False Assumptions: The BetterAid position paper on 'aid for trade' for the HLF4

Mon, 11/28/2011 - 00:00 -- content_manager02

Aid for trade has become somewhat like a ‘magic wand’[1] for the World Trade Organization (WTO) to make good on its commitment to the stalled ‘Development Round’ of trade negotiations since Doha in 2001. The Aid for Trade (AfT) framework was formally adopted at the 2005 WTO Ministerial Conference in Hong Kong aiming at “assisting developing countries to increase exports of goods and services, to integrate in the multilateral trading system, and to benefit from the liberalized trade and increased market access”. Thus, “Aid for Trade will enhance growth prospects and reduce poverty in developing countries, as well as complement multilateral trade reforms and distribute the global benefits more equitably across and within countries[2]”.

Trade can indeed contribute to a country’s economic development and bring about benefits for its population. However, several studies have shown that the ‘automatic’ relationship between trade liberalization and growth, which proponents of AfT so vehemently claim, does not exist.[3] Furthermore, evidence of the positive effect of AfT on growth is largely missing.[4] In fact, liberalization, a crucial part of the AfT agenda and one of its basic premises, can lead to large-scale negative effects for developing countries that outweigh any potential benefits coming from trade or aid.