WTO Fights Poverty
The World Trade Organization (WTO) is one of the youngest, international economic organizations in the world. However, it plays an important role in the international economy and the global fight against poverty. Originating from the Uruguay Round negotiations which took place from 1986 to 1994, the WTO took over the functions of the General Agreement on Tariffs and Trade (GATT) in 1995. Since then, it has been the setting for global trade negotiations. The main role of the WTO is to assess trade barriers between countries and solve them through diplomatic negotiation. The goal of the WTO is to achieve full, fair trade and a fully globalized economy. In doing so, the WTO fights poverty around the world.

Global Trade and Global Poverty Reduction

As global trade profits continue to rise, the need for a powerful and well-directed WTO is strong. According to the WTO, merchandise exports have increased by an average of 6% every year since the 1950s. Furthermore, global trade has grown 50% more than the global economy outputs every year and “total exports in 2016 were 250 times the level of 1948.” Global poverty reduction and global trade can play hand-in-hand. The WTO ensures that the two are harmonious as possible. By focusing on developing countries, protecting the most vulnerable populations and giving less powerful countries voices on the international stage, the WTO fights poverty in unique and effective ways.

Building Trade Capacity in Developing Countries

One way in which the WTO fights poverty is through global development. Also, the inclusion of low income in the global trade market. The WTO has a powerful commitment to assist developing countries in maximizing their trade potential. This, in an effort to achieve stable footing on the world stage. The WTO allows developing countries more time to meet certain commitments. Moreover, it plays an active role in building trade infrastructure across the developing world. One of the WTO’s most powerful policies is the Aid for Trade initiative launched in 2005. The initiative works to build developing countries’ trade capacity through investments in infrastructure. More than $340 billion supports growing economies through this initiative.

Creating Jobs and Meeting International Standards

Another key WTO program fighting poverty is the Enhanced Integrated Framework (EIF). The mission of the program is to assist developing nations “in their use of trade as an engine for growth, sustainable development, and poverty reduction.” EIF has worked in 51 countries, ensuring country ownership of trading ports. Moreover, EIF acts as an “honest broker” in trade negotiations and helps countries fight poverty by creating new trade-related jobs. EIF has invested more than $220 million into supporting the world’s poorest countries, through trade.

The WTO is also working to ensure that developing countries interested in entering into global trade can meet “international standards for food safety, plant and animal health”. This way, they can effectively access global markets. The program is called the Standards and Trade Development Facility (STDF) and it works to ensure that developing economies are prepared for the demands and standards of the global economy.

Increased Participation in Global Trade Leads to Poverty Reduction

The statistics speak for themselves as to how the WTO fights poverty. According to the World Bank, developing countries make nearly 50% of all global trade, an increase “from 33% in 2000.” Coinciding with the increase in developing countries’ role in global trade is a sharp decline in global poverty. Nearly 1 billion people have risen out of extreme poverty since 1990, underscoring the clear linkage between increased trade capacity and poverty reduction. The WTO is ensuring that citizens of all nations can participate in and benefit from global trade by providing a new road, source of employment or new exported goods.

The WTO indirectly affects poverty by facilitating the growth in trade that has brought about significant decreases in poverty. Increased trade brings employment and infrastructure to communities that never would have seen them without their nations’ entry into the global economy. Through its programs, the WTO affects poverty on a large scale by ensuring that the global trade market is just that, truly global.

Garrett O’Brien
Photo: Flickr

Trade in Bangladesh

Increased global integration has happened in Bangladesh as a result of domestic policy changes and the ability to take advantage of emerging opportunities in the international market. The increasing openness of the country’s economy reflects this. With the trend of Bangladesh devoting foreign aid towards project aid, foreign assistance has been playing a key role in increasing trade in Bangladesh.

Aid for Trade in Bangladesh by the World Trade Organization

Trade liberalization is not enough as many developing countries are still unable to take full advantage of it due to a lack of proper infrastructure and the relation between aid and trade flows. As a result, the concept of Aid for Trade (AfT) emerged in 2005 as an effort to assist developing countries to overcome supply-side constraints and improve trade capacity. This initiative also included economic infrastructure and productive capacity-building.

Aid for Trade in Bangladesh has helped strengthen its trade-related supply-side capacities through technical and financial support from various bilateral and multilateral development partners. Bangladesh had received a significant amount of trade-related assistance even before the institutionalization of AfT in 2005.

