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Commonwealth Secretariat press release

'Aid for Trade' on the Agenda as Trade Policy Makers Meet in Geneva

20 March 2006

Sixty countries are to gather in Geneva on Tuesday 21 and Wednesday 22 March to discuss new proposals for delivering 'Aid for Trade' - that is, providing adequate assistance to developing countries to enable them to take advantage of increased trading opportunities.

The meeting, organised by the Commonwealth Secretariat and held at the headquarters of the UN Conference on Trade and Development (UNCTAD), will further strengthen developing countries' ability to negotiate effectively in the new World Trade Organisation (WTO) task force, charged by Director-General Pascal Lamy to report back by 30 July on the best ways to deliver 'Aid for Trade.'

Don McKinnon, Commonwealth Secretary-General, said: "Aid for Trade is vital for poor and vulnerable economies if they are to meet the immediate costs of being open for and to business, and then to grasp the opportunities provided through trade.

"Multilateral trade liberalisation has the potential to lift millions out of poverty: it also has the potential to bypass millions in poverty, unless immediate transitional costs are met, and unless developing countries are given adequate assistance to allow them to take advantage of increased trading opportunities. Such assistance should target new infrastructure, enterprise development, training, and legal frameworks. For the poorest countries, this 'Aid for Trade' has therefore become as important an aspect of the Doha Round negotiations as removing tariffs and ensuring fair but open markets in areas such as textiles and cotton."

The centrepiece of the discussions will be a report by the Nobel Laureate Professor Joseph Stiglitz, calling for a new architecture for delivering 'Aid for Trade.'

The Stiglitz report, commissioned by the Commonwealth Secretariat, proposes significant reforms to the existing channels of delivery of 'Aid for Trade'. He calls for the existing multilateral structure (involving the International Monetary Fund, the World Bank, the International Trade Centre, UNCTAD and UNDP) to be consolidated into a new 'Global Trade Facility' ('GTF'), which - like the Global Environment Facility - would be located in the World Bank.

The funding for this facility, which would be additional to existing aid commitments, would need to be part of binding Doha Round agreements. Within the new aid funding committed at July 2005's Gleneagles G8 Summit, Professor Stiglitz wants to see assured sums for 'Aid for Trade'. Such commitments would be enforceable within the WTO, like all other commitments made under multilateral trade agreements. This would enable the GTF to bring a charge of non-compliance against any country not meeting its aid commitments. Professor Stiglitz believes that the facility should have a broad mandate to finance technical assistance, trade-related capacity building, enterprise development and infrastructure projects, through a combination of grants and concessional loans.

Professor Stiglitz writes: "Adjustment to a post-Doha trading regime will be disproportionately costly and difficult for developing countries because of the loss of preference margins, the loss of revenue from trade taxes, institutional weaknesses including the absence of adequate safety nets, implementation costs, the lack of finance required to restructure the economy, and the limited opportunity of poor populations to manage short-term unemployment." He points to World Bank research as to how higher prices of previously protected agricultural products will mean losses of over US$1 billion a year for the poorest of the food-importing countries.

The 53 member countries of the Commonwealth - rich and poor, developed and developing, with a third of the world's population and a fifth of its trade - agreed a joint declaration on the eve of December's 2005 WTO Hong Kong Summit, restating that increased trading opportunities are the most potent weapon for combating global poverty, and putting developing country interests at the heart of the Doha Development Round.

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