Target 8.a: Aid for Trade

International trade constitutes a powerful source of economic growth, allowing countries to concentrate their production of goods and services where they have a comparative advantage (specialization) and exchange these on the world market for other goods and services that are more efficiently produced elsewhere. Historically, export growth has been an important driver of economic development (UNCTAD, 2014).

First, international trade can generate export demand for manufacturing products, thereby facilitating growth of the manufacturing sector and giving an impetus to structural transformation, an important driver for economic development (see target 8.2). Second, there is evidence that export orientation induces a selection process, as an outcome of which the most productive firms remain in the market. Firms with strong export orientation tend to improve productivity through learning effects emerging from their cross-border connections and activities. Transfer of knowledge and know-how is particularly strong when firms form part of international production networks. Over time, this knowledge and know-how can spill over to other domestic companies (UNCTAD, 2014). The promotion of exports in developing countries as an objective for sustainable development is dealt with in greater detail under Goal 17, target 12.

Figure 8.10. Concentration curve of the distribution of Aid-for-Trade disbursements to developing economies, 2013 Download data

Source: OECD Aid-for-trade statistical queries.
Note: The concentration coefficient measures the area between the concentration curve and the diagonal line. It is positive if the concentration curve runs below that line and negative if it runs above it. The concentration coefficient can take values between 1, indicating extremely overproportional relation between the distribution of the two analyzed variables, and -1, indicating an extremely disproportional relation.

The Aid-for-Trade Initiative, led by the World Trade Organization (WTO), was launched at the 2005 WTO Ministerial Conference in Hong Kong (China) with the aim of helping developing countries maximize their gains from trade and reducing trade costsTrade costs are defined as all costs incurred in getting a good to a final user other than the cost of producing the good itself.
more, notably by assisting them to analyse, implement and adjust to trade agreements and to build the supply-side capacity and infrastructure they need to compete internationally. Aid-for-Trade assistance is targeted at the enhancement of national trade policy and regulations, developing infrastructure and building up productive capacity (OECD and WTO, 2015). The Enhanced Integrated Framework is a multi-donor programme, set up in 1997 and substantially reviewed in 2005, providing assistance to least developed countriesThis category was officially established in 1971 by the United Nations General Assembly with a view to attracting special international support for the most vulnerable and disadvantaged members of the United Nations family. Their low level of socioeconomic development is characterized by weak human and institutional capacities, low and unequally distributed income and scarcity of domestic financial resources.
more (LDCs). Its explicit aim is to help LDCs becoming more active players in the global trading system and tackle supply-side constraints to trade. Its specific objectives are to mainstream trade into national development strategies, set up structures needed to coordinate the delivery of trade-related technical assistance and build capacity to trade. The programme is supported by a trust fund built up by contributions from 23 donors worldwide (Enhanced Integrated Framework, 2016).

Between 2002 and 2013, annual Aid-for-Trade disbursements to developing economies increased constantly from US$8 billion to US$32 billion, and the disbursements to LDCsThis category was officially established in 1971 by the United Nations General Assembly with a view to attracting special international support for the most vulnerable and disadvantaged members of the United Nations family. Their low level of socioeconomic development is characterized by weak human and institutional capacities, low and unequally distributed income and scarcity of domestic financial resources.
more from US$3 billion to US$11 billion (UNCTAD calculations based on OECD, 2016). The funding target of the Enhanced Integrated Framework has been set at US$250 million over a period of five years (Enhanced Integrated Framework, 2016). Aid-for-Trade disbursements are slightly disproportionally related to levels of GDP per capita, as indicated by a concentration coefficient of ˗0.078 in 2013. As figure 8.10 reveals, assistance has the tendency to be more concentrated on the poorest. Roughly 40 per cent of the total amount of disbursements were provided to the developing economies inhabited by the 20 per cent poorest people in terms of national GDP per capita, and almost 90 per cent of the disbursements were given to the benefit of the economies that cover the two thirds of the population with lowest GDP per capita. The concentration curve develops two marked steps at the position of China and India that push the curve close to the diagonal line representing the theoretical state of a fully proportional distribution of disbursements. This is because China and India receive a relatively small proportion of the assistance in proportion to their rank in the GDP-per-capita distribution and to their population size. (The main criterion for the determination of Aid for Trade is the prevalence of trade costs.)