Foreign Assistance: The United States Provides Wide-ranging Trade Capacity Building Assistance, but Better Reporting and Evaluation Are Needed
Published: 2011-07-29T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: From 2005 to 2010, 24 U.S. agencies provided more than $9 billion in trade capacity building (TCB) assistance to help more than 100 countries reduce poverty, increase economic growth, and achieve stability through trade. To report on TCB funding, the U.S. government conducts an annual survey of agencies and publicly reports the data in a TCB database administered by the U.S. Agency for International Development (USAID). GAO examined (1) how agencies' TCB activities are aligned with the agencies' goals, (2) the extent to which the TCB database provides sufficient information on key trends and funding, and (3) the extent to which USAID monitors and evaluates the effectiveness of its TCB activities. GAO focused on the agencies that reported the most funding for TCB activities since 2005--the Departments of the Army and State, the Millennium Challenge Corporation (MCC), and USAID--and the Office of the U.S. Trade Representative (USTR). GAO analyzed U.S. government data; reviewed agencies' strategic, budget, and program documents; and met with U.S. and foreign government officials in select countries.
section_title: What GAO Found
paragraphs: USAID and State conduct TCB activities that are aligned with their primary goals, but TCB is secondary to the goals of other agencies. USAID and State have developed strategic plans that include TCB-focused goals. Aligned with these goals, USAID and State assist countries in negotiating and implementing trade agreements. In addition, USAID assists countries in taking advantage of economic growth opportunities stemming from trade, often in conjunction with other agency goals. TCB is not a primary focus of MCC and the Army, however, they conduct activities to meet their broader agency goals that have trade-related effects. MCC identifies trade-related assistance it considers TCB as part of its programs' poverty reduction goals. The Army implements TCB-related physical infrastructure projects as part of its disaster response objectives and in support of its reconstruction and economic development efforts in Iraq and Afghanistan. The U.S. government TCB database has reported that annual TCB funding has increased from $1.35 billion in 2005 to $1.69 billion in 2010, but the database does not adequately describe certain factors underlying this growth and other significant changes in the composition of TCB funding. From 2005 to 2010, two agencies--MCC and the Army--began reporting significant TCB funding, primarily for physical infrastructure projects. Their funding comprised 54 percent of total TCB, and physical infrastructure projects comprised 45 percent of total TCB. However, the TCB database does not adequately explain significant factors driving changes in the composition of TCB funding. In particular, the annual TCB survey methodology attempts to identify and quantify just the trade-related components of projects, but this can be difficult in practice, particularly for physical infrastructure projects. Although GAO found the survey data to be generally reliable, these factors can lead to limitations in the data that are not described for its users. Clear reporting and transparent methodology and data collection are essential to understanding levels of funding and changes in the nature of TCB over time. USAID has improved its assessment of TCB activities, including developing performance indicators and taking the positive step of commissioning a multicountry evaluation of the effects of TCB, but it has yet to develop plans to make use of the evaluation's valuable insights. USAID uses trade and investment indicators to assess the immediate results of its TCB activities. However, officials explained that it is difficult to attribute trade-related trends revealed by the indicators to the effects of TCB assistance and collect valid and reliable data to measure progress. To assess longer-term results, USAID has commissioned evaluations of TCB programs in specific countries, but these are limited in number. It recently commissioned a multicountry evaluation of the long-term effectiveness of its TCB activities agencywide. While USAID is beginning to incorporate the evaluation's results in its training, it has yet to develop plans for disseminating best practices to missions and offices on the methods they may use to better manage and assess their activities. Furthermore, it has not made plans for conducting evaluations on an ongoing basis.
section_title: What GAO Recommends
paragraphs: GAO recommends that the Administrator of USAID publicly report identified limitations and key distinctions in the categories of TCB assistance in the database. GAO also recommends that USAID develop a written plan for using its recent TCB evaluation and for conducting evaluations on an ongoing basis. USAID stated that it has already taken steps consistent with the GAO recommendations.

section_title: Letter
paragraphs: Trade capacity building (TCB) is a form of development assistance  provided by the United States and other countries to help developing  countries participate in and benefit from global trade. Congress and the  executive branch have identified TCB assistance as an important tool for  U.S. trade and development policy based on evidence of the  effectiveness of trade in reducing poverty and generating economic  development and growth. According to the Office of the U.S. Trade  Representative (USTR), poverty rates for countries engaged in  international trade have fallen sharply over the last 20 years. In the  context of the ongoing Doha Development Agenda multilateral trade  negotiations of the World Trade Organization (WTO), WTO member  countries have recognized the impact of trade on development, including  the role that trade can play in reducing poverty, achieving economic  growth, and raising income levels. WTO members have also recognized  the importance of trade-related assistance for addressing the constraints  that limit the ability of developing countries and, in particular the least- developed countries, to fully benefit from trade and the rules-based  multilateral trading system. To respond to these concerns, in 2001 and  2005, the WTO affirmed the importance of TCB assistance and the  United States and other donors pledged continued support, respectively.  The U.S. government provides TCB assistance to help developing  countries worldwide build the physical, human, and institutional capacity  to participate in global trade. Multiple U.S. agencies have developed a  variety of programs that provide such assistance and support more than  100 countries. When we examined U.S. government TCB efforts in 2005,  we noted the importance of the linkages between trade and development  and recommended that more evaluation be performed to help ensure that  TCB activities are effective in helping countries benefit from trade. We  also cited the importance of evaluation in demonstrating that the capacity  building goals envisioned by the United States are being achieved.
In response to your interest in U.S. TCB programs, this report examines  (1) how agencies’ TCB activities are aligned with the agencies’ goals, (2)  the extent to which the U.S. government TCB database provides  sufficient information on key trends and funding, and (3) the extent to  which the U.S. Agency for International Development (USAID) monitors  and evaluates the effectiveness of its TCB activities.
To address these objectives, we analyzed available data from the U.S.  government TCB database, which is maintained by USAID and reports  annual TCB data using a governmentwide survey. We have assessed  these data as part of our previous and ongoing work and have  determined that they are sufficiently reliable to identify TCB funding by  agency, country, and category; although we found limitations to the use of  the data, as discussed in this report. We focused our review on TCB  activities provided by the Departments of the Army (Army) and State  (State), the Millennium Challenge Corporation (MCC), and USAID, which  together have funded more than 90 percent of total U.S. TCB assistance  from fiscal years 2005 to 2010. In addition, we included USTR in our  focus due to its unique trade policy role. In conducting our work, we  analyzed strategic, budget, and programmatic documents describing  these agencies’ TCB funding and activities. We reviewed data and  information these agencies use to measure the performance of their  activities and, where available, evaluations of programs or projects. We  conducted fieldwork in Colombia, Morocco, and Mozambique. We  selected these countries because they were among the 10 countries  receiving the most TCB funding from fiscal years 2005 to 2009. In  addition, we sought a mix of U.S. agencies providing assistance in- country and the categories of assistance provided, as well as geographic  diversity. In each country we reviewed agencies’ strategy documents, and  performance plans and reports. We also interviewed agency officials, host  government officials, and contracted implementing partners and visited  TCB projects.
We conducted this performance audit from July 2010 through July 2011 in  accordance with generally accepted auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives. Appendix I contains a more detailed description of  our scope and methodology.
subsections: section_title: Background
paragraphs: TCB assistance is based on the premise that international trade can  positively benefit a country’s overall growth and development. The United  States and other countries increasingly view TCB assistance as an  important tool in promoting economic growth and reducing poverty.  Expanding trade with and among developing countries can be a critical  driver of economic growth and poverty reduction because it encourages  entrepreneurship, human resource development, technology transfer,  technological innovation, and good governance.
Developing countries have increasingly integrated into the global trading  system, and some of those countries have become important U.S. trading  partners. According to the World Bank, exports from developing countries  have grown twice as fast as those of high-income countries since 2000.  Moreover, imports in developing countries grew at almost twice the rate of  high-income countries. As a result, developing countries account for a  growing share of world imports. Furthermore, since 2000, many  developing countries have acceded to the WTO. Currently, about two- thirds of WTO members are developing countries or least-developed  countries. In addition, many developing countries have entered into free  trade agreements (FTA) with the United States. FTAs phase out barriers  to trade in goods with particular countries or groups of countries and  contain rules designed to improve access in services, investment, and  intellectual property rights.
However, many developing countries—in particular the least developed— face constraints that severely limit their ability to implement trade  agreements and benefit from trade. Many developing countries lack the  physical, institutional, or human capacity to participate effectively in global  trade. Additionally, developing countries sometimes lack the financial and  human resources to fulfill their trade commitments. USTR has indicated  that TCB assistance is important to enable developing countries to  negotiate and implement market-opening and reform-oriented trade  agreements. In addition, some view TCB assistance as important to  securing broad-based reforms across countries so that all countries  benefit from the trade rules negotiated in the WTO and in other trade  agreements. In 2001, the WTO Doha Ministerial Declaration advised that  technical assistance should be designed to assist developing, least- developed, and low-income countries to meet their WTO obligations, and  draw on the benefits of an open, rules-based multilateral trading system.  The WTO created the Doha Development Agenda Global Trust Fund to  help developing countries build capacity and establish a reliable basis for  funding WTO-related technical assistance. The 2005 Hong Kong WTO  Ministerial Declaration called for the expansion and improvement of this  type of assistance and set in motion a process to achieve this known as  the Aid-for-Trade Initiative. Partnering with the WTO on this initiative, the  Organization for Economic Cooperation and Development (OECD) jointly  created a database to provide comprehensive information on bilateral  donor and multilateral/regional agency support for TCB. The OECD has  issued a number of reports on aid-for-trade issues and attempts to share  good practices so that developing countries can capitalize on the  opportunities of international trade.
To identify and quantify the U.S. government’s TCB activities in  developing and transitional economies, USAID conducts an annual  survey on behalf of USTR. The data gathered from this survey are used  to inform and respond to inquiries from Congress, the executive branch,  the general public, and multilateral organizations such as the WTO.  USTR officials use the database regularly and, according to these  officials, it is a useful tool for identifying U.S. agencies’ TCB activities and  funding in a particular country or region, as well as the full extent of  assistance the U.S. government provides in that area. USAID oversees a  contractor that collects and maintains the survey results in a publicly  available online database. The survey defines TCB and asks agencies to  place their assistance into a range of categories and estimate funding  obligated for each category (table 1 provides further information on these  categories). In addition to administering this survey, USAID is also tasked  with reviewing completed survey forms, and checking for accuracy and  consistency in the reporting of funding and allocation into TCB categories.  A variety of U.S. agencies have a role in providing TCB assistance,  including the Departments of State, the Army, Labor, the Treasury, and  Commerce; MCC; and USAID.
