another case study concer ned improved productivity  in Latin American value chains.  He 
said that the problem here was that the substan tial regional opportunities for agricultural exports, WT/COMTD/AFT/M/4 
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  particularly to North America, were not being utilized because of non-competitive value chains and 
poor market research.  By looking at the entire suppl y chain, it was possible to determine where costs 
could be cut in order to increase competitiven ess.  USAID's response to the problem involved 
engaging the producers, through vertical and horiz ontal industry groups, and introducing value-chain 
analysis to achieve improved production and compe tiveness.  One example was in El Salvador, where 
over US$5 million in new exports and over US$12 m illion in new local sales had been generated. 
6. The last case study involved improved operations of the  Georgian Customs office.  He noted 
that in this case, the problem was extensive im port and export delays at customs for merchandise 
being transported by trucks.  The solution had been to bring together officials from Customs and the Private Sector to reduce export and import delays by 75 per cent and 60 per cent, respectively, by 
creating green lanes for trustworthy customers.  Th is resulted in a 21 per cent increase in exports and 
a 56 per cent increase in imports even during a ye ar when Russia was boycotting imports from 
Georgia.  The reduced customs delays also resulted in savings of US$40 million in export costs. 
7. He concluded by saying that response incentiv es were not the same as response capacity.  
This meant that even when incen tives to trade were given and trade was liberalized, increased trade 
did not necessarily follow as there was simply noth ing to be traded.  This was why USAID was 
working to increase capacity response, by focusing on the areas of improved production and productivity gains, improved market understanding  and improved investment climate.  He said 
USAID saw effective assistance as l eading to increases in trade, which involved building relationships 
between different producers, between exporters and importers, and between the public and the private 
sector. 
8. The representative of UNIDO
 said that his organization was very much involved in 
aid-for-trade activities.  The key aspect of UNIDO's involvement was being in contact with small- and 
medium-sized enterprises (SMEs) in developing countr ies, and with their institutions to support their 
development.  He said that in both industriali zed and developing countri es, SMEs faced challenges 
such as conforming to quality standards and transacti on costs.  UNIDO had tried to respond to those 
needs to ensure that official trade and industrial po licies actually reflected the needs of producers.   
9. He pointed out that one of UNIDO's challenges was to come up with strategies to add value to 
the products of developing countries.  Anothe r challenge faced by UNIDO was that existing 
productive capacity in many developing countries was obsolete and underutilized.  UNIDO estimated 
that only an average of 30 per cent of capacity wa s being utilized in developing countries.  Recent 
statistics showed that least-developed countries (LDCs) in Sub-Saharan Africa had less than 
one per cent share in global trade.  A third challenge faced by UNIDO was helping 
developing-country manufacturers to conform to a growing number of standards and requirements, 
and to assess conformity with those standards.  Recently, many of the trade difficulties faced by 
developing countries related to the lack of conformity of their products with international standards.   
10. He explained that UNIDO's work focussed on three areas:  poverty reduction through 
productive activities;  trade capacity building; and en ergy and environment.  When integrating into 
global trade, developing countries faced thr ee challenges that UNIDO called the three Cs, 
competitivity, conformity and connectivity.  Thus , the process of getting developing countries' 
products to the global market involved (i) de veloping competitive manufacturing capabilities;  
(ii) proving conformity with market requirements and standards;  and (iii) connecting to the market to 
be able to supply it in a timely and reliable manne r.  He noted that the benefits of open markets 
depended on the ability of enterprises to enter into global value chains.   
11. He noted that most opportunities for industrial growth in developing countries were currently 
in the agro-industry sector.  This included food pro cessing, textiles, leather and agro-industry support.  
Currently, UNIDO had several aid -for-trade programmes to help developing-country producers with  WT/COMTD/AFT/M/4 
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  issues of supply-side capacity and conformity with standards and requirements.   He mentioned several 
examples of these programmes, including projects in Egypt, Tanzania, Mozambique, Ghana and 
Sri Lanka.  He stressed that since resources were limited it was important for countries to identify 
priorities and focus attention on sectors that had a strong export potential. 
12. He concluded by saying that in order for aid for trade to fulfil its objectives, it was important 
to reiterate support for building supply-side capac ity and conformity assessment.  It was also 
important to ensure interagency cooperation and coherence.  Finally, it was crucial to involve the 
private sector as an actor.    
13. The representative of India  asked the representative of USAID whether the increase of 
Zambian honey exports was measured in value or vol ume, or both, and over what period.  He also 
asked over what period the increased exports in the cases of El Salvador and Georgia were recorded.  
