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Quantifying Aid for Trade

A Case Study of Tanzania

image of Quantifying Aid for Trade

Efforts to boost international trade as a means to foster economic growth, known as Aid for Trade, have become an important issue for both aid donors and recipients. However, significant ambiguity remains regarding what is and what is not Aid for Trade. Given the high profile of the Aid for Trade initiative, to which many donors have specified commitments, the issue is not only technical but also political. Hence, it is important that an effective method is developed to establish a clear border between Aid for Trade and other types of aid. This Economic Paper explains what Aid for Trade is, and how definitions have evolved over time. Using Tanzania as a case study it shows how different definitions lead to different estimates of the amount of Aid for Trade being delivered, and suggests an alternative simple and practical methodology for recipient countries to classify and quantify it.

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Summary

Over recent years, the Aid for Trade (AfT) initiative has become increasingly important in both the aid and trade arenas, especially since the WTO Ministerial Meeting in Hong Kong in December 2005. In particular, after several years during which the social sectors were prioritised in aid portfolios, many donors are becoming increasingly aware of the importance of developing the productive capacity of economies to foster growth and development. Trade is a key part of this strategy. Donors are pledging support, while recipients are anticipating more support in the area of Aid for Trade. However, despite attempts to define and measure AfT, and the need to begin operationalising it, there remains significant ambiguity regarding what does and does not constitute AfT, particularly given the subjectivity in assigning aid flows to AfT categories, especially those agreed by the OECD.

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