UK’s Aid for Trade Strategy

Claire DurkinDirector, Europe,

International Trade & Development

UK Government

“Free trade, one of the greatest blessings which a Government

can confer on a people, is in almost every country

unpopular”

Thomas Macaulay, 1824

For Growth and Development

• Trade and Investment• Economic policy• Development policy• International relations• International and internal scrutiny• Labour standards• Environmental policies

“Everything is connected to everything else”Albert Laszlo Barabasi

Trade and Investment

• Erodes “Import” “Export” bi-polars• Challenges RTAs• Not an option e.g.

India’s 11th 5 year plan: Infrastructure investment must rise from 5% GDP (06-07) to 9% (2011-12)

Global FDI and Trade

Increasing Stock in World FDI and Trade Flows

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1995 1997 1999 2001 2003 2005

World stock of FDI

Annual world trade

$bn

The Present

Average developed world tariffs• 1.7% goods• 5% agricultural products

Average developing world tariffs• 6.4% goods• 13% agricultural products

NTBs, Regulatory barriers.

“Protect” “Nurture” “Defend”

Reducing Poverty

Developing countries share of trade rises as Developing countries share of trade rises as

global integration intensifies…global integration intensifies…

0

5

10

15

20

25

30

1980 2005 2030

US$2001 trln.

Source: World Bank simulations with Linkage model; GEP 2007.Source: World Bank simulations with Linkage model; GEP 2007.

Exports from developing and developed countries, 2005-2030Exports from developing and developed countries, 2005-2030

Developing countries

High-income countries

$27 trln

32%

45%

22%

Structure is changing: Structure is changing: South as source of demandSouth as source of demand services services

the Good, the bad and the Ugly

• UK’s North Sea policy

• EU Common Agricultural policy

• British Empire’s cotton policy.

UK Aid For Trade Strategy

Increasing capacity within developing countries to trade and integrate successfully into the global economy whilst easing the costs of adjustment

The Challenges

• Cutting transport costs• Upgrading trade-related

infrastructure• Increasing regional trade &

integration• Expanding, diversifying & adding

value to agric & manufacturing• Improving trade & investment climate• Managing adjustment

High Transport Costs

• Trucks at the Petrapole–Benapole border between India and Bangladesh 10 days – fruit/ vegetable exports for poor producers

• Transport costs in East Africa on average 80% higher than USA & Europe

• It costs as much to move a freight container from Mombassa to Kampala as it does from Mombassa to Shanghai

• In Rwanda, the average import procedures124 days.

OECD average 12 days.

Regulatory Frameworks

• In South Asia, existing bilateral transit agreements and regulatory frameworks for cross border and rail transport prohibit best route to market

• Lack of transit rights through Bangladesh: India’s North Eastern states’ trade additional 1,300 km to a journey from Calcutta to Agartala.

Bariers to Regional Trade

• Regional trade 5% in Africa, 46% in NAFTA, 55% in East Asia and 62% in the EU

• Internal barriers, weak infrastructure inter-connectivity and high transport costs – in South Asia, barriers are also strongly political

Reduced border delays & faster movement goods

• (COMESA), the East African Communicty (EAC) and the Southern African Development Community (SADC) Regional Aid for Trade initiative, cut transport costs along North South Transport Corridor (DRC to Tanzania and DRC to South Africa) by 10% by the end of 2009

• Zambia and Zimbabwe One Stop Border Post in Africa at the Chirundu border. Setting up a OSBP between South Africa and Mozambique, and has been asked to support five more

• Trade Investment Facility in Lesotho, the One Stop Shop, export applications processed in 15 minutes rather than 7 days. Exporters fill in 2 pages of forms instead of 23.

Improved customs performance

Rwanda reduced transit times and improved revenue collection.

• Revenue Authority nearly tripled tax revenue over five years, despite falling tax rates

• Increase in poverty reduction expenditure from 5.3% of GDP in 2001 to 10.1% of GDP in 2005

Increased exports & income

• Regional Trade Facilitation Programme (RTFP): Southern Africa increase exports of nuts, tea and coffee by 1500 tonnes (2006-7

• Licensing programme secures trademarks for Ethopia’s fine coffee brands in 28 countries.

Productivity and Standards

• Lesotho, ComMark programme to enhance productivity in garments industry; employment of 50,000 people.