Last, he wanted to know what was being done by  UNIDO and other donors to improve the ability of 
developing countries to comply with enhanced SPS requirements of the developed countries' markets. 
14. The representative of Brazil  asked the representative of USAID what strategy had been used 
to identify problems and priorities, and to meet the n eeds expressed by the requestors.  He also wanted 
to know how further aid programmes could work in  areas where there were no incentives to export.  
He asked the representative of UNIDO what strate gy was used to enhance and strengthen regional 
links for productive capacity and whether UNIDO had identified how different countries in the same 
region could supplement their productive capacity a nd be inserted in the global value chains.   
15. The representative of Argentina  asked the representatives of USAID and UNIDO whether in 
their national experiences it had been necessary to  create groupings, consortia or associations of 
exporters to enhance their capacity to supply larger markets.  He believed that the creation of value 
chains was very important and, in this context, th e regional perspective was key.  He noted that the 
experience of UNCTAD with programmes such as Empret ec was also valuable in this area.  He also 
enquired about the weight given to job creation when setting priorities and deciding on projects. 
16. The representative of Barbados  asked the representatives of USAID and UNIDO about 
interactions they had had with transnational gl obal buyers and what advice they had given to 
governments and the private sector in developing co untries on their interface with these global buyers.  
He also wished to know whether these transnationa l global buyers contributed financially or provided 
knowledge to technical assistance projects. 
17. The representative of the European Communities  asked the representatives of USAID and 
UNIDO whether any analysis had been made on the negative impacts of providing assistance on the 
production of a particular product.  He also asked  how it was decided which products and sectors to 
support. 
18. Responding to the query by India, the representatives of USAID  said that the figures provided 
on Zambian honey referred to an increase in valu e.  Regarding the periods, he said that in 
Latin America it was a five-year period.  However, the period in Georgia was of just one year, with a 
US$3 million investment and a return on investment  of US$50 million.  Regarding the question by 
Brazil, he said that USAID used a number of differe nt tools for establishing priorities.  First, it would 
examine market demand, comparative advantage and what the country already produced but could produce better.  Second, they would look at the valu e chain within the country to identify constraints 
to a competitive return on investment.  On the legal side, USAID performed commercial legal 
institutional reform analysis in developing countries.  This type of analysis looked at the legislative 
and regulatory environment, as well as business constraints such as constraints on getting trade credit.  
Another important aspect that was looked at by US AID was the levels of competition in the market 
and competitive supply.  For example, in Guinea-Bi ssau the cashew market had been dominated by an WT/COMTD/AFT/M/4 
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  export cartel of six producers in 1995.  Once this ca rtel was broken up in 1997, within a period of 
five years, the producer price had doubled and exports had increased from US$20 million to 
US$160 million per year, simply because buyers were now able to compete.  
19. Turning to the question posed by Argentina, he  said that regional markets were a major focus 
for USAID.  Studies had shown that the greatest pot ential for growth was first in regional trade and 
then in international trade.  Therefore, USAID wo rked within existing market organizations, as well 
as in identifying new cross-border trade opportuniti es for the developing countries it worked for. 
20. In response to the question by the European Communities, he said that he had not yet 
witnessed a crowding-out problem in the markets he had worked in.  USAID was, in any case, careful 
not to cause harm to existing market structures. 
21. Regarding the role of the private sector and th eir dealings with global buyers, he said that 
USAID had a programme called the global develo pment alliance where it worked with various 
companies that had an interest in improving pr oductivity in other countries for their own supply 
chains.  This was a tripartite development appro ach where USAID, the buyers, and the producers all 
invested to improve productive capacity.  One example of this was the work of Starbucks Coffee, with 
producers in Rwanda and Latin America, to produc e high-value coffee so that producers would be 
able to obtain premium prices.  However, USAID di d not want to encourage single buyer situations 
and promoted competition which had the effect of  increasing prices for producers, such as in the 
example of cashews in Guinea-Bissau. 
22. With regard to the question on value chains a nd the regional dimension, the representative of 
UNIDO
 said that UNIDO worked with developing countries to harmonize their systems and 
standards, and examined opportunities to integrate their production.  One example of this was the 
export consortia which allowed sma ll producers to reach the volume levels required by large buyers.  