In our 2005 report on U.S. TCB efforts, focusing on the period from 2001  to 2004, we found that U.S. TCB assistance was primarily a collection of  a variety of trade and development activities. We noted that 18 agencies  had self-reported that they obligated almost $2.9 billion for TCB activities  in more than 100 countries and that USAID provided 71 percent of overall  U.S. TCB assistance. We also found that the six agencies we reviewed  were neither systematically monitoring nor measuring program  performance in terms of TCB and recommended USAID and USTR  develop a strategy to systematically monitor and measure results and  evaluate effectiveness. In response, USAID, in consultation with USTR,  took steps to develop a multicountry evaluation to measure the  effectiveness of U.S. TCB assistance, which was issued in November  2010.
section_title: USAID and State Conduct TCB Activities Aligned with Their Primary Goals; TCB Is Secondary to Goals of Other Agencies
paragraphs: Of the four agencies we reviewed that fund and implement TCB activities,  only USAID and State have strategic plans that include TCB-focused  goals. USAID has developed a strategic plan for TCB, and State’s joint  strategic plan with USAID for fiscal years 2007 to 2012 supports USAID’s  goal of advancing developing countries’ participation in and benefits from  trade agreements. MCC and the Army conduct TCB-related activities that  support their broader strategic and agency mission goals. However, they  do not have strategic plans and goals that specifically relate to TCB.
subsections: section_title: USAID and State Provide Assistance that Directly and Indirectly Supports USAID’s TCB Strategic Plan
paragraphs: USAID and State have strategic goals specific to promoting TCB and  have incorporated these goals in the planning of their assistance. (For  further information on USAID’s planning of its TCB activities, see app. II.)  In 2003, USAID issued a formal strategic plan on TCB, to focus its TCB  efforts and guide the selection of new activities. The plan calls for  USAID’s TCB projects to support the three primary objectives of helping  countries participate in trade negotiations, implement trade agreements,  and take advantage of trade opportunities. In addition, State supports  USAID’s TCB efforts outlined in its strategy. The USAID and State joint  strategic plan for fiscal years 2007 to 2012 calls for supporting USAID’s  strategic goal of providing assistance to help countries participate in and  benefit from trade agreement negotiations. We found that USAID and  State planned and provided assistance that supported TCB strategic  objectives. USAID also provided assistance that aligns with its April 2008  strategy for economic growth that includes the goals of (1) developing  well functioning markets in developing countries, primarily through  supporting policy and regulatory reforms and (2) strengthening the  international framework of policies and institutions that support countries’  economic growth and opportunities by promoting international standards.
USAID and State, in collaboration with other U.S. government agencies,  have provided TCB assistance as part of USTR-created TCB working  groups in developing countries where the United States is negotiating a  FTA. (For further information on interagency efforts to coordinate TCB  assistance, see app. III.) These working groups meet during the  negotiations to identify and select TCB activities that assist developing  country negotiating partners through regional and bilateral TCB programs.  In particular, TCB working groups were a feature of the bilateral  negotiations in support of the ratified Central America-Dominican  Republic Free Trade Agreement (CAFTA-DR) and Peru FTA, and the  signed FTAs with Colombia and Panama. For example:    During the CAFTA-DR negotiations, USAID, State, and other U.S.  agencies helped to provide technical assistance to the Central  American countries to address a variety of trade capacity issues,  including the strengthening of plant and animal health and food safety  regulatory systems, and the strengthening of customs procedures.
In conjunction with the U.S.-Colombian free trade negotiations a  USAID program assisted the government of Colombia in adopting and  implementing policy and regulatory reforms to facilitate the conclusion  and implementation of the FTA. The program included 18 components  of trade-related policy reforms that led to Colombia’s development of  new regulations and procedures consistent with the FTA’s  requirements. For example, the program supported the establishment  of a national food safety policy that ensured consistency with U.S.  sanitary and phytosanitary standards.
In addition, USAID provided TCB assistance to support countries’ efforts  to accede to the WTO. In fiscal year 2009, USAID provided TCB  assistance supporting the accession and membership of nine countries to  the WTO. USAID’s activities supported foreign governments’  implementation of regulatory reforms and the adoption of domestic  policies, laws, and regulations that align with international standards. For  example, under a 5-year joint-funded program with State, USAID  provided the government of Laos with legal and economic analysis of  needed reforms, particularly in the areas of services, and intellectual  property rights and standards.
USAID and State have provided TCB assistance to support the  implementation of U.S. FTAs with developing country partners. The final  texts of FTAs, including CAFTA-DR, and the Peru FTA, have provisions  that created committees on TCB to assist partner countries in  implementing the trade agreements and adjusting to more liberalized  trade. USAID, State, and other U.S. agencies have provided TCB  assistance in support of the work of these committees. For example,  USAID’s Regional Trade Program for CAFTA-DR provided training  relevant to compliance with the provisions of the CAFTA-DR agreement,  including training to some partner countries’ foreign government officials,  judicial officials, and private sector representatives in the area of  intellectual property rights protections and investment regulations. The  program also strengthened CAFTA-DR partner countries’ customs  operations and administration to meet international standards as well as  the FTA’s provisions.
USAID also conducts TCB activities with the objective of building the  capacity of firms to capitalize on the benefits of FTAs. For instance, in  2005, USAID created a program to provide technical assistance to  Moroccan firms in various sectors, including apparel, textiles, leather  footwear, and processed foods, with the goal of developing business  opportunities between the United States and Morocco under the U.S.- Morocco FTA. Under the program, Moroccan firms and trade associations  received technical assistance, including seminars and workshops on a  variety of trade-related topics such as sales planning, transport logistics,  and production standards and certification.
USAID also assists countries in adopting requirements related to WTO  agreements, and supports countries seeking to benefit from regional  trade agreements. USAID funds and implements projects to help recipient  countries comply with WTO agreements in areas such as government  procurement, agriculture, the application of sanitary and phytosanitary  measures, and the agreement on intellectual property rights. In addition,  USAID provided technical assistance to address developing countries’  capacities for meeting standards under regional trade agreements. For  example, a primary objective of USAID’s Southern Africa Trade Hub is to  increase international competitiveness and intraregional trade in the  Southern African Development Community region.
In addition, USAID provides TCB assistance in support of opportunities  provided under trade preference programs, most prominently the African  Growth and Opportunity Act of 2000 (AGOA). To help countries take full  advantage of increased trading opportunities under AGOA, USAID  provides TCB assistance primarily through trade hubs in East, West, and  Southern Africa and bilateral missions in sub-Saharan Africa. The trade  hubs assisted firms in taking advantage of opportunities under AGOA by  helping them develop market linkages, adapt products to the U.S. market,  and facilitate business deals. One trade hub also developed national  export strategies identifying countries’ constraints and opportunities for  exporting under AGOA, and another trade hub conducted workshops to  help African firms and foreign government officials increase their  understanding of AGOA.
In conjunction with objectives other than TCB, USAID conducts TCB- related activities that indirectly support TCB by helping countries take  advantage of trade-related economic opportunities. These activities aim  to address a wide range of development needs in the public and private  sectors. In conducting our fieldwork and research, we identified USAID  projects that missions conducted for various objectives in addition to TCB,  but that mission officials identified as achieving outcomes related to  international trade:    The mission in Mozambique conducted a TCB-related agriculture  development program with the primary objective of increasing the  sustainability and profitability of the country’s private sector to  strengthen rural income growth. While TCB was not an explicit  objective, as part of the program, USAID funded a commercial food  laboratory that provides screening services to reduce illnesses from  contaminated local food supplies, which also helped producers meet  quality standards for the export of commercial food products.   USAID implemented TCB-related programs in Colombia with the  primary objective of generating economic alternatives to illicit crop  production. However, the program also helped agricultural producers  expand sales, including exports, and assisted the government of  Colombia in implementing economic policies and institutional reforms  to enhance the competitiveness of the Colombian economy in  general, including those related to international trade.
In Morocco, the mission conducted TCB-related activities aimed at  improving the general business environment and promoting broad- based economic growth, in part through a reduction in trade and  investment barriers. One TCB-related program provided technical  assistance in support of regulatory and legal reforms to promote  investment and enhance the general ease of doing business, for  instance. In addition, USAID implemented a program to improve the  productivity and competitiveness of certain agricultural products,  including those for export.
section_title: TCB Is Secondary to the Goals of MCC and the Army
paragraphs: Other agencies we reviewed do not have TCB-focused strategic goals,  but conduct activities that have trade-related effects and that are  considered TCB to fulfill their broader mission goals. While 23 other U.S.  agencies, in addition to USAID, reported funding for TCB-related activities  from fiscal years 2005 to 2010, MCC, in particular, reported obligating  almost half of total U.S. government TCB funding over this period. In  addition, over the same period, the Army reported obligating the fourth  largest amount of funding for TCB among U.S. agencies, following MCC,  USAID, and State. However, MCC and the Army do not have strategic  plans and goals that specifically relate to TCB, but sometimes conduct  TCB-related activities to fulfill their strategic and agency mission goals.  MCC generally identifies TCB-related activities as part of its poverty  reduction goals in its 5-year country compacts and threshold programs,  although TCB is not an explicit objective. The Army conducts trade- related physical infrastructure projects, such as roads and  telecommunications projects, that it reports as TCB to respond to its  emergency and disaster response objectives in Afghanistan and in  support of its reconstruction efforts in Iraq and Afghanistan.