Over the years, AfT disbursements in Bangladesh have increased from $376.2 million in 2006-2008 to $910.1 million in 2015. As of 2015, the top AfT disbursement donors were Japan with $359.5 million, IDA with $292.4 million, AsDB Special Funds with $88.8 million, the United States with $50.6 million and Korea with $35.2 million. Most of these disbursements went to energy generation and supply, followed by transportation and storage, and agriculture, forestry and fishing.

By 2015, exports of goods increased by 183 percent and commercial services increased by 81 percent. Import of goods increased by 164 percent and commercial services increased by 220 percent, reflecting the increase in trade in Bangladesh.

Bangladesh Regional Connectivity Project 1 by World Bank

On December 7, 2017, the World Bank signed a $150 million agreement with Bangladesh to improve trade-related infrastructure, systems and procedures so that Bangladesh could increase trade regionally with India, Bhutan and Nepal.

The Bangladesh Regional Connectivity Project 1 will develop and improve four land ports – Bhomra, Sheola, Ramgarh and Benapole, which are key ports for regional trade, especially with India. The modernization of these ports will not only increase trade in Bangladesh and its freight volumes but also lessen truck clearance times at border posts. For instance, the expectation is that clearance time will decrease by 83 percent in the Bhomra port.

According to Qimiao Fan, World Bank Country Director for Bangladesh, Bhutan and Nepal, “By addressing the key barriers to trade, especially transport and clearance delays, Bangladesh can become more competitive regionally and globally, and reach more emerging and dynamic markets with diversified product mix, including higher-value garments.”

The project will also develop a National Single Window, a single electronic gateway, through which traders can submit all import, export and transit information needed by the Customs and other regulatory organizations. Not only will it reduce transaction time and costs but also increase transparency in international trade procedures.

The project will also initiate skills development programs to include more women in formal trade networks and global value chains, while also developing the necessary infrastructure, logistics and transport services for women.

Trade Finance Program (TFP) by Asian Development Bank

ADB’s TFP provides guarantees and loans to banks in order to support trade and fill the gaps in trade financing. The program works with over 200 banks to provide financial support to companies so they can actively participate in exports and imports in the challenging markets of Asia. The program supports transactions of commodities and capital goods to medical supplies and consumer goods.

This program has been working with Bangladesh since 2004 and has been involved with 13 local partner banks. It has conducted around 1,983 transactions in total, supporting trade in Bangladesh worth $3.1 billion and benefiting 966 small and medium-sized enterprises in various sectors ranging from food and agricultural goods to commodities and industrial machinery, capital goods and more.

Dutch-Bangla Bank Ltd. (DBBL) in Bangladesh partnered with the bank of TFP in 2009 and signed an agreement on February 22, 2018, to receive $10 million in loans annually from the program to support and increase trade in Bangladesh.

Multilateral and bilateral trade preferences towards Least Developed Countries have played an important role in increasing trade in Bangladesh, specifically the growth of exports, and as a result, the contribution of export-oriented sectors towards the country’s GDP, employment and investment. With diversified programs from development partners, the expectation is that the quality, volume and transparency of trade will increase for Bangladesh.

– Farihah Tasneem
Photo: Flickr

The end of 2015 has proven to be the time to shift focus. Worldwide, countries have shifted from the Millenium Development Goals (MDGs) to the Sustainable Development Goals (SDGs). On a smaller scale, Australia is shifting focus in its aid programs.

Aid for Trade was launched in 2014 with a two-year budget of $823 million. Its main agenda is based on the idea that “no country has achieved high and lasting growth without participating in international trade.”

According to the Australian Government’s Department of Foreign Affairs and Trade (DFAT), “aid for trade supports the aid program’s key objectives of reducing poverty and lifting living standards through sustainable economic growth.”

The Aid for Trade investment from 2014-15 was used to build productive capacity in agriculture, economic infrastructure and trade policy and regulations.

According to the EUROPA, through continued innovations in how aid is tackled, various governments and organizations have found that trade is able to:

  • Boost development and reduce poverty
  • Enhance competition
  • Open access to new markets and new materials
  • Encourage innovation
  • Expand business opportunities and removes barriers to new markets
  • Expand choice and lowers prices for consumers
  • Cut government spending
  • Strengthen ties between nations
  • Create new jobs

As 2015 comes to an end, Australia’s Aid for Trade program moves into a new year of helping developing countries boost their economies through trade. DFAT estimates its budget to be $698 million for 2016.

When considering what to expect from the new year, one must look to the past. Over the few years of the aid for trade program, more women have been empowered, trade has been increased, infrastructure and finances have been improved, along with health and agriculture.

