Aid for Trade and Regional Integration as Means for Accelerating - PowerPoint PPT Presentation

Aid for Trade and Regional Integration as Means for Accelerating Development of LLDCs 2nd UN CONFERENCE ON LLDCs Vienna, Austria – 4 November 2014 ( 8.15 - 9.45 ) Jaime de Melo FERDI 1

AID FOR TRADE What have we learnt? Which way ahead? (e-book at http://www.ferdi.fr/en/publication/ouv-aid-trade-what-have-we-learnt-which-way-ahead ) What do we know about LLDC needs? Any Lessons? I - Aid for Trade: Looking Ahead Olivier Cadot and Jaime de Melo II - Evaluation in Aid for Trade: From Case Study Counting to Measuring Olivier Cadot and Jaime de Melo III - Aid for Trade: What can we Learn from the Case Studies? Richard Newfarmer IV - Diagnostic Trade Integration Studies and their Updates under the Enhanced Integrated Framework – A Retrospective Paul Brenton and Ian Gillson 2 2

What Have we Learnt about Trade Costs? Reduction in trade costs account for about 1/3 of growth in trade Evolution of simulated trade costs from a gravity equation (sample of 118 countries) Trade Costs have fallen less rapidly for low income countries …. Low income High Income 3

What Have we Learnt about Trade Costs? Trade Costs have only fallen by about 2% for a sample of 14 LLDCs Trade costs in LLDCs and non-LLDCs LICs : 1996- 2010 110 105 100 95 90 85 80 1996 1998 2000 2002 2004 2006 2008 2010 Year non-LLDCs LICs(18) LLDCs LICs(14) Source: Authors construction based on Arvis et al. (2013) 4

T HE V ICIOUS CIRCLE OF LLDC S INFRASTRUCTURE N ETWORKS 5 5

… so non-oil LLDCs trade shares have stagnated LLDC share of exports of Goods and Services : 1985- 2011 .8 .6 .4 .2 0 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Year (Three year moving average) non-oil LLDCs (27) Oil LLDCs (4) Source: World Bank data : Oil LLDCs : Azerbaijan, Chad, Kazakhstan, and Turkmenistan 6

AFT per capita trends have remained fairly constant through time Aid for Trade per capita - country average (Commitments in constant US Dollars per Capita) 60 50 Cosntant US Dollars per capita 40 Landlocked Developing Countries 30 Least Developed Countries Low Income Countries 20 10 0

…Per capita AFT shares of LLDCs remained low Aid for Trade per capita (commitments, average over 1995-2012) 25 20 US dollars per capita 15 10 5 0 Landlocked Developing Least Developed Countries Low Income Countries Countries

For most countries, the share of AFT is less than the share of other types of aid 100 120 140 160 20 40 60 80 0 Bhutan Mongolia Armenia Countries ranked in descending order of per capita AFT Lao PDR Kyrgyzstan Afghanistan Bolivia Per Capita Aid: Total Aid and Aid for Trade (Average Commitments over 1995-2012) Kyrgyz Republic Mali Zambia Lao People's Democratic Moldova Burkina Faso Lesotho Central African Republic Azerbaijan Tajikistan Uganda Rwanda Nepal Malawi Swaziland Botswana Paraguay Ethiopia Chad Burundi Niger Kazakhstan Uzbekistan Zimbabwe Turkmenistan Aid for Trade Other Types of Aid

Most AFT is allocated to infrastructure Aid for Trade in Landlocked Countries (Commitments in constant millions of US Dollars) 9000 8000 7000 Millions of US Dollars 6000 Trade Related Adjustments 5000 Trade Policy Related 4000 Building Productive Capacities 3000 Economic Infrastructures 2000 1000 0

Share of Aid for Trade in Total Aid (Commitments, 1995-2012) 60% AFT shares to LL countries have 50% remained fairly constant 40% Landlocked Developing 30% Countries Other Developing Countries 20% 10% 0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 … so have components of AFT

AFT: What Have we Learnt? Some apparent success in mobilizing funding … 60.0% 55.0% DAC countries 50.0% Following the Paris declaration of 2005, Multilateral 45.0% the decline of the share of AFT in ODA 40.0% 35.0% has been arrested. 30.0% 25.0% 20.0% 1995 1997 1999 2001 2003 2005 2007 2009 50 45 DAC countries Multilateral Other Constant price billions USD 40 35 30 25 20 15 10 5 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 12

What Have we Learnt? … and some success in mainstreaming trade in national development strategies (… sometimes) Applying OECD word- count approach to Uganda’s budget speeches 13

What Have we Learnt? … but no faster export growth for large recipients of AFT flows o Split countries by the median in terms of 2000-2005 AFT receipts (per dollar of export) o Check if high-receivers ’ exports grew more over subsequent 5-year period (2005-10) 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% Low High Low High Low High Low High Low High Weakest Strongest Q1 Q2 Q3 Q4 Q5 exporters exporters Quintiles of the export/capita distribution 14

What have we Learnt? Macro and Micro face different trade-offs so we need both Micro studies face trade-off 1: they Identification of causal chain identify causal chains fairly extensively at the cost of less relevant (i.e. less T RADE - OFF 1 easily transposable) outcomes Relevance of outcomes Internal validity (ability to identify a causal relation) Impact Evaluation Cross-country studies have greater T RADE - OFF 2 external validity but have less internal Cross-country econometrics validity (omission of important factors) External validity (ability to derive generalizable results) 15 15

Which way ahead? Randomista or not, evaluate RCT is not the alpha and omega of impact evaluation o What matters is baseline data collection + control group o Wealth of quasi-experimental methods available, even ex post «RCT controversy» should not be an excuse to not evaluate o Every intervention left un-evaluated is a missed learning opportunity o Evaluation raises incentive issues; incentive-compatible setups can be designed (e.g. making IE the «default» in all cases; decoupling IE results from project manager’s performance evaluation , …) Toward an «evaluation-friendly» AFT o Cut costs; e.g. use existing stats as much as possible; put pressure on governments to share statistics, in particular firm-level data o Encourage a culture of project design for evaluation (all projects designed like Progresa?) 16

Which way ahead? Streamline the initiative Exploit the opportunity offered by the Trade Facilitation Agreement o Help make trade portals useful repositories of NTMs o Provide technical assistance to Trade Facilitation Committees (Art. 13) to develop trade- related regulatory-oversight capabilities (not just counting documents to export) Better use Diagnostic Trade Integration Studies o DTIS updates already a crude form of progress monitoring; clear learning curve from first generation o Still lack of ownership (government side) and visibility (donor side) o Need for leaner, more focused action matrices (already largely the case) o Mainstream regional integration in trade policy; region-level DTISs 17

Which way ahead? In sum … AFT’s broad achievements … o Mainstreaming of trade in national development strategies o Creating a crude form of donor coordination around «competitiveness strategies» o Mobilizing funding … are at risk unless a «culture of evaluation» builds up o Donor budget pressures require credible identification of outcome improvements + causation; the instruments are there to use o Successful globalizers have all experimented with policy, but no learning from experimentation without evaluation … and the initiative gets a second wind from the TFA o A tool for the TFA’s application, focused on NTMs o A vehicle to foster deep regional integration 18