Although from 2005 to 2010 MCC reported obligating the largest amount  of TCB-related assistance funding of any U.S. government agency— approximately $4.7 billion, or 65 percent, of its total assistance—MCC  does not fund TCB-related activities for the specific objective of TCB,  according to officials. It funds TCB activities as part of its larger mission to  reduce poverty and stimulate economic growth through its compact  agreements, and to help countries address policy weaknesses through its  threshold programs. MCC provides monetary assistance through  multiyear compact agreements with developing countries that create and  maintain sound policy environments. Its threshold programs fund a limited  amount of assistance to certain developing countries to help them  become eligible for compact funding. TCB is not an explicit objective of  the agreements and programs, according to officials, and MCC funds are  not earmarked for specific TCB projects. Compact countries define their  own development priorities and project proposals, which may include  projects considered as TCB. MCC first reported obligating funding for  TCB assistance when it signed its initial compacts with recipient countries  in fiscal year 2005. MCC has continued to report high levels of funding for  TCB assistance as countries sign compacts, but the levels of funding and  types of TCB-related activities depend on whether countries include TCB  as a component in their proposals.
MCC operates differently than USAID and other U.S. agencies in that it  only provides assistance to developing countries based on criteria  involving governance and economic reform measures. For a country to be  selected as eligible for MCC’s compact assistance program, it must have  demonstrated a commitment to ruling justly, encouraging economic  freedom, and investing in people by performing well on 17 indicators that  MCC uses to assess policy performance. Each compact is unique, and  MCC works in partnership with eligible countries that identify the greatest  constraints to their own development and establish priorities. In  consultation with the private sector and nongovernmental organizations, a  country government submits a proposal that may include TCB-related  projects. The proposal forms the basis for the compact. To help focus the  proposal on the root causes of constraints to private investments and  identify the appropriate activities, MCC and country partners use a written  analysis of a country’s constraints. The analyses facilitate the consultative  process for developing compacts that address country priorities. For  example, according to MCC officials in Mozambique, MCC funded  prefeasibility analyses of four potential TCB-related projects. Three of the  projects were included in the compact. However, following consultations,  a free trade zone project was determined not to be viable.
As of fiscal year 2010, MCC reported TCB-related activities in 20 compact  countries and 9 threshold program countries. TCB-related activities in  compact countries primarily consisted of physical infrastructure  development activities, while activities in threshold program countries  focused on customs operation and administration, such as strengthening  border inspections to improve import and export monitoring. For example,  in Benin, Honduras, Mali, Mozambique, and Tanzania, MCC has funded a  variety of physical infrastructure projects, including port and airport  improvement projects, as well as road construction and rehabilitation. The  Moldova, Sao Tome and Principe, and Zambia threshold programs  included a variety of activities related to customs operations and  administration, including the upgrading and modernization of customs  systems and enhancements to custom operations and inspection  procedures.
The Army does not have TCB-focused strategic objectives, according to  Army officials. However, the Army funds trade-related physical  infrastructure projects considered TCB as part of the Commander’s  Emergency Response Program in Afghanistan and in support of its  infrastructure development efforts in both Iraq and Afghanistan. Since  fiscal year 2009, the Army has reported $615 million in total obligated  funding for TCB-related activities that support the Army’s broader goal to  achieve U.S. security objectives, provide basic humanitarian aid and  services, and support economic stability and development as a means of  responding to security concerns. For example, as part of its funding for  humanitarian assistance, the Army constructed and restored a variety of  physical infrastructure in Afghanistan that it reported contributed to trade,  including telecommunications and electrical systems projects. Although  the objectives of these projects are not directly focused on TCB,  according to officials of one Army command, these projects further  increase economic integration and trade by providing communication and  electrical power linkages between Afghanistan and neighboring countries.  The Army also undertook food production and distribution processes in  Afghanistan that also helped meet sanitary and phytosanitary standards.  In addition, as part of its mission, the Army supports economic stability  and sustainable development to promote security, in part, through the  development of infrastructure, such as roads, that facilitate trade. For  example, the Army funded the restoration and construction of roads in 20  regions in Afghanistan, which it reported contributed to the development  of physical infrastructure needed to promote trade. In addition, the Army  reported funding to repair, improve, and create new infrastructure in Iraq  and Afghanistan, including roads and bridges, necessary for trade routes  and market access improvements. According to officials of one Army  command, the road projects facilitated regional and international trade  flows by linking Afghanistan with neighboring countries. Officials noted  that recipient countries of the Army’s assistance are identified through  Department of Defense guidance and with input from in-country U.S.  agencies on recipient countries’ needs.
section_title: The TCB Database Does Not Provide Adequate Information Necessary to Understand Significant Changes in the Composition of Reported TCB Activities
paragraphs: USAID does not adequately describe certain key factors underlying  significant changes in the composition of TCB funding as reported by the  TCB database. According to the database, from 2005 to 2010, overall  annual funding increased 25 percent, from $1.35 billion to $1.69 billion.  This increase is largely the result of the inclusion of funding from MCC  beginning in 2005, and the Army beginning in 2009. Correspondingly,  there has been a steep decline in the share of total funding reported by  USAID and other agencies. MCC and the Army reported TCB funding  primarily in the category of physical infrastructure, which has contributed  to a steep rise in overall funding in that category. In addition, agencies  that are newly identified for inclusion in the database, such as the Army,  are sometimes unable to provide data for previous years, which may  imply a certain amount of under reporting. Although the annual TCB  survey attempts to identify and quantify just the trade-related components  of projects, this can be difficult for officials to fully achieve in practice. It  may also be challenging for survey administrators to fully clarify the  distinction between direct and indirect TCB funding. The limitations  involved in collecting and reporting TCB-related data do not necessarily  invalidate the figures in the database; however, USAID is not providing  sufficient context or explanation of these limiting factors with the dataset.  Clear reporting and transparency in methodology and collection are  essential for users of the data to understand changes in the nature of  TCB over time.
subsections: section_title: The Inclusion of MCC and the Army Has Significantly Increased the Reported Levels of and Changed the Composition of Total TCB Funding
paragraphs: Since our previous review of TCB assistance in 2005, there have been  significant changes in the level and composition of total TCB funding as  reported by the U.S. TCB database. Our past report reviewed TCB  funding obligated from 2001 to 2004. Over that period, the average  annual amount reported by all agencies was about $735 million. In  comparison the average annual amount reported by agencies during the  period 2005–2010 was more than twice as much—$1.65 billion. From  2005 to 2010, total funding levels have generally increased, with annually  reported funding growing from $1.35 billion to $1.69 billion, a 25 percent  increase. Since 2005, the number of agencies reporting TCB obligations  has grown from 18 to 24. However, the significant increase in total TCB  funding is attributable to two agencies in particular—MCC, which was  established in 2004 and began reporting TCB funding in 2005, and the  Army, which began reporting TCB funding in 2009 (see fig. 1).
Over 2005–2010, MCC reported obligating $4.7 billion, or 48 percent of  total TCB funding. In 2009, the first year Army began submitting data to  the survey, it reported $497 million in funding or 27 percent of the total for  that year. Combined funding from MCC and Army comprised 54 percent  of total TCB over 2005–2010. The significant amount of funding reported  by MCC and the Army lowered the relative share of total TCB funding  provided by USAID and other agencies. For example, over 2001–2004,  USAID reported obligating 70 percent of total TCB funding, the largest  share of any U.S. agency; while over 2005–2010, USAID’s share declined  to 29 percent of total funding. While the amount of TCB funding provided  by USAID declined over that period, this does not account for such a  large decline in relative share. In addition, the relative combined share of  total funding for all other U.S. agencies also declined, going from 25  percent over 2001–2004 to 10 percent over 2005–2010.
Annual TCB funding in the category of physical infrastructure has grown  from $346 million in 2005 to $787 million in 2010, a 127 percent increase.  Over 2005–2010, physical infrastructure was the largest category of total  TCB funding, at 45 percent of the total, or $4.5 billion out of $9.9 billion. In  contrast, over 2001–2004, physical infrastructure comprised only 8  percent of total funding, or $226 million out of $2.9 billion. The share of  funding for all other TCB categories has declined between those two  periods. For example, there has been a decline in the overall share of  funding of trade facilitation, which was the largest category over 2001– 2004, from 27 percent to 16 percent, and a decline from 17 to 6 percent in  human resources and labor standards, which was previously the second  largest category. Figure 2 illustrates the large increase in the category of  physical infrastructure and the proportional decline in the other categories  of TCB, from 2001–2004 to 2005–2010.
The increase in the category of physical infrastructure since 2005 has  been driven by the TCB funding reported by MCC and the Army. Physical  infrastructure and trade-related agriculture constitute the primary  categories of TCB assistance obligated by MCC. Over 2005–2010, MCC  reported obligating $3.3 billion in the category of physical infrastructure  development and $667 million in trade-related agriculture. MCC’s funding  made up a majority share of overall TCB funding for both categories.  MCC accounts for 74 percent of total funding in physical infrastructure  and for more than half of total funding in trade-related agriculture.  Similarly, the $497 million in TCB funding reported by the Army in 2009  was exclusively for physical infrastructure development. This amount  accounts for 13 percent of total funding in physical infrastructure, the  majority of which—$396 million—the Army reported as funding for road  and bridge projects in Afghanistan. Figure 3 shows the amount of funding  for each category of TCB by agency over 2005–2010.
MCC and the Army have also impacted the regional distribution of TCB  as reported by the database. Since 2005, U.S. agencies have provided  TCB funding to 143 recipient countries in 6 geographic regions, including  Southern Asia, Europe and Eurasia, East Asia/Oceania, Latin America  and the Caribbean, the Middle East and North Africa, and sub-Saharan  Africa. The sub-Saharan African region received the most funding, driven  primarily by projects funded by MCC (see fig. 4). Funding for Southern  Asia was largely made up of the Army’s reported 2009 funding of physical  infrastructure projects in Afghanistan. In contrast, USAID funding is  spread more evenly worldwide. (For a more detailed table of country  funding, including TCB assistance to least developed countries, see   app. IV).
The methodology of the TCB survey, the multiyear nature of MCC  compacts, and the relatively large size of those compacts are factors that  drive the impact of MCC funding on the TCB funding landscape. The TCB  survey collects and reports funding for each fiscal year on an obligation  basis, as opposed to reporting funding in the year in which it was  distributed. MCC obligates full funding for its 5-year compact agreements  in the year the compacts enter into force. The TCB survey methodology  captures the amount obligated in that year, resulting in large spikes in  MCC annual figures. This is unique in that other U.S. agencies generally  fund their multiyear projects through ongoing annual obligations. As a  result, any comparisons between MCC funding and other agencies in any  given year may be distorted. USAID officials noted that it may not be  feasible to alter the data collection process in such a way as to address  this issue.
