NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, July 9, 2013

Developing countries are increasingly opening up more to crucial trade routes, which connect them to world value chains.

But barriers remain: Deficient infrastructure, low trade finance, high entry costs, restrictive trade regimes and a labor market lacking in skilled workers, among others. The most significant challenge is whether Aid for Trade (AfT) actually bridges the poor to the world economy.

Eight years after the initiative was launched to align donor’s aid money to recipient’s trade opportunities, government officials and representatives from development agencies, aid groups and the private sector are reviewing in Geneva what AfT has accomplished and what challenges it still faces.

The Fourth Global Review of Aid for Trade where a report released by the World Trade Organization and the Organization for Economic Co-operation and Development points to AfT as the future to untying developing countries from the grips of poverty.

How AfT is changing development policy

Developing countries, the report says, now invest their money in opening up to trade, while donors fund programs that tie development to trade, like technical assistance for trade talks or building infrastructure. AfT reached $41 billion in 2011, up 57 percent from 2005.

“Aid for trade is making a difference,” WTO director-general Pascal Lamy said this week in Geneva.