Doha Development Agenda Aid for Trade and the Doha Development Agenda Aid for Trade and Economic Partnership Agreements Burgers Park Hotel, Pretoria 23-24 August 2006 Mark Pearson

Introduction AfT debate – Feb 2005 G7 Ministers - WB/IMF 2005 Spring Meetings – consultative process in Geneva in WTO – WB/IMF paper Sept 2005 – HK Declaration on AfT Dec 2005 – Task Force recommendations – suspension of negotiations – loss of momentum at multilateral level? Concept not new. However, emphasis on targeted removal of trade-related supply-side constraints and emphasis on trade as a development tool is new. Programming of EDF10 resources under Regional Indicative Programmes could be used as Aid-for-Trade pilot programmes.

Aid for Trade and EPAs Why EPAs? Cotonou Agreement not WTO-compatible so need to replace with either negotiated EPAs or GSP. EPAs being negotiated by 6 regions – Caribbean, Pacific and 4 in Africa. Dev. & Trade components. EPAs will incur losses (tariff revenues) and costs (putting systems in place). Development component of EPAs to be partly financed through EDF10. Additional resources to come from elsewhere (EU Member States and WB?). Direct link between allocation of EDF10 monies and EPAs. To allow multiple donors EDF10 needs a new flexibility in disbursement procedures.

Aid for Trade and EPAs First tranche EDF10 allocations for Africa total €1.2 billion with the following regional allocations: SADC-7 €135 million Central Africa € 93 million West Africa €478 million Eastern and Southern Africa €465 million These monies are being programmed through the Regional Indicative Programmes (RIPs). Second tranche allocations will be done before RIPs become operational. All RIPs have, as their main focal area, regional economic integration and trade.

Aid for Trade – Coverage and Scope Coverage: country and sectoral Scope: Trade Related TA and Capacity Building Adjustment Facility: allow countries to continue with trade liberalisation - remove short-term budgetary constraints (caused by tariff reduction or changes in terms of trade, including preference erosion, social costs and higher food costs. Not a compensatory programme. Budget support. Removal of supply-side constraints: leveraged fund to address trade-related infrastructural constraints to reduce trade costs.

Aid for Trade – Operational Modalities Emphasis on HOW to finance not WHAT to finance. EPAs are open-ended but EDF10 covers the 2008-2013 period. Priorities will change over time. Funding mechanism – budget support and contribution agreements should be flexible enough to ensure adequate flexibility of an EDF-financed AfT programme. AfT facility should be leveraged so it can use EDF grants, EIB (and other) concessional loans, other grant funds and funds from the private sector in the form of BOO, BOT, PPP, SPVs, etc. Architecture will depend on what is financed.

Aid for Trade – Additionality of Resources In AfT debate lot of emphasis on additionality of resources. What is as important as additionality of resources is ensuring the resources are made available to ACP countries in a simple, efficient, and timely manner, without sacrificing transparency or accountability. Although there has been an improvement with the introduction of the Contribution Agreements, getting access to EDF funds is both extremely difficult to manage, and extremely bureaucratic. If the public sector is to work with the private sector it is important to be able to guarantee the availability of a sum of money in a short space of time, with minimum bureaucracy involved.

Aid for Trade – Conclusions Reduced momentum for AfT under WTO. EDF10 RIP programming process could be used as a pilot AfT programme. Main focal sector is regional economic integration and trade – can best be addressed through AfT programme. Contribution Agreements could provide the flexibility needed for co-financing/leverage. An EDF AfT programme in support of EPAs would need strong linkages with PRSPs and IF. Additionality of resources needed. The AfT Facility could be used to finance Trade Related TA and CB; an Adjustment Facility and removal of trade-related supply-side constraints.