As we have previously reported, MCC’s actual disbursements have  substantially lagged behind planned disbursements for countries with  compacts in force. This is because initial compact disbursement plans  underestimated the time required for compact countries to establish the  structures, agreements, and capabilities to begin implementing compact  projects. For example, MCC signed a compact with Mozambique in fiscal  year 2008 for $507 million and reported $222 million of that total as TCB- related funding in that fiscal year. However, as of December 31, 2010,  MCC reports having expended only $39 million, or just less than 8  percent of the total compact amount. Furthermore, due to the multiyear  nature of MCC compacts, MCC funding usually constitutes a significant  amount of total annual TCB funding, so the MCC obligations that appear  in the TCB database are large relative to other agencies and have an  increased impact on overall TCB statistics (see fig. 1).
USAID management officials acknowledge the potential for the database  to distort the portrayal of TCB funding by comparing what is, in effect, 5- year funding for MCC with 1-year funding for other agencies, but they  maintain that it is not possible to reconfigure the data in any meaningful  way due to the survey’s methodology. They also note that they  sometimes remove MCC from the dataset when conducting their own  analyses. In response to the concerns we noted, USAID updated the TCB  Web site in July 2011 to include a prominent notice on the Web site’s  home page of the unique nature of MCC obligations. Given the relative  size and impact of MCC funding, such explanation is necessary to fully  understand the data.
section_title: The TCB Database Does Not Adequately Explain Significant Factors Driving Changes in the Composition of TCB Funding
subsections: section_title: The Database Does Not Fully Explain Limitations That May Cause Prior Years’ Reporting to be Understated
paragraphs: Difficulties reporting previous years’ data for newly identified sources of  TCB funding may mean that funding levels for those years are  understated in certain cases. The TCB survey team under contract with  USAID annually reviews various sources, such as the President’s budget  request, to identify any TCB-related funding that is not currently being  reported to the survey. In this way, the survey team identified the Army as  a provider of TCB funding and requested that Army officials began  submitting data beginning in 2009. The Army provided this funding for  physical infrastructure development projects in Afghanistan and Iraq. The  Army had provided funding for similar activities for a number of years  prior; however, survey officials told us it was not practical to attempt to  capture previous years’ data. Although the TCB Web site notes that 2009  was the first year USAID received a submission from any of the U.S.  Armed Services, it does not provide any further information. Specifically, it  does not make users aware of the possibility that prior years’ reporting is  highly likely to be understated due to the challenges in reporting on the  Army’s previous funding. Furthermore, the TCB Web site does not note  the process or describe the limitations of identifying new TCB funding  sources in its methodology. The Army’s funding made up 27 percent of  the total TCB for 2009. Given the relative size and impact of Army  funding, such an explanation is necessary to fully understand the data  and the future impact of newly-identified agencies.
Reporting and measuring TCB-related funding and activities, particularly  for physical infrastructure projects, can be difficult, largely because of the  need to distinguish between assistance focused on improving trade  capacity, in particular, and support to promote economic growth or some  other goal in general. While agencies such as USAID fund activities that  have clear and direct links to TCB, other agencies, including MCC and  the Army, fund activities that are sometimes more indirectly related to  international trade. For example, technical assistance USAID provides to  aid in a country’s accession to the WTO has a clear and direct relation to  trade, but activities such as constructing roads or electrical grids may not.  In addition, certain types of projects might be related to trade in one  context but not in another. For instance, an energy project might relate to  trade if it is servicing a tourism complex but not if it is providing electricity  to local neighborhoods.
The TCB survey was developed to capture any and all U.S. government  TCB-related funding at the activity level of all participating agencies.  USAID and USTR officials have noted that the design of the TCB survey  enables them to determine on a case-by-case basis the extent to which a  project or program may relate to TCB because reporting officials  understand the specific trade-related components of the project for which  they are reporting data. USAID officials explained that the TCB survey is  designed to solicit such a determination because it surveys those officials  responsible for managing the projects “on the ground.”
Although the TCB survey attempts to identify and quantify just the trade- related components of a physical infrastructure project, we found  examples where the application of this distinction was challenging.  Officials with whom we spoke during our fieldwork agreed that the  definition of TCB used in the survey was quite broad, which could  sometimes make it difficult to identify the activities to report in their survey  responses. They relied on the categorical definitions provided by the TCB  survey and survey guidance. However, we found instances in which  officials experienced challenges in clearly discriminating between  components of projects that were TCB or non-TCB related, particularly in  large TCB-related infrastructure projects. For example:    The Army reported $396 million in TCB funding for infrastructure  projects in Afghanistan that consisted of activities intended to repair,  restore, or build roads to respond to urgent humanitarian relief and  reconstruction requirements and that also had trade-related effects.  Army officials cited concerns about reporting the entire road project as  related to TCB because it may only be minimally used for international  trade. However, survey administrators advised Army officials  responsible for reporting the Army’s TCB data that the entire funding  for the road project should be counted as TCB-related assistance “so  long as the project is not designed to exclusively support a military  installation and so long as the power/utility project is not designed to  exclusively support residential use.” As one official put it, “a road will  support the ability of farmers to transport their products to a local  market as well as to an export facility.” “Fishing is one of the most important industries in Morocco. Morocco is unable to  satisfy current domestic demand for quality fish. Demand is expected to increase,  driven by an expanding tourist sector and expected growth in domestic fish  consumption. The Small Scale Fisheries Project seeks to modernize the means of  catching, storing, and marketing fish, thereby improving the quality of the catch,  maintaining the value chain, and increasing fishers’ access to both local and export  markets.”
According to MCC and foreign officials in Morocco, external trade was  not in the forefront of their thinking on this particular project when the  compact was being developed. When we originally discussed this  project with one MCC official in Morocco, we were told that 100  percent of the catch was intended for domestic consumption.  However, we later learned from a host country project manager that  an estimated 20 to 30 percent of the catch would go to outlets that  might be considered exports. There was no readily available  quantitative data to verify this. Differing from both those estimates,  MCC had previously reported to the survey that all $116 million of  funding for the project was TCB-related.
Other entities that report TCB-related funding face similar challenges. For  example, the 2005 WTO Hong Kong Ministerial Conference established  the Aid-for-Trade Initiative that prompted a joint effort by the OECD and  the WTO to track TCB activities by all global donors in a manner similar to  the approach of the TCB database. The U.S. TCB survey is used to  generate the TCB activities and funding the U.S. government reports to  that joint database. While the OECD and WTO effort collects and tracks  aid-for-trade data using definitional categories similar to those used in the  U.S. TCB survey, they more explicitly acknowledge the challenges  associated with physical infrastructure projects. One OECD report notes  that it is almost impossible to provide sound criteria that differentiate  between trade-related infrastructure and general economic infrastructure.  In addition, they report that few international donors can identify the trade- related share in individual projects and programs. As stated earlier in this  report, USTR maintains that the U.S. TCB survey has the ability to  determine on a case-by-case basis the extent to which projects may have  trade-related components. USTR has explained that this ability to dissect  programs into their component parts is an important difference between  the U.S. TCB definition and OECD’s aid-for-trade definition. However, we  have noted examples when agency officials submitting TCB estimates  have found it difficult to make this distinction.
USAID does not provide any information on the difficulties involved in  making these determinations on the TCB database Web site. In contrast,  the 2007 report on global aid-for-trade issued jointly by the OECD and the  WTO dedicates an appendix to discussing the difficulties in collecting  data on infrastructure (as well as other categories of TCB) and the  possibility that a significant over-estimation of the actual TCB-related  volume is possible. The U.S. TCB survey attempts to make this  differentiation but does not provide a clear explanation of how such a  differentiation operates or the degree to which some of these  determinations are subjective. Although the database states that the  physical infrastructure category only includes assistance to establish  telecoms, transport, ports, airports, power, water, and industrial zones  that have a direct link to trade, it does not include a discussion of whether  those projects are primarily for a non-TCB goal and how that might affect  the project’s value to TCB efforts.
Furthermore, the TCB database Web site does not distinguish or explain  “direct” and “indirect” linkages between projects and TCB. USAID  recognizes in its annual Congressional Budget Justification that there is a  distinction between direct and indirect TCB. It cites examples of “direct  TCB” that include support for countries’ efforts to streamline customs and  examples of “indirect TCB” that include modernizing transport. In neither  of the examples above, where we noted instances in which officials  experienced challenges in clearly discriminating between components of  projects that were TCB or non-TCB related, was TCB explicitly the  primary goal of the project. However, USAID officials provide no such  distinctions or explanations on TCB database Web site, which could lead  to users misunderstanding the data.
section_title: USAID Has Improved Its Assessment of TCB, but Has Not Made Plans to Make Use of Insights from a Recent Multicountry Evaluation, or to Conduct Additional Evaluations
paragraphs: USAID has made improvements in assessing the results of its TCB  assistance, including developing indicators and taking the positive step of  commissioning its first independent agencywide multicountry evaluation  of TCB activities, as we recommended in our 2005 report. The  evaluation provided valuable information about the effectiveness of  USAID’s TCB assistance worldwide, and the factors associated with  project success; however, the agency has yet to make specific plans to  incorporate the evaluation’s key insights into its planning and  management of activities and conduct such evaluations in the future. To  assess the immediate results of its TCB activities, USAID uses standard  trade and investment indicators, and missions may develop additional  custom indicators. In addition, it has commissioned a limited number of  evaluations of specific TCB programs to assess longer-term results.  However, most significantly, in 2010, USAID took the positive step of  issuing an independent multicountry evaluation of U.S. government TCB  assistance that focused on activities USAID administered. The evaluation  provided the agency useful information on the effectiveness of USAID’s  activities across countries, the factors that influenced project success,  and the means by which monitoring and evaluation could be improved.  Although the agency is developing training based on the results of the  evaluation, it has not developed plans for disseminating best practices to  missions nor has it made plans for conducting such evaluations on an  ongoing basis.
subsections: section_title: USAID Has Developed Indicators to Monitor Short-Term TCB Results, but Assessing Quality of Results Is Difficult
paragraphs: To assess and report on the immediate results of its TCB-related  programs, USAID uses standard and custom indicators. (For further  information on the frameworks agencies use for monitoring and  evaluating their TCB activities, see app. V.) USAID requires missions to  report performance against standard indicators, which include  agencywide trade and investment indicators. Activities in the trade and  investment program area relate to TCB, and USAID uses 20 trade and  investment standard indicators to measure the immediate results of its  TCB activities. Missions and offices report on a subset of the standard  indicators that relate to the trade and investment program elements they  are funding. Examples of USAID trade and investment standard  indicators include:    Number of customs harmonization procedures implemented in  accordance with internationally accepted standards as a result of U.S.  assistance.   Number of investment measures made consistent with international  investment agreements as a result of U.S. assistance.   Reduction in the number of procedures required to trade goods  across borders as a result of U.S. assistance.   Number of firms receiving capacity building assistance to export.    Number of participants in U.S. government-supported trade and  investment capacity building trainings.   Number of trade and investment capacity building diagnostics  conducted.   Number of U.S. government supported training events on topics  related to investment capacity building and improving trade.
