Given the fact that there exists a structural asymmetry in the multilateral trading system in favour of developed countries, would aid-for-trade reinforce these imbalances or would it bring about a significant change in the current state of affairs? What do you think could be the benefits for recipient countries in the long run?
That depends on many things, particularly on how developing country leaders manage the issue at the World Trade Organisation (WTO) and in their dealings with development banks and bilateral donors. The most visible part of that management at the WTO has so far been unproductive and over-emphasised. On the other hand, much has been accomplished through the interface with development banks and bilateral donors. Aid-for-trade has considerable potential to advance development.
There is a view that aid-for-trade is, in effect, deflecting the focus away from the Doha negotiating mandate and onto Special and Differential Treatment (S&DT). How do you view this concern?
Negotiations on Special and Differential Treatment (S&DT) have no potential to advance development. Their capture of what might have been a constructive discussion of WTO implementation has been a step backwards for development. I will explain.
Analysis of the Uruguay Round outcome revealed an imbalance that was to the disadvantage of developing countries. The implementation problem -- bound commitments in exchange for unbound promises of assistance -- was one element. The other was that developing countries had given on intellectual property and other ‘new areas' more than they got from developed countries on agriculture and textiles/clothing.
This perception of imbalance generated among WTO members a general sympathy to take up, in the next negotiation, issues of particular interest to developing countries. Hence members accepted the label ‘Doha Development Agenda'.
As to how this concern might be made substantive, Rubens Ricupero, then Secretary-General of UNCTAD, had earlier made an important suggestion: future proposals should include an implementation audit that would identify the specific investments needed to meet new obligations so that any agreement could include bound commitments to provide the needed support. Indeed, the idea might be retrofitted to the Uruguay Round agreements, to arrive at a concrete measure of what might be needed to overcome this part of the Uruguay Round imbalance.
In the Doha Declaration that opened the new round, WTO ministers stated that they “attach the utmost importance to the implementation-related issues and concerns”. They also called for a review of special and differential treatment provisions “with a view to strengthening them and making them more precise,” but then allowed things to spin off in an unproductive direction.
Their decision on implementation ignored Ricupero's suggestion. It did not call for identification of the resources developing countries would need to meet WTO implementation requirements -- and perhaps expand trade capacities more generally. In fact, ministers provided no work programme at all on implementation, only a work programme on special and differential treatment: “We endorse the work programme on special and differential treatment set out in the Decision on Implementation.” A work programme on S&DT falsely labelled a Decision on Implementation!
On S&DT, they provided nothing new: unreciprocated market access concessions by developed countries, less rules obligations on developing countries, longer phase-in periods for obligations developing countries did accept. Such debate is diplomatic coup-taking, not development.
There are, however, a lot of useful things going on elsewhere.
Operationalisation of aid-for-trade would require cooperation and coordination of international development agencies in order to be effective. Also, there are several important concerns on aid-for-trade, including issues such as conditionalities, accountability and agenda-setting by donor countries. What instruments are needed to ensure that aid-for-trade is channelised effectively?
If Toyota announces the construction of a new truck plant, many potential suppliers will come forward to offer their products and services. Should Toyota respond by asking the potential suppliers to get together among themselves and decide who will supply what to Toyota ? Of course not. Managing suppliers is an important part of what makes Toyota an efficient enterprise. In my experience, the first persons to call for ‘coordination and coherence' of policies and programmes are the least knowledgeable about what they are, least capable of determining what they should be.
Managing aid is a challenge for recipient countries and many have taken useful steps. Unfortunately, aid analysts more often cite these steps as evidence of the need for coordination rather than as evidence that recipient countries are capable of doing it. Business schools in developing countries should do case studies on aid management and train developing country managers.
Do you support a legally binding multilateral agreement on aid-for-trade? Do you think the WTO is an appropriate forum for such an agreement?
What I support is irrelevant. WTO members have already rejected the idea. The WTO Task Force on Aid-for-Trade came after Ricupero's suggestion for implementation audits, after several proposals had been tabled to create ‘platforms' through which WTO legal obligations to implement and to provide assistance could be forged and linked. The task force recommendations -- endorsed by the General Council on October 10 -- mention neither implementation audits nor such platforms. That is “No!” (To Pascal Lamy's subsequent report of WTO ‘progress and momentum' on aid-for-trade, I would ask: “What part of ‘No!' do you not understand?)
Worse than not doing the right thing, the report goes on to actively do the wrong thing. In its list of 13 ‘major challenges/gaps', 12 are administrative matters such as mainstreaming, linking mechanisms, monitoring, coordination, and coherence (resources for infrastructure and enterprise capacities, alas, rank no better than second-to-last on the list). Its flagship recommendation is an annual debate on aid-for-trade in the WTO General Council. This debate is to be supported by a published global review of aid-for-trade by a new WTO monitoring body. The global report would draw on aid-for-trade reports from recipient countries (the OECD/WTO database lists 174 of them), donor countries (the OECD/WTO database lists 27, plus the European Union), regional entities (the WTO web page lists 33 regional agreements), international agencies (the WTO/OECD database lists 26), and the private sector. It's a bonanza for consultants, nothing for development.
The World Bank has been active in supporting infrastructure development projects, with an aim to tackling supply-side constraints. What is your evaluation of the World Bank's role in helping developing countries and Least Developed Countries (LDCs) to trade? What future role do you envisage for the Bank?
The attitude reflected in the World Bank's ‘Doing Business' database is constructive. Aid-for-trade is aid for doing business. This motivation is widely shared and is critical to donor support as well as to effective use of resources in recipient countries. The WTO/OECD database shows that aid-for-trade has increased significantly, and that there are many providers: 26 regional and multilateral international agencies, and 28 countries, including four developing and transition economies. Assistance to least developed countries for infrastructure increased in 2001-2004 by almost 70%.
Given the ineffectiveness of the WTO as a venue for addressing even the development problems created by the WTO's Uruguay Round agreements -- most recently demonstrated by the fact that this issue was not even addressed by the WTO task force charged with finding ways to operationalise aid-for-trade -- the development community should focus its efforts elsewhere to expand aid-for-trade. There is a lot going on elsewhere.
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