These type of consortia also helped to standa rdize production to comply with import market 
requirements and to pool production investment resources.  Regarding the last question by Argentina, he said that employment was an important factor.  However, the amount of jobs created depended on 
the product being produced.  Nevertheless, in select ing its projects UNIDO did consider their impact 
on employment.  Sometimes, the intended impact was maintaining employment levels and preventing 
disinvestment in a particular sector.  Regarding possible negative effects on other sectors, he said that it was difficult to give an answer.  There was no hard  rule on what effect focus on one product with 
export potential may have on other pr oducts.  Nevertheless, this had to  be considered and taken into 
account.  Finally, he said that in developing producti ve capacity, it was important  to take actions on 
three levels:  local, regional and international, whilst at the same time taking into account the 
opportunities and requirements of the market.  In this  regard, he said that a recent document presented 
by the LDCs in the WTO put emphasis on moving to  a value chain approach in the aid-for-trade 
context.  UNIDO was trying to follow this approach.  
C. 
ASSISTANCE FOR ADJUSTMENT , TRADE DIVERSIFICATION AND COMPETITIVENESS  
23. The Chairman  said that the next item for discussion was "assistance for adjustment, trade 
diversification and competitiveness".  In this cont ext, the Committee would hear presentations from 
the International Trade Centre (ITC) and the International Monetary Fund (IMF). 
24. The representative of the ITC  said that his presentation would focus on the role of the private 
sector and ITC in Aid for Trade.  The private sector 's role in Aid for Trade was divided into four 
inter-connected aspects:  the private sector c ould act as dialogue and advocacy partners, as 
beneficiaries, as knowledge and know-how partners, and  as financing partners.    WT/COMTD/AFT/M/4 
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  25. He explained that the role of the private sector  changed depending on the specific area of the 
Aid for Trade agenda.  Thus, in the areas of trad e development and building trade capacity, the private 
sector was mostly a beneficiary.  In the area of tr ade policy and regulation, the private sector could act 
as an advocate by lobbying governments to enact or  negotiate necessary trade laws and regulations.  
In the areas of trade-related adjustment and trade-re lated infrastructure, the private sector contributed 
more as a partner, since it possessed both the financial resources and the know-how needed for 
investment.   
26. The role of the private sector was also linked to the role of the ITC.  He said that the ITC's 
work on Aid for Trade focused on three of the four ma in areas of Aid for Trade.  In the area of trade 
policy and regulation, the ITC's strategic objective was to strengthen the policy-makers' ability to 
integrate business into the global economy.  In the area of trade development, the ITC's strategic 
objective was to strengthen trade promotion institu tions.  In the area of building productive capacity, 
the ITC's strategic objective was to ma ke enterprises more competitive.   
27. He explained that to achieve enterprise comp etitiveness, the ITC had developed a number of 
advisory services and tools in its work so as to provide trade support infrastructure for the private 
sector.  This work involved providing assistance to the private sector in six important areas.  First, 
understanding the business implications of the tr ading system.  Second, assessing the competitive  
position and trade potential of the enterprise.  Th ird, producing quality products and meeting the 
standards of international markets.  Fourth, pack aging and labelling.  Fifth, ensuring and managing 
trade finance.  Sixth, negotiating and drafting contract s, as well as resorting to arbitration or mediation 
services. 
28. He said that all enterprises in the developing world, regardless of their activity, faced similar 
challenges.  These challenges were: geographical constr aints, different levels of trade integration, 
weak trade support institutions (TSIs), and sev ere supply capacity constraints, such as quality 
inconsistency, coordination of produce aggregation, synchroniza tion of harvests, and logistics 
requirements. 
29. He then explained how the ITC assisted the private sector to overcome supply-side 
constraints.  He said that ITC had five core comp etencies:  export strategy, export policy for business, 
TSI strengthening, trade intelligence, and exporter co mpetitiveness.  In all of these five competencies, 
the ITC worked with its clients, policy makers, trade support institutions and the business sector to 
help small- and medium-sized exporte rs achieve export impact for good.   
30. He provided different examples of the concrete wo rk of the ITC with producers in developing 
countries.  One example, in the area of export mark et diversification and poverty reduction, was the 
horticultural sector in Mali.  The ITC had work ed with producers from Mali and with European 
importers to get Mali's horticultu ral products, such as mangoes, watermelons and green beans to the 
European market.  Another example of ITC's coope ration with the FAO and UNIDO was in Ethiopia's 
leather sector where each of the cooperating agenci es had focused on providing assistance in the areas 
where each had comparative advantages.  Thus, the FAO had focused on hide and skin recovery, 
while UNIDO had focused on leather tanning, and th e ITC on the design and marketing of shoes.  