The standard indicators are complemented by custom indicators that  USAID missions and offices select to further measure and monitor  particular programs. USAID uses the indicators in performance plans and  reports summarizing project results.
Some USAID officials noted that the standard indicators largely measure  program outputs rather than results or outcomes of TCB assistance.
Standard indicators generally gauge activities undertaken or services  provided by USAID; for example, missions we visited used such output- oriented standard indicators as the number of U.S. government supported  training events on topics related to investment capacity building and  improving trade. However, they do not measure whether such activities  contributed to a beneficiary country’s capacity to trade. Our review of  documentation of countries where USAID has conducted TCB activities  revealed that these standard indicators serve certain USAID management  purposes, but USAID mission officials told us it was difficult to use to such  indicators to inform decisions about how TCB assistance could improve a  country’s capacity to trade. On the other hand, some USAID officials in  recipient countries explained that in addition to the agencywide standard  indicators, missions can develop project-specific custom indicators that  tend to be more outcome-focused. For example, the mission in Morocco  used the custom indicators, “total value of sales in target sectors  (disaggregated by domestic sales and exports)” and “value of private  investment (disaggregated by domestic and foreign direct investment).”  Some program officers said that outcome-oriented custom indicators  were more useful than the standard indicators for evaluating activities’  effects on trade. Thus, based on data collected from a custom indicator  that measured the volume of agricultural exports, program officials in  Mozambique said that the mission modified the focus of an agriculture  TCB-related program to target assistance to new crops with better export  potential.
While the agency uses project-specific custom indicators for virtually  every project, USAID management and mission officials cited challenges  in developing meaningful outcome custom indicators. Some USAID  officials explained that it is difficult to identify indicators that measure the  effects of TCB directly attributable to U.S. government assistance. For  example, one USAID official noted that many missions supporting TCB  activities may track export growth as an outcome indicator, but according  to mission officials, a variety of factors may impact a country’s exports,  including fluctuations in market prices and currencies, and it is difficult to  isolate these factors from the effects of TCB assistance. Similarly,  mission officials cited challenges to collecting and using valid and reliable  data to gauge an indicator. For instance, in Mozambique, mission officials  explained that local government trade data are not reliable, so they may  have to rely solely on private sector data from firms targeted by the  mission’s TCB-related programs to measure exports. They said that this  makes it difficult to compare the export performance of targeted  beneficiary firms in the same sector. In addition, many USAID TCB- related activities are implemented as part of broader programs that have  primary development objectives other than TCB. Consequently, the  programs are assessed in relation to other objectives, and monitoring the  effects on trade capacity may not be feasible if the performance indicators  developed were not intended for that purpose.
section_title: USAID Has Commissioned a Limited Number of Evaluations of TCB Programs to Assess Longer-Term Results
paragraphs: USAID also commissioned longer-term evaluations of a small proportion  of specific TCB programs. These include evaluations of its regional TCB- focused programs, including the Regional Trade Program for CAFTA-DR,  the Andean Regional TCB Program, and the regional trade hubs in sub- Saharan Africa. In addition, USAID has commissioned evaluations of its  bilateral TCB programs, including the Colombia Trade Capacity Building  Program implemented to support the U.S.-Colombia FTA negotiations.  The evaluations are intended to help missions and offices understand the  progress of programs and any needed actions to improve performance.  Although mission officials stated that evaluations are useful for identifying  best practices and lessons learned, USAID’s recent agencywide  multicountry TCB evaluation found that only 15 percent of the agency’s  TCB projects were found to have been independently evaluated.  Mission officials informed us that they conduct few independent  evaluations of their TCB programs because of the resources required,  and the difficulty of evaluating impact in the area of TCB. In addition, they  noted that program evaluations had not been required. According to  USAID’s 2010 evaluation guidance, missions are encouraged, but not  required, to  conduct program evaluations during implementation unless certain  management issues arise.
section_title: USAID’s Recent Agencywide Multicountry Evaluation Provided Valuable Insights, but USAID Has Yet to Take Action to Address Results
paragraphs: To learn from experience and identify ways to improve the  implementation and assessment of TCB activities, and in response to our  2005 recommendation, USAID took the positive step of commissioning its  first independent multicountry evaluation of U.S. government TCB  assistance that focused on activities USAID administered. We support  the evaluation as an important means of providing objective information  on the progress of USAID’s TCB efforts. It provided the agency valuable  insights on the positive effects of USAID’s TCB assistance across  countries, particularly with regard to its impact on trade and income  growth in recipient countries. It also provided useful information on the  factors that contributed to and hindered project success, and the means  by which monitoring and evaluation could be improved. Issued in  November 2010, the evaluation examined documentation for 256 ongoing  and completed USAID TCB projects the agency implemented in 78  countries from 2002 to 2006.
Overall, the evaluation concluded that USAID and other U.S. government  agencies’ TCB activities are associated with increases in the value of  recipient countries’ exports, after controlling for other factors that have  influenced international trade. According to the evaluation’s findings:    USAID TCB activities had a positive effect on developing countries’  exports, even in very poor countries, but the relationship between  TCB assistance and export gains varied by country depending on  factors that are known to influence export performance, including  world prices and economic growth rates, and domestic economic and  business policies.   USAID’s TCB activities resulted in export gains in terms of value, but  not volume, which suggested that exporters earned more from the  same volume of production they exported.   Export gains associated with USAID’s TCB projects stemmed from  trade facilitation activities and from improvements in government  practices, as well as from projects that work directly with exporters.   USAID’s TCB activities contributed to employment and income growth  for those firms and individuals directly reached by USAID projects,  although the evaluation did not find sufficient information on projects’  effects on net employment or poverty rates at a regional or national  level.
The evaluation calls attention to characteristics that contributed to the  success of USAID TCB projects and that tended to lead to sustainable  outcomes. Some of these factors were associated with the focus of TCB  assistance provided. For example, assistance that was directed at one  type of beneficiary generally enjoyed better results than projects that  included various categories of recipients. In addition, TCB projects that  concentrated on a single sector generally performed better than projects  that focused on multiple sectors. Thus, TCB projects that concentrated on  the agricultural sector were more likely to successfully achieve their  objectives than projects that attempted to cover diverse sectors, such as  manufacturing and services, as well as agriculture. Conversely, projects  that combined different types of assistance, such as performing a trade  diagnostic study as well as providing training, were more likely to achieve  their performance targets and objectives than projects that relied on a  single approach. In some cases a combination of technical assistance,  training and use of communications technologies helped change private  sector practices, resulting in trade-related gains, such as new products for  export and more timely delivery of goods.
The evaluation also describes certain factors related to beneficiaries’  participation that were found to contribute to successful project results.  For example, encouraging participation of beneficiaries in project design  and promoting private sector involvement were also found to be  associated with assistance efforts that met performance targets or  objectives. Projects characterized by adversarial relations among  participants were, however, less likely to succeed. Other factors that the  evaluation cited as hindering project success included excessive host  government regulation and unexpected shifts in the recipient  government’s priorities. The evaluation also found that improvements  resulting from TCB assistance were more likely to be sustained beyond  the life of the project when anticipated funding sources, such as revenues  from export earnings, were clearly set forth.
Recognizing the importance of learning from experience and improving  the implementation of TCB activities, USAID and USTR commissioned  the evaluation to inform their efforts to develop an interagency strategy to  systematically monitor results and evaluate the effectiveness of TCB  assistance. Accordingly, the evaluation identified certain gaps in the  monitoring and evaluation of TCB projects and recommended ways to  improve USAID’s performance management practices. The evaluation  found that USAID’s practices for monitoring the performance of its TCB  projects does not correspond, in many instances, to the agency’s  performance guidelines, and its evaluations of TCB projects are limited in  number and suffer from methodological weaknesses. For example:    A large proportion of projects did not include baseline data for the  performance indicators selected.   While most projects identified performance indicators, most of these  TCB projects did not include performance targets for the indicators to  track results.   While evaluations used both qualitative and quantitative data, most  evaluations lacked data with which to compare circumstances before  and after TCB projects to determine whether the project’s activities or  some other factor were the likely cause of the results.   Certain performance indicators intended to assess changes in  institutional capacity, such as strengthening a given country’s ministry  of trade, lacked clarity in the outcome results they were designed to  measure.
To improve USAID’s monitoring and evaluation of its TCB projects, the  evaluation recommended steps the agency should take to better align its  performance management practices with its existing guidance. These  include adopting tools to facilitate the development of appropriate  indicators and data collection methods with which to measure results, and  helping missions improve performance baseline data and targets for  those projects that currently lack these data. In addition, the evaluation  recommended that USAID update its current TCB strategy to better  reflect findings from recent studies on trade facilitation and on other  factors that influence developing countries’ export performance.
section_title: USAID Has Yet to Take Action on the Evaluation’s Results or Plan for Additional Evaluations
paragraphs: Although the evaluation examined the results of USAID’s TCB activities  for the purpose of learning from experiences, improving the design and  implementation of TCB assistance, and informing efforts to systematically  monitor and evaluate results, it has yet to take action to incorporate the  results of the evaluation into its management of TCB activities. USAID  management officials explained that the evaluation has been helpful in  identifying the factors that contribute to the success of TCB projects and  the agency agreed with the evaluation’s findings and recommendations,  particularly with regard to needed improvements in monitoring and  evaluation practices. According to these officials, the agency has  identified the need to incorporate the evaluation’s findings into USAID’s  trainings, guidance, and strategies, as well as implement its  recommendations, but further actions are needed to do so.
