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Trade and Development-The Role of Aid for Trade in Promoting Growth and Development in East Africa

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Title: Trade and Development-The Role of Aid for Trade in Promoting Growth and Development in East Africa


1
Trade and Development-The Role of Aid for Trade
in Promoting Growth and Development in East
Africa
  • DR. Halima Noor Abdi
  • CPA, Commonwealth Secretariat
  • Regional Workshop for East African
    Parliamentarians
  • 27-28 2010 Arusha Tanzania

2
Outline
  • Introduction
  • Objectives of AfT and Development
  • Rationale of AfT
  • Scope of AfT Initiative
  • AfT Progress in EAC Countries
  • Trade Related Bottlenecks in EAC Countries
  • Recommendations and Way Forward

3
Introduction
  • Trade and Economic Development
  • Empirical results show a mixed picture. There are
    cases where trade expansion has helped a country
    grow faster (China) and on the other hand there
    are countries that have experienced poor economic
    and social conditions after trade liberalization
    (SSA)
  • Flanking measures and trade liberalization

4
Introduction (2)
  • The direct impacts of trade are at least
    three-fold (i) employment (ii) income and revenue
    (iii) prices.
  • Indirect impacts have to do with how changes in
    trade and export promotion measures affect the
    informal and household sectors.

5
Objectives of AfT and Development
  • Expansion of developing countries trade is the
    core objective (WTO, 2005)
  • Philosophy of AfT initiative is not to support
    trade per se but trade in as much as it
    contributes to growth and poverty reduction
  • According to the WTO Task Force on AfT (2006b)
    effective aid for trade will enhance growth
    prospects and reduce poverty in DCs, as well as
    complement multilateral trade reforms and
    distribute the global benefits more equitably
    across and within DCs

6
Rationale for AfT
  • Global crisis has strengthened the rationale-The
    quantity and quality of aid and including AfT are
    now more important than ever for economic growth
    and human welfare
  • Provides an essential stimulus in the short term
    creating employment and reinvigorating growth
  • Address long term competitiveness
  • Fear that OECD might reduce AfT because of the
    global crisis

7
Scope of Aft Initiative
  • Trade is a diverse and complex activity, AFT is
    broad and not easily defined and it includes
  • Technical assistance helping countries to
    develop trade strategies, negotiate more
    effectively, and implement changes
  • Infrastructure assistance Building the roads,
    ports, telecommunications that link domestic,
    regional and global markets
  • Productive capacity assistance investing in
    industries and sectors so countries so countries
    can build on their comparative advantages to
    diversify and add value to their exports
  • Adjustment assistance helping with the costs
    associated with tariff reductions
  • AfT initiative is reviewed 2 to 3 years at the
    global level. The 2nd Global Review (July 2009)
    evaluated progress and scrutinized how the
    initiative is being implemented on the ground.
    The next global review is scheduled for 2012.

8
AfT Progress in EAC Countries
  • Regional Integration is a powerful catalyst to
    economic growth
  • The WTO Task Force recommended that AfT assist
    RI WTO 2006b
  • EAC capacity constraints in capitalizing on the
    full potential
  • Poor cross border infrastructure and transport
    infrastructure
  • Export Bans
  • Customs procedures, taxes, delays and bribes
  • Lack of awareness and understanding/limited
    capacity at regional and national level
  • Poor implementation of food safety standards

9
AfT Progress in EAC Countries (2)
  • The logical framework to assess whether progress
    is being made towards the desired aid-for-trade
    goals consists of the following four elements.
  • Mainstreaming and prioritising trade (Demand)
  • Trade-related projects and programmes (Response)
  • Enhanced capacity to trade (Outcome)
  • Improved trade performance and reduced poverty
    (Impact)

10
AfT Progress in EAC Countries (3)
  • AfT has made progress
  • Activities in the area of TRTA/CB at the country
    level has been prolific
  • EAC countries have mainstreamed trade in their
    development strategies and clarifying their needs
    and strategies
  • Donors are improving AfT delivery and scaling up
    their resources
  • Trade policy analysis, negotiation and
    implementation suggest that training and
    workshops have been particularly useful in
    helping officials to better understand the
    function, structure and rules of MTS (Kenya)
  • However concern that programs risk officials
    turning into rule takers rather than rule
    makers by focusing too narrowly on rules, rather
    than development or PPP-may bring importance
    increases in customs revenues and increased
    trade.