Another example was ITC's work in the Cambodi an silk sector where the ITC had assisted the 
Government of Cambodia to adopt a national silk strategy based on a value-chain approach.  This 
strategy focused on building private-public sector part nerships at each stage of the production process.  
He pointed out that this strategy had been so su ccessful that it was now also being implemented in 
Laos. 
31. He said that, looking to the future, the ITC was now working on a project called "ethical 
fashion".  In this project, the ITC was working w ith producers in Uganda and Kenya to get fashion WT/COMTD/AFT/M/4 
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  products made from traditional materi als, such as beads, wood, crochet, bone and organic jersey, into 
the global market.   
32. He concluded his presentation by saying that the ITC was undergoing a reform process to 
better deliver its services, but that its motto remained "export impact for good".   
33. The representative of the IMF
 said that his presentation would focus on the trade-related 
financial assistance provided by the IMF.  Th is assistance comprised technical assistance and 
financing for adjustment.  He said that in the ar ea of financing for adjustment, the IMF addressed its 
members' needs through the trade integration mech anism (TIM) and the exogenous shock facility.  
34. He said that in terms of scale, the IMF was a niche player in overall Aid for Trade and total 
IMF assistance, which included technical and financial assistance, and was a fraction of global Aid for 
Trade flows.  He remarked that the IMF was not a development agency and did not provide assistance 
for infrastructure and capacity building.  However, the IMF could play an important role as a provider 
of assistance to mitigate the effects of trade-related shocks on a country's balance of payments.  One 
of the events that was seen as possibly leading to a demand for IMF resources to ease adjustment was 
the completion of the Doha Development Agenda (DDA).  However, this was yet to happen and, 
therefore, the main cue for a more important role  for the IMF in Aid for Trade was yet to come. 
35. He said that in the IMF's efforts on trade-re lated technical assistance it carried out about 
25 missions a year and devoted approximately three pe rson-years of short-term expert time per year.  
He said that most of the technical assistance provide d by the IMF was in the fiscal area and focused 
on tax and tariff reform, as well as on customs reform.  He noted that the IMF was one of six participating agencies in the Integrated Framewor k (IF) for Trade-Related Technical Assistance to 
LDCs. 
36. Regarding the IMF's activities on financing for adjustment to trade liberalization, the main 
mechanism tailored to this end was the TIM.  The TIM was created three years ago and was linked to 
the DDA and its impact on developing countries especially regarding issues such as preference erosion and increase in food import prices.  He said that the TIM could be activated when a 
balance-of-payments need arose fro m multilateral trade liberalization. 
37. He noted that the TIM was not a new financing window per se .  Rather, it was a policy to 
simplify procedures for accessing IMF resources via a new arrangement or enhancement of an existing arrangement.  He said that most borro wing under the TIM would come via the Poverty 
Reduction and Growth Facility (PRGF) arrangement s with low-income countries.  The amount of 
borrowing was determined by the overall balance-of-p ayments need in discussion with the authorities;  
but the expectation was that access would be limited to 5 to 10 per cent of a Member's quota in the 
IMF.  Since IMF members could address their balance-of-payments needs through other IMF 
mechanisms, the TIM could be seen as redundant.  Nevertheless, the TIM provided more automaticity 
in responding to balance-of-payments needs by defining multilateral trade liberalization as a 
circumstance under which an IMF member could seek IMF assistance and by establishing norms on 
access. 
38. He added that at the time of its creation, it was estimated that up to 48 IMF members were 
potential users of the TIM and total borrowing c ould amount to 141 million Special Drawing Rights 
(SDRs) or approximately US$208 million.  However,  only three countries had activated  the TIM and 
just 53 million SDRs had been drawn.  The reason for this was that the TIM was created mostly to address post-DDA needs, and the DDA had not been concluded.  Therefore, the real test for the TIM 
would come once the DDA was concluded.   WT/COMTD/AFT/M/4 
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  39. He explained that the other specialized mechanism for helping IMF members in addressing 
trade-related adjustment needs was the Exogenous Shocks Facility (ESF).  This facility was designed 
to help low-income countries deal with exogenous shocks including, inter alia,  those related to trade.  
He said that lending was on the same terms as the PR GF, i.e. a duration of up to two years and access 
for up to 50 per cent of quota.  In this regard, he noted that there had been no use of the ESF to date, 
largely due to the positive financing environmen t for emerging economies and low-income countries 
since its activation in 2006.  