Officials explained that the written evaluation is lengthy, and technical  officers managing TCB activities are not likely to easily understand its  findings or find it useful for management purposes in its current form.  USAID management officials stated that the evaluation’s findings must be  “repackaged” to help USAID missions and offices understand and use the  information to improve the design, implementation, and the monitoring  and evaluation of TCB activities. We have reported that performance  information should be useful for decision making throughout an agency,  and that agencies need to consider users’ needs. Currently, the agency  is in the initial phases of developing ways to use the evaluation’s findings  to help missions develop better defined and more useful indicators,  baselines, and targets with which to measure the results of TCB activities.  For example, based on the results of the evaluation, USAID  commissioned the development of a pilot training course on methods for  developing outcome measures for monitoring and evaluating TCB  programs. The pilot course provided an overview of the evaluation,  described challenges of developing indicators to assess the outcome  results of policy and institutional reforms on TCB, and discussed  approaches to defining indicators and collecting measurements. The pilot  course was presented to mission officials in Bangkok, Thailand, which  one USAID management official explained had been a useful preliminary  effort to incorporate the evaluation’s findings into mission training. The  official stated that a more comprehensive training program will likely be  developed and disseminated to missions, although the agency has no  specific plans in place. Differences in countries’ trade and investment  environments have proven a challenge to developing training and  guidance that would be useful to missions worldwide, according to  officials.
In addition, according to management officials, USAID has not  determined its plans for conducting additional TCB evaluations to assess  the effectiveness of its TCB activities on an ongoing basis. As the  evaluation, published in November 2010, focused on TCB projects funded  during the period 2002–2006, the agency does not have current plans to  systematically evaluate its TCB projects worldwide and on an agencywide  basis beyond this period. While USAID management officials stated that  replicating the evaluation’s methodology is likely to be too resource- intensive for future evaluations, any subsequent evaluations would  similarly aim to assess a variety of TCB projects implemented across  countries to identify those that are most successful in achieving their  objectives and the factors that contribute to these successes. We have  reported that it is important that agencies use timely performance  information to assess the results of their activities to understand how they  contribute to their agency missions and broader results. Conducting  evaluations on an ongoing basis increases accountability and would help  ensure that assistance is effectively delivered and implemented to  maximize development. It also would provide opportunities to learn from  project implementation by identifying which activities work, under what  circumstances, and why. For example, USAID officials could use future  evaluations to identify approaches to providing TCB assistance that have  worked well and consider alternative approaches where improvements  could be made. Furthermore, such evaluations might inform other donor  and recipient countries’ efforts to determine instances in which TCB  assistance can be effective.
section_title: Conclusions
paragraphs: The U.S. government and international organizations acknowledge the  critical role of trade in promoting development and have made TCB an  important aspect of making trade more effective in reducing poverty and  increasing enduring economic growth. The U.S. government TCB  database is a useful tool for identifying the many agencies and activities  of the U.S. government that contribute to other nations’ development  through trade. In particular, the inclusion of MCC’s funding and activities  in the database creates opportunities to identify ways in which TCB  funding and development goals relate. In addition, the Army’s recent  reporting highlights the linkage between security and development, as  there is a recognition that economic stability and development contribute  to peace and security. However, some U.S. agencies, including MCC and  the Army, struggle to report their trade-related infrastructure assistance  using the survey methodology of the database. The definition of TCB  includes a wide array of activities implemented by multiple agencies to  fulfill a variety of objectives. Some relate more directly to trade than  others. While some agencies, such as USAID and State, conduct  activities that are easily identified as intended to help a country build its  capacity to trade, agencies such as MCC and the Army conduct activities  that have trade-related effects but do not directly support TCB. This  distinction has become increasingly important because of the significant  funding reported by these two agencies, particularly for physical  infrastructure, in USAID’s TCB database. As a primary source of  information on TCB funding for Congress and the public, it is important  that its information create a clear picture of funding trends. But without  explanations of the database’s limitations, it may distort users’  understanding and create misperceptions.
While USAID has taken positive steps to track the progress of individual  TCB activities, like other development organizations it continues to  struggle to link this assistance to important trade and development  benefits. USAID’s recent agencywide evaluation of the effectiveness of its  TCB activities in multiple countries is an important step, but USAID  officials have not yet signaled how they plan to address the evaluation’s  valuable findings. Without planning actions to utilize the results of its  evaluation, the agency may miss opportunities to take advantage of the  insights from that analysis to improve the effectiveness of its TCB  assistance. Moreover, by evaluating its TCB activities across countries on  an ongoing basis, USAID could gain a better understanding of the linkage  between TCB and development. It could also gain valuable experience  regarding the types of assistance important for the diverse set of  countries and situations that could potentially benefit from U.S. TCB  assistance.
section_title: Recommendations for Executive Action
paragraphs: To enhance the management and evaluation of TCB activities, we  recommend that the Administrator of USAID take the following two  actions:    Explicitly and publicly report the identified limitations associated with  the methodology used to collect and report data in the U.S.  government TCB database, including MCC and the Army’s data  issues, and consider ways to differentiate between categories of  assistance that directly and indirectly relate to TCB.   Develop a written plan that details the actions the agency intends to  take to address the findings and recommendations of its recent  multicountry evaluation of TCB, and its plans for conducting  evaluations of its TCB activities on an on-going basis.
section_title: Agency Comments and Our Evaluation
paragraphs: We received written comments from USAID, which are reprinted in  appendix VI. USAID stated that it has already taken steps consistent with  our recommendations. USAID also noted that it would take our  recommendations into account in its ongoing plans and provided  additional information and observations.
USAID stated that it updated the TCB database to include fiscal year  2010 data and noted it had revised the Web site for the database to  clarify the unique nature of MCC obligations. We believe this is a positive  step, and will improve users’ ability to accurately compare and assess  data over time. USAID further noted that it is reviewing its plans for the  fiscal year 2011 survey of TCB activities and anticipates revamping and  streamlining components of the database consistent with our  recommendations. Clear reporting and transparency in methodology and  collection are essential for users of the TCB database; the actions USAID  has already taken, as well as those they state they intend to take, should  facilitate the ability of users to understand changes in the nature of TCB  over time.
Further, USAID noted it had recently completed a synopsis of the TCB  evaluation which it is distributing to key stakeholders and other target  audiences both within and outside the agency to highlight elements of the  evaluation. In addition, USAID stated it is building on the pilot training of  the evaluation’s lessons, which we noted in the report, and is actively  developing further training modules. However, at the time of our review  USAID did not provide us with specific documentation of the actions it is  planning to take to make use of the evaluation’s findings and  recommendations. Without developing a plan documenting specific  actions the agency intends to take to utilize the results of its evaluation,  the agency may not take full advantage of opportunities for improving the  effectiveness of its TCB assistance identified in the TCB evaluation.
USAID also stated that under the agency’s recently issued January 2011  evaluation policy, it is committed to a systematic monitoring and  evaluation of USAID’s entire portfolio of activities, including TCB  activities, as the policy is fully implemented. While USAID’s January 2011  evaluation policy encourages evaluations across the agency’s portfolio of  activities, the policy is not focused on TCB activities and does not specify  the type of evaluation USAID will conduct on its TCB activities. We are  suggesting that USAID document its specific plans for conducting TCB  evaluations on an ongoing basis.
MCC, State, the Army, and USTR received a draft copy of the report but  did not provide formal comments. State, USAID, and USTR provided  technical comments, which we have incorporated in the report, as  appropriate.
We are sending copies of this report to appropriate congressional  committees, the Secretary of the Army, the Secretary of State, the  Administrator for the U.S. Agency for International Development, Chief  Executive Officer of the Millennium Challenge Corporation, and the U.S.  Trade Representative. This report will also be available at no charge on  GAO’s Web site at http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  me at (202) 512-4347 or yagerl@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made major contributions to this report  are listed in appendix VII.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: This report examines (1) how agencies’ trade capacity building (TCB)  activities are aligned with the agencies’ goals, (2) the extent to which the  U.S. TCB database provides sufficient information on key trends and  funding, and (3) the extent to which U.S. Agency for International  Development (USAID) monitors and evaluates the effectiveness of its  TCB activities. To address these objectives we built upon information  collected for our 2005 report on the same topic. We conducted fieldwork  in Colombia, Morocco, and Mozambique. We selected these countries  because they (1) were among the 10 countries receiving the most TCB  funding from fiscal years 2005 to 2009, (2) had a mix of U.S. agencies  providing assistance and categories of TCB assistance provided in- country, and (3) had a diversity of geographic regions and country income  levels. We limited our review to four agencies that provided more than 90  percent of total U.S. TCB assistance from fiscal years 2005 to 2010—the  most recent fiscal year for which data are available. These include the  Millennium Challenge Corporation (MCC), the Departments of the Army  (Army) and State (State), and USAID. In addition, we included the Office  of the U.S. Trade Representative (USTR) in our review due to its role in  trade policy coordination.
To understand how agencies’ TCB activities are aligned with the  agencies’ goals, we analyzed strategic, budget, and programmatic  documents describing these agencies’ TCB funding and activities. We  assessed these agencies’ reports and strategic plans to determine the  extent they addressed agencies’ TCB-related strategies and objectives.  We examined U.S. government reports on TCB assistance, annual  agency reports, and agency TCB planning and project documents. In  each country we examined program documents and interviewed agency  officials to understand the types of TCB programs the agencies managed.  In conjunction with our work at the missions, we held meetings with other  key U.S. government officials, USAID contractors, host government  ministry officials, and various TCB recipients. To assess how U.S.  agencies coordinate the allocation of TCB assistance, we reviewed  published reports on TCB activities, agency strategies, and program  documents. We interviewed U.S. officials in the field responsible for  implementing TCB programs and officials at agency headquarters,  including the USTR.