11
AfT Progress in EAC Countries(4)
  • Trade Facilitation
  • This is the 2nd most frequently identified area
    where AfT is seen as effective. Simplification of
    customs procedures and improvements to ports
    authorities (Kenya and Tanzania)
  • Customs reforms-often supported by TA programmes
    and financial assistance
  • Infrastructure development
  • North-South Corridor as an example of an AfT
    programme being implemented

12
AfT Progress in EAC Countries(5)
  • Productive Capacity
  • It is difficult to address productive capacity
    building at the regional level (since it is
    better dealt with at the national level) and the
    regional strategy focuses upon trade-related
    infrastructure and trade related adjustments

13
AfT Progress in EAC Countries(6)
  • EAC region has made a lot of progress in
    identifying projects for AfT
  • EAC partnership Fund established in addition to
    EC support, EAC receives financial and technical
    assistance from a number of EU Member States
    including Germany, Finland, France, Sweden,
    Denmark and the United Kingdom.
  • EAC key priorities under 9th EDF support have
    been the environment (notably Lake Victoria),
    institutional capacity of the EAC institutions,
    information technology and conflict prevention
    activities
  • 10th EDF-Regional Integration-update EC
    assistance to take account of EACs strategic
    priorities (in its development plan) and to
    address Aid for Trade issues (i.e. EAC
    Development Strategy 2006-2010, EAC Agriculture
    and Rural development Strategy 2005-2030).

14
Trade Related Bottlenecks in EAC
  • Shortcomings (from a trade perspective)
  • Trade ministers are rarely at the table in AfT
    discussions
  • Intra and Inter ministry consultations
  • Cabinet may not focus on improving
    competitiveness and promoting exports
  • RI-lack of co-ordination between donors and
    partners

15
Trade Related Bottlenecks in EAC (2)
  • High transport costs
  • Complicated and cumbersome customs procedures
  • Inadequate usage of information and communication
    technology
  • Payments, insurance, and other financial
    requirements, and
  • Non-tariff barriers in export markets

16
Recommendations and Way Forward
  • EACs growth potential depends upon marketing its
    existing degree of integration at a global level,
    upon creating economies of scale, and at the same
    time upon addressing some critical constraints,
    notably in infrastructure, services and
    institutional capacity.

17
Recommendations and Way Forward
  • Donor Side
  • Need for donors to strengthen their capacities to
    respond to rising AfT demand by bolstering
    in-house expertise
  • Raising awareness among policy makers and
    practitioners at headquarters and in the field
  • Alignment of donour and partner countries
    procedures and systems and undertaking joint
    initiatives (Need to keep track of who is
    getting what, how much and for what activity)

18
Recommendations and Way Forward(2)
  • Beneficiaries
  • RI -Further coordination on regional AfT
    activities is needed (EAC regional strategy)
  • Broadening the AfT dialogue to engage
    parliamentarians, CSOs more effectively.
  • Without broader engagement and outreach
    initiative AfT is likely to be only of interest
    to bureaucrats and remain divorced from political
    landscape in which it must be carried forward.

19
Recommendations and Way Forward (3)
  • Inclusive dialogue is important especially given
    the political sensitivities of many trade reforms
  • Importance of monitoring AfT and national
    Parliaments and EAC Parliament can play a crucial
    role
  • Need for an organized database at the level of
    EAC on AfT activities, projects and funding.
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