Aid for Trade: Questions and Answers

1. Why does the UK support increased Aid for Trade?

Aid for Trade and economic growth assists developing countries (especially the poorest) to become more competitive exporters and better able to take advantage of opportunities created by more open regional and international markets. In a nutshell, increased Aid for Trade will help poor countries to trade their way out of poverty.

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2. What will Aid for Trade money be used for?

Aid for Trade priorities will be very country-specific and will depend on what individual governments prioritise. In broad terms, assistance is needed in 4 areas to build:

  • i. specifically trade-related capacity for example, tax reforms, improving import/export processes, developing the right export industries, meeting international health and safety standards, and encouraging private sector/business development and investment
  • ii. wider (not-trade specific) economic infrastructure for example, transport, roads, energy, and communications
  • iii. capacity to develop and implement trade policies for example, undertake cross government and stakeholder consultation (including with the private sector) on what the priorities and objectives should be, include those priorities and objectives in national development plans, and design, finance and implement supporting programmes and interventions in partnership with donors and other stakeholders
  • iv. adjustment costs: preference erosion – sugar, textiles and so on, loss of tariff revenue and higher cost of food imports.

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3. Will it pay for infrastructure?

Yes. If increased investment in large-scale trade related infrastructure is prioritised by developing country governments, donors should respond.

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4. Will it cover adjustment costs (including preference erosion, loss of tariff revenue, rising costs of food imports for net food importers)?

Yes. If that is what countries choose to prioritise in their national development plans.

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5. Are the UK and G8 Aid for Trade Commitments contingent on successful conclusion of the Doha Round or any other trade negotiations?

No.

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6. Which developing countries will get Aid for Trade, and which will not?

None is excluded. It's up to individual countries that are aid recipients to decide between competing trade and non-trade specific priorities. The UK will focus on least developed countries (LDCs) and other low income countries, particularly in sub-Saharan Africa.

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7. Will 'conditions' be attached to Aid for Trade for recipients?

No. Aid for Trade is no different to regular aid. UK policy is that conditions should be light (that is to avoid corruption and fiduciary risk and ensure aid is used for poverty reduction).

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8. How much has been pledged for Aid for Trade? How much of it will be new?

In December 2005, the G7 group of countries (Canada, France, Germany, Japan, Italy, UK, USA) agreed to increase spending to $4 billion. Based on current pledges we expect this to be achieved, and probably exceeded, by 2010:

  • European Union members and the European Commission have agreed increased spending to €2 billion every year by 2010. The UK is committed to increasing our spending on trade-related assistance to £100 million per annum by 2010
  • the US pledged $2.7 billion by 2010
  • Japan has pledged $10 billion.

In line with the Task Force recommendations, the actual delivery of these pledges will be monitored both at country and global levels.

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9. Is the UK's pledge to increase its Aid for Trade to £100 million by 2010 additional to our 2005 commitment to increase aid overall?

No. However, the £100 million does represent a real increase in our trade related assistance, from a baseline of the £28 million in 2004. In other words we will roughly treble our 'Aid for Trade' by 2010.

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10. Does the UK agree with the need for new Aid for Trade mechanisms?

In line with the Task Force recommendations, we believe that the best way of ensuring that increased Aid for Trade is used effectively is to build on existing aid delivery mechanisms – such as budget support, support for economic growth sector strategies within national development and poverty reduction plans, as well as existing global mechanisms such as the Integrated Framework.

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11. How much do we and others spend on infrastructure?

In 2004, Development Assistance Committee donors committed $26 billion (50% from bilaterals, 50% from multilaterals) to infrastructure projects and programmes – a 50% increase on 2002 commitments. Trade-related infrastructure expenditure is mainly focused on four key areas – transportation (including roads), telecommunications, irrigation and energy generation and supply.

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12. What is the infrastructure funding gap?

Investment needs are enormous. The Commission for Africa report estimates that an additional $10 billion every year is required up to 2010 - a doubling of existing expenditure.

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13. What are G8 commitments for additional infrastructure investment and how are we meeting them?

Our G8 commitment was that, "In the context of our shared commitments to double aid for Africa by 2010, we agree to give priority to the infrastructure necessary to allow countries to take advantage of the improved opportunities to trade".

Through the collective efforts of the G8 and other donors and private investors, good progress has already been made which should ensure that Africa receives the additional $10 billion.

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14. What is the UK doing to scale up infrastructure investment?

We are scaling up infrastructure investment principally through our contributions to multilateral development agencies and Banks.


Last updated: 31 August 2006