Targeting Aid for Trade for Impactful Capacity‐Building in the Least Developed Countries
| Author | Ratnakar Adhikari |
| DOI | http://doi.org/10.1111/1758-5899.12705 |
| Published date | 01 September 2019 |
| Date | 01 September 2019 |
Targeting Aid for Trade for Impactful
Capacity-Building in the Least
Developed Countries
Ratnakar Adhikari
World Trade Organization, Geneva, Switzerland
For the least developed countries (LDCs) facing supply-side constraints, the SDGs target of doubling the share of their global
exports by 2020 is a chimera. Various mechanisms have been put in place to help LDCs to enhance their trade capacity, of
which WTO Aid for Trade (AfT) is a notable one. Although the Enhanced Integrated Framework (EIF) pre-dates the AFT initia-
tive, the EIF’s focus on evidence based needs assessment, institutional and policy support and productive capacity building
support have helped a number of LDCs overcome their binding constraints to trade expansion. Besides, country ownership
principle, partnership approach and targeted nature of AfT support means that the chances of achieving success is much
higher than other development interventions.
The least developed countries (LDCs) –defined as such by
the United Nations based on three criteria of per capita
income, human assets and economic vulnerability, currently
47 in number, face significant development challenges.
Although they account for 13 per cent of global humanity,
their collective share in global gross domestic products is
1.2 per cent.
1
This is commensurate with their share in the
global merchandise exports of 0.95 per cent (WTO, 2018a).
Recognizing this asymmetry and mindful of the need to
expand the LDCs’share in global exports, Goal 17.11 of the
Sustainable Development Goals (SDGs) commits the interna-
tional community to doubling the LDC share of global
exports by 2020. While this remains an aspiration, one of
the means of implementation is included immediately in
Goal 17.12 of the SDGs, which aims at enhancing market
access opportunities for the LDCs. Even prior to the SDGs,
several developed countries and some developing countries
provided market access opportunities to the LDCs through
various unilateral preferential schemes. A major example of
this is the Everything but Arms initiative of the European
Union (EU), which provides duty-free access to all LDC
imports entering the EU except for arms and ammunitions.
However, the utilization of such preferences has been very
limited, which is mainly due to two reasons.
First, non-tariff measures (NTMs), such as health, safety
and environmental standards and rules of origin –requiring
the LDCs to ensure that major value addition or transforma-
tion takes place in their territories –are the major impedi-
ments. Second, these countries face several supply-side,
behind-the-border constraints, which limit their ability to uti-
lize these preferences. These constraints are mainly due to
market failure resulting in less than optimal provision of
public goods, such as human capital, infrastructure, finance
and technology, which cannot be adequately provided by
the market. Another supply-side bottleneck is the institu-
tional foundation that helps conduct evidence-based analy-
sis of opportunities and constraints, create a favourable
investment climate, enhance productive capacity and com-
petitiveness of their enterprises and ensure the seamless
movement of goods across borders, among other things.
Addressing these constraints undoubtedly requires political
will as well as human resources. However, the most pressing
need for the LDCs is the financial resources. Although many
LDCs have successfully mobilized resources for financing
their development, domestic resource mobilization mea-
sured by the tax-to-GDP ratio in many of these countries is
still low –16.3 per cent (UNORHLLS, 2018). The financing
gap can be met through various mechanisms, including for-
eign direct investment, remittances and development assis-
tance. The focus of the paper is on the latter one, of which
Aid for Trade (AfT) is a component.
Binding constraints
Most of the NTMs imposed by importing countries are
aimed at achieving certain policy objectives and cannot be
done away with as long as they are applied in a non-dis-
criminatory and least trade-distortive manner. However,
exporting countries need to invest resources into meeting
those standards by establishing appropriate legislation, test-
ing facilities, capacity-building of stakeholders and accredita-
tion mechanisms. Once these are achieved, they can even
enter into mutual equivalence agreements with importing
countries.
Human capital constraints, in particular, skills deficits are a
serious challenge facing the LDCs in their quest to achieve a
certain threshold of competitiveness demanded by the
international market. Although this has a root in the low
©2019 University of Durham and John Wiley & Sons, Ltd. Global Policy (2019) 10:3 doi: 10.1111/1758-5899.12705
Global Policy Volume 10 . Issue 3 . September 2019
408
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