One example of an Australia Aid for Trade success story from DFAT states that, “Australia worked with the World Bank and other donors to help Lao PDR undertake the necessary trade reforms to join and benefit from WTO membership. As part of the reforms, Laos reduced the clearance times for goods by non-customs agencies by 42 percent.”

According to DFAT, “Aid for Trade supports developing countries’ efforts to better integrate into and benefit from the global rules-based trading system, implement domestic reform, and make a real economic impact on the lives of their citizens.”

Katherine Martin

Sources: 1, Europa, 2
Photo: Wikimedia

Does WTO's Aid for Trade Reduce Poverty?
Aid for Trade is a holistic approach to incorporating developing economies into global trade networks by assisting them in increasing exports and market access. Aid for Trade was initiated at the WTO Ministerial Conference in 2005, and the program has since increased its scope to include building production capacity (financial services, businesses, and industry), trade-related infrastructure (communications, energy, transportation), and trade policy and regulations.

When the Aid for Trade initiative began, it was unclear whether it would receive funding or be successful. Now that it has been implemented for over a decade, it is time to reexamine the links between trade, development, and poverty reduction that Aid for Trade aims to strengthen.

The principle behind Aid for Trade is that increased trade should benefit inhabitants of developing countries, whether or not they are directly involved in the program. One Aid for Trade program teaches Ugandan farmers how to grow and process dried fruit to be sold into the European cereal market. The farmers involved should benefit from increased income, market access, and productivity, and Uganda should benefit from increased exports.

Most evaluations of the effectiveness of Aid for Trade programs take place within 18 months of a given program’s initiation. This is not enough time to measure whether the program has truly been successful at reducing poverty in a sustainable way. Additionally, evaluations often do not take into account a program’s impact on those not involved; how did the fruit-growing education program impact farmers who did not receive additional training and support?

A new study on European trade assistance aid, commissioned by NGOs Traidcraft and the Catholic Agency for Overseas Development, suggests that there may be “hidden losers” to Aid for Trade initiatives. For example, South African fruit growers increased exports to Europe after trade sanctions were lifted. They earned higher wages and improved their standard of living. However, the demand for cheaper fruit also caused some growers to lower wages and to replace full-time employees with temporary, often migrant workers, who did not enjoy the benefits.

The study also found that the majority of trade assistance goes to middle-income countries rather than to the least developed countries (LCDs) that Aid for Trade is directed towards. Little evidence exists to prove Aid for Trade’s effectiveness in reducing extreme poverty; this is likely a result of short-term program evaluations that take place before real impact can be measured, as well as lack of donor interest in, and therefore funding for, impact evaluations.

Overall, there are many obstacles to determining whether or not Aid for Trade has been successful thus far. More thorough, accurate, and long-term evaluations of poverty rates are necessary in order to determine the tangible successes or failures of Aid for Trade.

– Kat Henrichs

Sources: OECD, International Center for Trade and Sustainable Development, The Guardian
Photo: European Commission

Can Aid For Trade Reduce Poverty?In 2005, the World Trade Organization (WTO) launched its Aid for Trade initiative, which works to reduce poverty in developing countries through trade. In most developing countries, supply-side and trade-related infrastructure problems hinder the ability to participate in international trade. The Aid for Trade initiative works to educate governments on the potential for trade to work towards development.

The World Trade Organization has managed to raise $200 billion worth of funding for the initiative that will go towards resource mobilization, the mainstreaming of trade into development plans and programs, regional trade integration, private-sector development, and the monitoring and evaluation of Aid for Trade. Emphasis is placed on gathering support and resources to counter constraints that deter trade in developing countries. Aid for Trade works on the assumption that “a rising tide floats all boats,” meaning that as national wealth increases, the poor will profit as well.

Some NGOs, however, question the viability of this method in reducing poverty. A study was commissioned by Traidcraft and the Catholic Agency for Overseas Development to look into the real impacts of these projects on the poor. Saana Consulting reported that most of the funding had gone to middle-income rather than low-income countries. They had also found that the program had little impact on the poor, calling the assumption that it will have an effect “a leap of faith.”

Donors have admitted that impacts are indeed difficult to track. Adaeze Igboemeka, head of Aid for Trade at the UK Department for International Development, concedes that there is indeed a lack of information, as the programs impacts on poverty are seemingly indirect.“The assumption,” Igboemeka said, “is – and there is a lot of evidence to support it – that if a country is able to trade more, it will grow, and that will create jobs and increase incomes and lead to poverty reduction.”

The consensus seems to be that, generally, trade is good. However, for now, there is not enough information and time to accurately project its impact on poverty reduction.

– Rafael Panlilio

Sources: The GuardianWTO