.

Aid For Trade: Next Steps 

 Jaime de Melo&

Laurent Wagner 

July 1, 2015

Regional Infrastructure for Trade Facilitation - Impact on Growth and Poverty Reduction

Reducing Trade Costs remains the key objective for AFT

Landlocked Low Income Countries (LL-LICs) have been losing ground over the past 15 years, their trade costs having fallen by only 2 percent while trade costs have been falling more rapidly for all other country categories.

Figure 1 : Calibrated Trade Costs (group averages), 1996-2009

Source: Authors construction based on Arvis et al. (2013)Note: The figure shows average trade costs for goods with respect to the 10 largest importing countries, by World Bank income groups, 1996-2009, 1996=100.

1996199719981999200020012002200320042005200620072008200985

90

95

100

105

Landlocked LICNon-landlocked LIC

Reducing Trade Costs remains the key objective for AFT

Time to import is also much higher for landlocked low income and least developed countries

Figure 2 : Time in Import & Export Customs in LL-LICs & nonLL-LICs in 2015.

0.1

.2.3

.4D

ens

ity

0 5 10 15Days in Import Customs (Doing Business data)

LL-LICs nonLL-LICs

17 LL-LICs & 21 nonLL-LICs

Source:Data from Doing Business 2015.

Time in Import Customs

0.1

.2.3

.4D

ens

ity

0 2 4 6 8Days in Export Customs (Doing Business data)

LL-LICs nonLL-LICs

17 LL-LICs & 21 nonLL-LICs

Source:Data from Doing Business 2015.

Time in Export Customs

Use the Trade Facilitation Agreement to Direct AFT to Least-Developed Landlocked Countries

The TFA is the opportunity for AFT to move beyond the narrow focus on accountability towards a management framework that can track the results of AFT interventions. 

The TFA explicitly recognizes that technical assistance will be required for some LDCs that will then link their commitments to the receipt of technical assistance and support for capacity building.

The TFA has been signed by all WTO members so that it is rules-based rather than discretionary with specified appeal and review procedures.

Progress on many TFA objectives can be monitored by indicators lending themselves to targets.

Different approaches all point towards reduced trade volumes and lost time resulting from delays as goods travel from factory to consumer.

By taking the TFA seriously, AFT would contribute towards the post-2015 development agenda. By concentrating disbursements in LDCs and especially in LL-LDCs where import (and export) times are the longest, AFT would contribute towards the objective of an inclusive growth.

Use the TFA to Direct AFT to Least-Developed Landlocked Countries By focusing resources on Least Developed Countries, especially Landlocked LDCs, aid for 

trade and more specifically aid for trade facilitation should contribute to the post-2015.

However, preliminary evidence shows that aid for trade facilitation allocation is weakly correlated with trade facilitation indicators.

Table 1: Determinants of the geographical allocation of aid for trade facilitation disbursements in 2013.

Note : AFT disbursements. Each specification includes a constant and 5 regional dummy. * p<0.1; ** p<0.05; *** p<0.01. Robust standard errors in parenthesis.Source: WDI, OECD and Doing Business team

Aid for trade and aid for trade facilitation should be directed where it is the most needed.    

Dependent : AFT – Trade Facilitation (Current US$, log) 1 2 3 4 5 6 7 8 OLS OLS OLS OLS OLS OLS OLS OLSDB - Time in export customs (in days, log) 0.256 0.639 0.165 0.328 (0.324) (0.425) (0.366) (0.401) DB - Time in import customs (in days, log) 0.181 0.322 -0.126 -0.206 (0.322) (0.431) (0.384) (0.448)DB - Total export time (minus customs, days, log) -0.923 -0.232 -0.271 (0.557) (0.392) (0.481) DB - Total import time (minus customs, days, log) -0.303 0.266 0.311 (0.507) (0.451) (0.478)AFT – Hard Infrastructure (Current US$, log)     0.195* 0.178     0.208* 0.204*     (0.114) (0.117)     (0.118) (0.119)AFT – Soft Infrastructure (Current US$, log)     0.401*** 0.312*     0.391*** 0.287*     (0.133) (0.178)     (0.138) (0.172)AFT – Trade Policy (Current US$, log)     0.098 0.005     0.119 0.038     (0.124) (0.132)     (0.117) (0.126)Population (log)       0.110       0.095       (0.324)       (0.314)GDP (current, log)       0.179       0.212       (0.512)       (0.509)Imports (current, log)       0.380       0.271       (0.606)       (0.635)Exports (current, log)       -0.342       -0.247       (0.450)       (0.449)Landlocked dummy 0.604 1.073* 0.674 0.955** 0.589 0.710 0.463 0.768* (0.453) (0.578) (0.437) (0.463) (0.490) (0.547) (0.432) (0.447)Number of countries 113 113 106 89 113 113 106 89R2 0.101 0.125 0.420 0.480 0.099 0.101 0.420 0.478