40. In conclusion, he said that the IMF was a co mmitted but minor player in Aid for Trade.  
Nevertheless, one area where the IMF could have an  important role was in mitigating adjustment 
costs due to multilateral liberalization.  The TIM ha d been created for this purpose.  However, the 
IMF's role in Aid for Trade had not been tested mainly because the DDA had not yet been completed. 
41. The representative of Brazil  asked the representative of the IMF what his assessment was of 
the IMF pilot programmes that excluded public investme nt on infrastructure projects not to be used in 
the calculation of budget deficits.  He said that this approach could he lp developing countries 
undertake infrastructure projects without the burden of creating  more debt.  On the issue of trade 
financing, he said his understanding was that the IMF did not provide financing for trade operations.  
However, the recent crises in sub-prime loans had shown that the credit assessment of countries, as 
well as enterprises, could be faulty.  He believed th is could have a negative impact on the ability of 
countries to have access to trade-finance credit, esp ecially since the Basel-II Ac cord was due to enter 
into full force soon.  Therefore, he asked whethe r the IMF envisaged any project to deal with this 
situation.  Regarding the TIM, he said that the TIM had been criticised as a debt-creation mechanism.  
He asked whether the representative of the IMF considered this to be a valid criticism. 
42. The representative of Pakistan  noted that the TIM and the ESF had the same structure as other 
IMF regular programmes.  In this regard, she asked the IMF if there were any plans to make the TIM 
and the ESF more concessional and easier to use by developing countries.  She also asked the ITC 
whether the ITC's efforts in building competitiveness  in some countries had led to a decrease on the 
dependence on preferences. 
43. The representative of India  asked whether the ITC had done any studies on the impact that 
100 per cent buyback arrangements by the importer may have on the exporting company and country. 
44. The representative of Guinea  said that her country had the same advantages as Mali for the 
production of fruits.  She wanted to know how Guinea could benefit from the ITC projects.  Regarding the issue of compliance with internatio nal standards, she asked UNIDO what type of 
projects could benefit an LDC such as Guinea. 
45. The representative of the IMF
, in reply to the questions from Brazil, said that those questions 
were beyond the realm of Aid for Trade, but that he would try to give an answer.  Regarding the pilot 
projects, he said that this was a question of definitio n and that the pilot project might affect how debt 
was presented but that it did not affect the actual accumulation of debt, as th is depended on how much 
was borrowed, irrespective of definitions.  Regard ing the spillover effects of the crisis in the 
sub-prime market, he said that this was one of the pressing issues being discussed and analyzed by the IMF, but that there was no specific project underw ay to redefine how credit was assessed.  On the 
issue relating to the validity of the criticism of th e TIM as a debt generating mechanism, he said that 
activation of the TIM did involve a request to borrow from the IMF.  However, the primary instrument for the TIM was the PRGF which was a highly concessional facility, with five-and-a-half 
years grace, half-a-per cent interest and a ten-year pay-back period.   WT/COMTD/AFT/M/4 
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  46. Responding to the question from the representative of Pakistan, he explained that the TIM for 
low-income countries was on the same terms as the ESF, which was very concessional, and that the 
IMF did not provide grant financing. 
47. The representative of the ITC
, in reply to the question by Pakistan, said that the ITC had a 
programme called the "Export Led Poverty Reduc tion Programme", where the ITC had its own 
methodology to measure impact on poverty reduction.  He offered to provide more details on the 
measuring methodology upon request.  Regarding the question on private sector partnership, he said 
that the ITC had had some experiences where the private sector companies started competing among 
themselves for policy advocacy, sometimes in a contra dicting and detrimental manner.  Therefore, the 
ITC had insisted that the private sector should be consistent and credible in their requests from the 
public sector.  In reply to the qu estion from Guinea, he said that a request from the government was 
needed in order to access the ITC's programmes.  The ITC would then send an evaluation mission to 
the requesting country to consider the different products that might receive support.  One of the 
important elements of the ITC's programmes was that it required involvement from the buyers from 
the start, and together it helped identify the mark ets and demand for the products.  He said that the 
ITC worked increasingly with UNIDO to make sure  that the products benefiting from support were 
exportable, competitive and complied with international standards. 
48. The representative of UNIDO  confirmed that UNIDO and th e ITC worked together in 
West Africa on projects that linked the issues of productive capacity, market access and quality standards. 
49. The Chairman
 thanked all the speakers for their presen tations and replies to questions.   
D. OTHER BUSINESS  
50. There were no items raised under Other Business. 
51. The meeting was adjourned . 
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