• In Bangladesh, compliance with labour and health standards: 600 factories have completed audits improved productivity a 14% increase in sales turnover of assisted companies

• Fisheries export in Mozambique supports 70,000. Regional Standards Programme helped maintain EU standards accreditation

UK AFT COMMITMENTS

Strategic Objectives

• Build countries’ capacities to trade through growth & competitiveness strategies

• Ensure trade results in poverty reduction & inclusive growth

• Facilitate regional trade & integration, and ensure that EPAs are beneficial for the ACP

• Build an international system that delivers more and better AFT

… THEMATIC ALLOCATIONSUK Aid for Trade expenditure profile 2008 -13

Trade policy & regulations (including

trade facilitation, customs

modernisation, regional integration

15%Economic infrastructure

(including ICA, IPPF, EIB Trust Fund and contributions via

multilaterals)45%

Productive capacity building and adjustment

(including private sector development,

investment climate and trade development)

40%

… Geographical SpreadUK Aid for Trade geographical spread

Africa55%

Rest of the World15%South Asia

30%

Deliverables• Delivery of EU G8 AFT spending targets - $4 billion per year and €2

billion per year by 2010

• A successful EIF up and running and delivering real trade-related technical assistance and support to LDCs. Contribution of £38 million over five years with £15.5 million over the first two years

• Concrete plans and support for a 2nd phase EIF covering non-LDC, IDA-only countries by end of CSR period

• A robust global monitoring framework on AFT (global indicators, regular reports, annual global WTO-led review, best practice, etc.), developed jointly with the OECD, World Bank, WTO, RDBs and other donor partners.

Delivery Challels

• Programmes in countries and in regions • Core contributions to multilateral partners• Multilateral trust funds • International partnerships

Think tanks, NGOs and academia • International agencies • Regional economic and integration

institutions

UK Spend through Multilaterals

April 2008 – March 2011:

£1.15 billion (70% of overall UK spend)

• £676 million to EU.• £472 million to World Bank and R.D.Bs.

“Multilat is Hell”Victoria Nuland, quoted by Strobe Talbott

Victoria Nuland, quoted by Strobe Talbott

Managing Multilateral Funding

SymphoniesQuartetsSonatas

but who holds the baton?

COUNTRIES MUST

CODA• Aid for Trade to enable developing

countries benefit from economic climate.

• Our challenge as leaders, as trade negotiators, as Governments, as economists, is to change the economic climate.

• Never Take Open Markets For Granted

AlgeriaLibyaMorocco MauritaniaTunisia

AMU

GhanaNigeria Cape Verde

Gambia

ECOWAS

Benin NigerTogo Burkina FasoCote d’Ivoire

Conseil de L’Entente

Guinea-Bissau Mali Senegal

WAEMU

Liberia Sierra Leaone Guinea

Mano River Union CLISS

CameroonCentral African Rep.GabonEquat. GuineaRep.Congo

Chad

Sao Tomé & Principe

ECCAS

CEMAC

Angola

Burundi*Rwanda*

Egypt

DR Congo

DjiboutiEthiopiaEritreaSudan

Kenya*Uganda*

Somalia

Tanzania*

EAC

South AfricaBotswanaLesotho

Namibia*Swaziland*

Mozambique

SACU

Malawi*Zambia*Zimbabwe*

Mauritius*Syechelles*

Comoros*Madagascar*

Reunion

IOC

*CBI

SADC

COMESA Nile River Basin IGAD

AMU: Arab Maghreb UnionCBI: Cross Border InitiativeCEMAC: Economic & Monetary Community of Central AfricaCILSS: Permanent Interstate Committee on Drought Control in the SahelCOMESA: Common Market for Eastern and Southern AfricaEAC: East African CooperationECOWAS: Economic Community of Western African StudiesIGAD: Inter-Governmental Authority for GovernmentIOC: Indian Ocean CommissionSACU: Southern African Customs UnionSADC: Southern African Development CommunityWAEMU: West African Economic & Monetary Union

Overlapping African agreements…Overlapping African agreements…

BilateralsWe give advice but we do not influence

people’s conduct ”Rochefoucauld

• Baldwin – making RTAs mutually compatible

• Model FTAs• Role of WTO

Multilaterals

DOHA DEVELOPMENT

ROUND

Future World Trade Rounds

Movement of Capital

Movement of Labour

Development, Standards, Climate Change = Global Responsibility

To move from Georgics to Aeneid

Ever the Optimist

It moves, all the same.

Galileo