To describe the composition of TCB and determine the extent to which  the TCB database provides sufficient information on key trends and  funding, we analyzed available data on agencies’ TCB activities and  funding from the U.S. government TCB database. USAID is responsible  for maintaining the database and gathering data annually through a  governmentwide survey. We analyzed data from the database to identify  the major funding categories, agencies, and recipients of TCB assistance.  As part of our previous and ongoing work, we have assessed this data  and determined that they are sufficiently reliable to identify TCB funding  by agency, country, and category; although we found limitations to the  use of the data, as discussed in this report. We examined the guidance,  protocols, and definitions specified in the TCB survey. We also reviewed  documents from the Organization for Economic Cooperation and  Development and the World Trade Organization (WTO) to understand  definitions and data collection methodologies used globally for trade- related funding. In addition, we interviewed the USAID contractor that  manages the data collection and analyzed the steps the contractor took to  ensure data reliability. For example, we asked the contractor how the  survey data were collected, what quality checks were performed, and  what other internal controls were in place. At the missions overseas, we  reviewed various TCB activities and interviewed U.S. and host country  officials to corroborate the descriptions and funding levels reported in the  TCB database.
To understand the extent to which USAID monitors and evaluates the  effectiveness of their TCB activities, we analyzed strategic, budget, and  programmatic documents describing these agencies’ TCB funding and  activities. We reviewed data and information these agencies use to  measure the performance of their activities, and, where available,  evaluations of programs or projects they undertake that may be related to  TCB. In particular, we reviewed a recent USAID evaluation study,  commissioned in response to our previous recommendations and  intended to present findings of a cross-country evaluation of U.S.  government TCB assistance. In each country we visited we reviewed  agencies’ strategy documents and performance plans and reports for  activities reported as TCB. We also interviewed agency officials, host  government officials, and contracted implementing partners and visited  TCB projects. In addition, we examined performance and monitoring  principles used by multilateral donors and international organizations,  such as the Organization for Economic Cooperation and Development.
We conducted this performance audit from July 2010 through July 2011 in  accordance with generally accepted auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives.
section_title: Appendix II: USAID Plans Trade Capacity Building- Related Activities In-Country, Often in Collaboration with Recipient Governments and Stakeholders
paragraphs: USAID field missions plan TCB-related projects primarily in recipient  countries, often in collaboration with recipient country governments and  other in-country stakeholders. USAID’s TCB strategy recognizes that  priorities vary from country to country depending on the levels of income  and development, and the missions’ country strategic plans and  resources will inform the selection and prioritization of the TCB activities  the agency implements. According to USAID officials, mission officials  understand country-specific factors such as the activities of other TCB  donors and the composition of trade. The USAID officials informed us that  missions identify their TCB projects as part of their mission strategic  plans, which USAID’s headquarters bureaus review in conjunction with  the agency’s budget planning process. They further explained that  USAID’s headquarters bureaus provide missions guidance and training,  and help missions develop and design specific programs when  necessary; however missions primarily identify the country-specific trade- related constraints and TCB assistance needs in consultation with  governments and associations in recipient countries. In addition, missions  use trade diagnostic studies and analyses of trade-related constraints and  TCB needs.
According to USAID officials, missions plan TCB activities using analyses  of trade-related constraints and TCB-related needs prepared by the  recipient government and in-country stakeholders, including business and  trade associations. For example, specific activities of the USAID TCB  programs related to the U.S.-Colombia free trade agreement (FTA)  negotiations responded to priorities defined in collaboration between  USAID and the government of Colombia as the negotiations were carried  out. Specifically, USAID officials stated that they collaborated with the  government of Colombia to identify 52 TCB initiatives. Following the  completion of the FTA negotiations in 2006, USAID continued to provide  technical assistance to support the initiatives, and by 2010 the mission  had addressed all but two of these initiatives. According to mission  officials, the mission in Mozambique identified TCB activities, in part,  based on the country’s trade association’s evaluation of trade-related  constraints. Mission officials cited the importance of involving the  business association and various government ministries to identify  feasible policy reforms and foster the collaboration. For example, the  mission has worked with the business association and the Ministry of  Commerce to reduce import and export barriers, and reform licensing and  shipment processes. In addition, these officials explained that they have  daily interactions with officials of various ministries and these discussions  will often identify potential areas for TCB assistance.
USAID missions also use trade diagnostic studies sponsored by USAID  and developed by multilateral agencies to identify trade-related  constraints and TCB needs. According to mission officials in Colombia  and Mozambique, these diagnostic studies are important to encourage  recipient governments to undertake needed reforms. For example, USAID  commissioned three diagnostic studies to identify and plan TCB  assistance in support of the U.S.-Colombia FTA negotiations. Based on  study results, USAID developed seminars to increase awareness of both  the Colombian congress and civil society about the importance of the FTA  and how regions and productive sectors would benefit from it. In  Mozambique, multilateral and bilateral stakeholders developed a  diagnostic study that mission officials said contributed to the mission’s  decisions regarding sectors and areas of the country where it provided  technical assistance under its TCB-related agribusiness and tourism  programs. For example, according to mission officials, the study  contributed to the agribusiness program’s focus on commodities such as  cashews and coconuts from the country’s northern region that have the  greatest export potential. Furthermore, according to one government of  Mozambique official, the mission utilized the study results to encourage  the government to develop a national strategy to address trade-related  constraints to economic growth.
We also found that USAID missions generally select TCB-related  activities that align with broader country development strategies. In  countries we visited, mission officials cited the importance of consulting  with recipient governments’ national development strategies and with  foreign officials of recipient countries to identify potential TCB-related  activities that have the support of the recipient governments. For  example, the mission in Mozambique identified TCB-related activities  under its agribusiness and policy reform programs that directly supported  the implementation of priorities identified in national strategies of various  ministries. In Morocco, the mission supported the government of  Morocco’s strategy of providing jobs, economic opportunities, and political  stability through free trade. The mission identified the potential economic  challenges posed by the FTA, particularly in the area of agriculture, and  outlined activities to help the government of Morocco respond to the  challenges and opportunities posed by the FTA. According to mission  officials, the mission worked with Moroccan associations to promote  transparent and simplified investment procedures, increase access to  finance for small businesses, and increase assistance to the Ministry of  Agriculture to promote a shift in the country’s agricultural production to  higher value crops.
section_title: Appendix III: Coordination of U.S. Trade Capacity Building Assistance among Agencies
paragraphs: USTR leads efforts to coordinate the TCB activities of USAID and other  U.S. agencies through interagency groups and committees tied to FTAs  and in response to multilateral initiatives related to TCB. USTR-led  interagency groups often seek U.S. agencies’ input into TCB-related  issues and identify the types of assistance agencies have provided and  may be able to provide in a particular area. In addition, U.S. agencies  coordinate their TCB-related activities in recipient countries as part of  interagency groups that discuss general development assistance  activities, but which do not focus on TCB specifically. For example,  USAID coordinates its TCB-related activities with other U.S. agencies in- country, as appropriate, through embassy-led task forces and working  groups focused on development assistance in the area of economic  growth. These interagency groups seek to prioritize projects with broader  foreign assistance strategies, eliminate duplication of efforts, and identify  where assistance gaps exist, for instance.
subsections: section_title: USTR Leads Efforts to Coordinate U.S. TCB Assistance among U.S. Agencies
paragraphs: USTR leads efforts to coordinate the TCB activities of USAID and other  U.S. agencies through interagency groups and committees tied to FTAs.  USTR has created TCB interagency groups in free trade negotiations with  developing countries and committees on TCB to prioritize and coordinate  TCB activities to help FTA partner countries participate in negotiations  and implement trade rules during the transition and implementation  periods. Interagency groups have been a feature of the FTAs with  Bahrain, Central America-Dominican Republic, Chile, Jordan, Morocco,  Oman, and Peru. According to USTR officials, these interagency groups  do not influence the outcomes of FTA negotiations; however, interagency  groups and committees meet periodically in conjunction with ongoing and  completed negotiations to discuss partner countries’ TCB needs,  determine the types of TCB activities agencies already provide, and  identify the types of TCB assistance agencies might provide in the future.  According to USTR officials, the interagency groups tied to the FTAs offer  USTR the opportunity to work with other agencies to try to identify the  types of assistance they may be able to provide in a particular area.  USAID and other U.S. agencies participate in these working groups and  committees so that identified TCB needs are incorporated into ongoing  assistance programs. For example, according to USTR officials, during a  2008 meeting of the Central America-Dominican Republic FTA TCB  Committee, agencies identified sanitary and phytosanitary assistance as  a priority, and with USDA assistance, each partner country’s sanitary and  phytosanitary system was assessed and gaps or deficiencies in those  systems were identified. In response, State, USAID, USDA, and USTR  reached agreement to provide further sanitary and phytosanitary  assistance. In addition, in 2010, USAID, U.S. Customs and Border  Protection, and USTR developed training sessions in all Central America- Dominican Republic FTA partner countries to address textiles compliance  issues the interagency committee had identified, according to USTR  officials.
USTR also leads the coordination of agencies’ TCB-related activities  resulting from Trade and Investment Framework Agreements (TIFA)  between the United States and partner countries. According to USTR  officials, USTR works with other agencies—including the U.S. Patent and  Trademark Office and the Departments of Commerce, Justice, and  State—in working groups that respond to partner countries’ assistance  needs and priorities. TIFAs also prompt regular meetings between the  U.S. government and the partner country. Officials explained that these  discussions are led by USTR for the United States, but a number of other  agencies also participate and TCB is often a part of these dialogues. For  example, officials noted that USTR recently chaired a meeting with the  government of Mauritius in which the Department of Commerce  presented TCB tools and trainings that it provides. Similar meetings with  South Africa and Nigeria have also included representatives from a  number of different agencies and included TCB discussions.
