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Aid for Trade is Reaching its Limits, So What's Next?

The Aid for Trade Initiative has reached its limits and is in a need to be revamped. This article describes the political economy that led to the launch of the Initiative and explains why it focused on the mobilization of financial resources. The mobilization of resources has been impressive but, in the midst of a fiscal crisis and against the background of growing suspicion by developing countries, the Initiative is asked to show results. This proved difficult. As a result, in order to preserve resource mobilization and preserve donors’ interest, the WTO is expanding the scope of the Initiative to new areas only remotely related to the trade and growth nexus. This article argues that this is unlikely to address the main challenge that the initiative faces: building confidence. As confidence is crucial for the future of the Initiative and for the negotiation of a Doha Round agreement, the WTO should rather follow the suggestion of some donors to narrow the scope of the Initiative in order to make it more focus, monitorable, and efficient. The Aid for Trade Initiative was launched in 2005 because the WTO and donors had converging interests. The WTO needed to mobilize resources to address developing countries’ concern about the possible impact of the Doha Round. Donors, needed to scale up aid to meet the Millennium Development Goals (MDGs) while improving aid effectiveness. The objective of the Initiative is to use trade as an engine for development. However, in part because the task of operationalizing the Initiative was given to the WTO, Aid for Trade focused on the mobilization of financial resources. The issue of how best harness trade for development purposes was largely overlooked. The mobilization of financial resources was impressive and became the metrics of the success of the Initiative. However, after six years and in the midst of a fiscal crisis that puts development budgets under pressure, the focus is changing. Aid for Trade is asked to show results. This proved difficult to do convincingly. This article argues that unable to show meaningful results, with bleak prospects of mobilizing more financial resources, and with a monitoring and evaluation framework which, despite