Last week, just before the G8 Summit in Italy, the second global review of Aid for Trade was held at the World Trade Organisation (WTO) in Geneva. Aid for Trade is an initiative that started in 2005 through the WTO framework in recognition that developing countries lack the basic infrastructure and capacity to take advantage of the market access opportunities resulting from trade negotiations — that in fact, changes in the international trading system have significant costs to developing countries — and that normal aid programmes have not been able to deal with these. The second global review aimed to evaluate the progress of the initiative and scrutinize how it is being implemented on the ground.

During the high level event, the UN Secretary-General Ban Ki-moon described aid for trade as “promising and life saving” for poor countries. At the same time, he expressed concern recently that the initiative will fall short by some $20 billion. WTO chief Pascal Lamy said that the global trading environment has worsened dramatically since the first review a year ago, and that the Aid for Trade initiative is “urgent and essential today.”

Despite the economic downturn, several donors responded positively to this call – Japan unveiled a new development initiative for trade under which it will provide $12 billion through bilateral assistance for trade-related projects over the next two years. Announcements of substantial commitments by the UK (£1 billion per year), the Netherlands (€550 million per year) and France (€850 million per year) were also welcomed.

The report, co-published by the WTO and OECD for this event, says the initiative has achieved remarkable progress in a short time: partner countries are mainstreaming trade in their development strategies and clarifying their needs and priorities; donors are improving aid for trade delivery and scaling up resources. In 2007, as was the case in 2006, aid for trade grew by more than 10% in real terms and total new commitments from bilateral and multilateral donors reached $25.4 billion, with an additional $27.3 billion in non-concessional trade-related financing. But the report warns that maintaining the momentum will be difficult in this current economic recession, and that the quantity and the quality of aid, including aid for trade, are now more important than ever for economic growth and human welfare.

-Mikiko Imai