In addition, USTR coordinates TCB efforts with USAID and other  agencies through the Trade Policy Staff Committee (TPSC) and its  associated subcommittees. Following the Hong Kong WTO Ministerial in  2005, the U.S. administration formed a TPSC Subcommittee on TCB.  According to officials, the subcommittee has focused on WTO  developments in the area, including USTR’s sharing of information  regarding the WTO and other multilateral initiatives related to TCB, such  as the Enhanced Integrated Framework, and seeking other agencies’  input. As these initiatives had near- and long-term implications for the  WTO, a permanent subcommittee of the TPSC was deemed the  appropriate mechanism for interagency coordination, according to USTR  officials. All members of the TPSC are invited to participate in meetings of  the TPSC Subcommittee on TCB. In addition, other agencies that have a  particular interest or expertise in TCB assistance are also invited,  including MCC. USTR utilizes other TPSC subcommittees to coordinate  U.S. agencies’ TCB efforts in various contexts. For example, the TPSC  Subcommittee on Africa has discussed TCB issues particularly related to  the African Growth and Opportunity Act, and the TPSC Subcommittee on  Labor has discussed TCB issues related to FTA labor commitments and  trade preference program labor obligations.
section_title: U.S. Agencies Coordinate TCB Activities In-Country as Part of Interagency Groups Focused on Broader Assistance Objectives
paragraphs: U.S. agencies generally coordinate their TCB-related activities in-country,  primarily through mechanisms that do not focus on TCB, but which  discuss TCB-related assistance in connection to broader foreign  assistance objectives. In conducting our fieldwork we found that  embassy-led task forces and working groups sometimes discuss  agencies’ TCB-related activities, as appropriate. For example, according  to officials in Morocco, USAID, State, MCC, and other agencies discuss  their TCB-related activities as part of the embassy’s foreign assistance  working group that aims to prioritize projects in alignment with broader  foreign assistance strategies, eliminate duplication of efforts, and identify  where assistance gaps exist. Through Ambassador-led working group  meetings and communications with headquarters in Washington, D.C.,  agencies have identified and coordinated their specific TCB-related  activities, such as USAID and State’s collaboration on activities that  promote access to finance, and USAID’s focus on working with the  government of Morocco to promote policy reforms, particularly in support  of MCC’s projects. In Mozambique, the mission coordinates TCB-related  activities through the embassy’s private sector working group that focuses  on foreign assistance covering multiple economic sectors, according to  officials. Officials noted that the working group has reviewed the mission’s  TCB-related agricultural development projects in conjunction with similar  projects conducted by other agencies. In particular, through the working  group mission officials have worked regularly with USDA officials to  coordinate the processing and storage of agricultural production  supported by each agency’s TCB-related projects.
section_title: Appendix IV: Recipient Countries of Bilateral U.S. Trade Capacity Building Assistance and Funding Levels, Fiscal Years 2005–2010
paragraphs: Table 2 shows the 143 countries that received roughly $8.5 billion in  bilateral TCB funding between fiscal years 2005 and 2010. Of the 20  countries receiving the largest obligations, all but 5—Afghanistan,  Colombia, Sudan, Iraq, and Egypt—are MCC compact countries. These  20 countries received $6.3 billion, or 74 percent, of total U.S. TCB  assistance over the period. Among these 20 countries, 8 are least  developed countries (LDC) according to the definition used by the United  Nations. In total, 43 LDCs received $3.6 billion or 43 percent of total  bilateral TCB funding. Of the four agencies we reviewed, MCC obligated  the most funding, $2.3 billion, to LDCs, while USAID obligated $618  million, the Army obligated $550 million, and State obligated $8 million.  Figure 5 illustrates the shares of TCB funding obligated to LDCs in total  and for each agency.
section_title: Appendix V: MCC and the Army Assessments of Trade Capacity Building-Related Activities
paragraphs: MCC and the Army do not use TCB-specific performance indicators and  evaluations to assess the progress of their activities in terms of TCB.  Each agency uses its overall monitoring and evaluation framework to  assess their TCB-related activities in relation to the agency’s missions  and program goals. MCC monitors its TCB-related activities in terms of  the progress they make towards the objectives of the compacts and  threshold programs in which they are included. The procedures the Army  uses to assess individual TCB-related projects are based on the types of  project funding and the primary project objectives.
subsections: section_title: Millennium Challenge Corporation
paragraphs: MCC does not monitor the results of its TCB-related activities in terms of  TCB, but monitors progress using its overall policies for monitoring the  results of its compacts and threshold programs. MCC monitors TCB- related activities in terms of their progress towards the immediate results  and final program objectives of the compacts and threshold programs in  which they are included. During compact development, project appraisals  and development procedures include defining the objectives and  benchmarks that will be used to measure progress over the duration of  the compact. MCC performs an economic analysis on each compact  project proposal, which includes assessing the economic growth rationale  for the investment, calculating an economic rate of return, and estimating  its poverty reduction impacts. The economic analysis results in the  indicators MCC uses to monitor its compact projects, including those that  it reports as TCB. Project managers may monitor additional indicators for  their own management purposes. While the economic analysis and the  selection of additional indicators may result in indicators meaningful to  measure the effects of activities on trade, MCC does not identify a  particular set of TCB-specific performance indicators to monitor TCB- related compact projects in terms of their effectiveness in building the  trade capacity of the compact country. Similarly, the indicators used to  monitor TCB-related activities included in threshold programs are not  specific to TCB, but are identified during program development. The  selection of performance indicators for threshold programs are based on  information on the policies and actions that may have affected the  threshold country’s standing in relation to the MCC’s eligibility criteria.
In the two compact countries we visited—Morocco and Mozambique— most projects MCC reported as related to TCB were not assessed using  performance indicators meaningful for measuring progress in terms of  TCB, according to in-country MCC officials. These officials explained that  projects MCC reported as TCB could have been assessed using trade- related indicators, such as the volume and value of exports stemming  from projects, because they have trade-related effects. However, these  officials explained the economic analysis of the compact projects and the  project manager’s selection of additional indicators did not result in  indicators that directly measured the results of projects in terms of trade.  For example, in Morocco, officials noted that the performance indicators  used to monitor three TCB-related compact projects did not provide  information to track results in terms TCB, but monitored projects’ effects  on household incomes and employment. Similarly, in Mozambique, none  of the three compact projects MCC reported as TCB-related were  monitored in terms of their effects on trade, according to in-country  officials. Although these officials explained that all three projects result in  trade-related outcomes, including a road rehabilitation project that  facilitates the transport of goods for export and an agriculture  development project that resulted in production for export, the projects  were monitored in terms of other objectives. For example, the objectives  of a TCB-related roads rehabilitation project in the Mozambique compact  included reduced transport costs, and increased public transport access  for individuals to take advantage of job and other economic opportunities.  The economic analysis of the project focused on the reduction of  transport costs, including savings in vehicle operating costs, and time  savings. Examples of performance indicators for the project included  measures of the roughness of the road and the dollar value of time saved  due to shorter trip times and increased speed on upgraded roads.
In addition, MCC conducts independent evaluations of its compacts and  threshold programs to better understand the effectiveness of its  development programs; however, these evaluations are not intended to  directly evaluate projects in terms of TCB. According to MCC’s monitoring  and evaluation policy, every compact project and each threshold program  must undergo a comprehensive, independent evaluation after completion,  and compact projects may be evaluated during compact implementation  as necessary. The evaluations are intended to compile lessons learned  and improve the effectiveness and efficiency of project implementation.  Evaluations also are meant to compare projects’ final results with a  credible estimate of what would have happened without the project,  including changes in individual, household, or community income that  result from a particular project or program. According to MCC officials in  the countries we visited, evaluations had not yet been conducted on  compact projects, including TCB-related projects, but each project would  be evaluated upon the completion of the compact. These officials  explained that the evaluation will be conducted in accordance with  agency guidance to assess the performance of specific activities and  contribute to a broader understanding of development effectiveness.  While the evaluation may assess the trade-related results of projects as  trade may contribute to the economic growth and poverty reduction  objectives of the compact, officials explained that an assessment of the  effectiveness of compact projects in terms of TCB would not be a specific  focus.
section_title: The Department of the Army
paragraphs: The Army does not have a specific process for monitoring and evaluating  the performance of projects reported as TCB, but uses its general  guidance and processes for assessing projects. According to officials of  one command, the infrastructure projects identified as TCB are not  monitored using performance indicators specific to TCB, and the Army  does not evaluate the effectiveness of its TCB-related infrastructure  projects in terms of TCB. Officials explained that the monitoring and  evaluation procedures used to assess individual TCB-related projects  depend on the types of funding used for specific projects and the project’s  primary objectives. For example, according to officials, TCB-related  projects funded under the Commander’s Emergency Response Program  (CERP), which include TCB-related projects implemented to respond to  humanitarian and reconstruction requirements in Afghanistan, are  monitored and evaluated using processes outlined in CERP guidance,  which do not include methods for monitoring and evaluating projects’  effects on trade. TCB-related projects funded under CERP include the  repair and restoration of telecommunications and electrical systems, and  irrigation projects. According to the July 2009 CERP guidance,  performance indicators for CERP projects are selected based on each  project’s scope, complexity, and period of usefulness. In identifying  procedures for evaluating projects, officials are to consider certain factors,  including the benefits of the project to the local population, and the  number of individuals in the local population engaged in and benefiting  from the project; also the project must meet engineering standards.
section_title: Appendix VI: Comments from the U.S. Agency for International Development
subsections: section_title: GAO Comments
paragraphs: 1.  In response to the updated TCB database and the inclusion of  information on the unique nature of MCC obligations, we incorporated  fiscal year 2010 data into our analysis and revised our report as  appropriate to reflect these developments. 2.  We welcome USAID’s recent actions to make use of the findings of its  recent evaluation. However, during the course of our review, USAID  officials were unable to provide us with documentation of its synopsis  of the evaluation and its specific plans for addressing the evaluation’s  findings and recommendations. We believe documenting specific  actions the agency plans to take to make use of the evaluation’s  valuable information would provide a structured approach that would  help ensure the lessons learned will be incorporated into the design,  implementation, monitoring, and evaluation of TCB projects. 3.  We support USAID’s commitment to systematically monitor and  evaluate its portfolio of activities, including those related to TCB, and  the agency’s intent to conduct evaluations of new and ongoing TCB  interventions in order to generate new knowledge and apply those  lessons to its development activities. However, USAID’s January 2011  evaluation policy covers evaluations across the agency’s portfolio of  activities and thus is broad-based and does not target TCB  specifically. We believe that USAID still should document its specific  plans for conducting TCB evaluations on an ongoing basis as laid out  in the November 2010 evaluation.
section_title: Appendix VII: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, the following persons made  major contributions to this report: Juan Gobel, Assistant Director; Bradley  Hunt; Karen Deans; David Dornisch; Ernie Jackson; and Brian Tremblay.  Miriam Carroll Fenton, Howard Cott, Timothy Fairbanks, Victoria Lin, and  Christina Werth provided technical assistance.