Trade for aid
As efforts to restart the stalled Doha Development Round negotiations intensify, the policy focus on world trade, and, specifically, its relation to development aid and growth in poorer countries, has become more acute. Trade is a powerful engine for economic growth, as the OECD’s founders argued 50 years ago, and, as such, can contribute to reducing poverty. However, efforts to improve trade in developing countries are often hampered by domestic constraints, particularly a lack of adequate economic infrastructures, as well as institutional and organisational obstacles.
Trade for Growth and Poverty Reduction focuses on the framework of the Aid for Trade Initiative, launched in 2005 by the World Trade Organization. This report identifies the four main objectives of aid-for- trade programmes: increasing trade, diversifying exports, increasing the capacity of countries to adjust to world trade, and linking with domestic economies.
Policymakers have to identify the constraints they may be facing in their own countries by combining various approaches, from consulting stakeholders and comparing with other countries, to scrutinising the entire value chain. Once these constraints have been identified, any measures to counter them need to fit a country’s specific needs while targeting the sectors which poorer people work in. This can help to enhance productive capacity, reduce vulnerability and better integrate them into regional and global markets.
However, if the approach promoted by the Aid for Trade Initiative is to bear fruit, it must be grounded in international co-operation, as well as being supported by other policies, in education and training for instance, and providing social safety nets. Developing countries are now responsible for between a quarter and a third of world trade. By helping them to improve their trade mechanisms, OECD countries may find that they are also helping themselves.
©OECD Observer No 284, Q1 2011
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