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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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What is Aid for Trade?

The AfT initiative has its origins in the WTO negotiations and fears over adjustment costs associated with multilateral trade liberalisation, particularly those arising from preference erosion. The initiative gained prominence during the WTO Ministerial Meeting held in Hong Kong in December 2005. The final Ministerial Declaration stresses the importance of AfT in assisting developing countries, especially least developed countries (LDCs) ‘to build the supply-side capacity and trade-related infrastructure that they need to assist them to implement and benefit from WTO Agreements and more broadly expand their trade’. The phrase ‘more broadly expand their trade’ is important since it separates AfT from the Doha Round, while the reference to ‘supply-side capacity and trade-related infrastructure’ indicates a remit for AfT that goes wider than narrow definitions of assistance on trade.

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