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Aid for Trade

Aid for Trade . By Joseph E. Stiglitz, Andrew Charlton Ania Bonarska , Wisdom Ejebugha. Outline. Introduction why Aid for Trade Purposes for Aid for Trade Concerns with purposes’ application Accepted Purpose The design of Aid for Trade Principles A n ew mechanism for Aid for Trade

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Aid for Trade

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  1. Aid for Trade By Joseph E. Stiglitz, Andrew Charlton Ania Bonarska, Wisdom Ejebugha

  2. Outline • Introduction • why Aid for Trade • Purposes for Aid for Trade • Concerns with purposes’ application • Accepted Purpose • The design of Aid for Trade • Principles • A new mechanism for Aid for Trade • The components of a new mechanism • Conclusion

  3. Introduction • Trade liberalization creates opportunities for development. • Aid for trade agenda reflects the realization that WTO Doha Round requires adequate trade related aid to mitigate the detrimental effects of trade reforms and enhance the trading capacity of LDCs.

  4. Aid for Trade – why? • Trade liberalization • not sufficient • Adjustment costs • caused by liberalization

  5. Purposes for Aid for Trade: • Political motivation • Compensation motivation • Fairness

  6. Concerns with purposes’ application • All these three purposes see aid for trade as an exchange: payment, compensation, or gift in return for complicity in the multilateral trade liberalization agenda

  7. Accepted Purpose • Aid for trade should be an essential component of market access offers to the poor countries. It should create an effective market access by removing internal barriers to trade.

  8. The design of Aid for Trade: • ‘Needs question’ • What should be funded? • ‘Instrument question’ • In what form should the money be given? • ‘Institutional question’ • Who should manage the transfer?

  9. What should be funded? • Aid for trade involves the flow of development finance from rich to poor countries for the purpose of enhancing the world trading system. • Aid for trade shows that trading system imposes costs on developing countries.

  10. In what form should the money be given? • Gift • Loan • Compensation • Limits a pool of donors • May prevent aid reaching the most needy countries • Does not say which losses should be included

  11. Who should manage the transfer? • Integrated Framework (IF) under the management of UNCTAD • Global Trade Facility (GTF) • Global Enviroment Facility (GEF)

  12. Principles • Additionality • Predictability • Country ownership • Coherence • Private sector • Loans vs. grants

  13. New mechanisms for Aid for Trade • Continue with existing mechanisms • Create a new trade specific fund • Reform existing mechanisms

  14. The components of a new mechanism • Consolidating IF under the management of UNCTAD • Currently participating agencies in IF would conitinue to operate in advisory capacity • Aid would be a part of bining Doha Round agreement • Commitments would be subsequently enforcable within the WTO. • Grants and consessional loans

  15. Agenda for Capacity Building needs • Trade Policy and regulations • Enterprise development • Internal Barriers/Infrastructure

  16. Conclusion • Trade liberalization is one of many potential shocks and opportunities, and internal and external reforms are essential in enssuring the reality of potential development • Aid for trade offers the possibility of a trade agreement to not only result in more imports and job loss in LDCs, but more exports and job creation

  17. Conclusion • What’s new about this paper is its proposition to bring the power of commitment and enforcement to the promisses of aid. • Developing countries should have equal negotiating power with developed countries in the Doha Round negotiation agreement.

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