. 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), 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=100.

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.

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  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 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$, log) OLS DB - Time in export customs (in days, log) (0.324)(0.425)(0.366)(0.401) DB - Time in import customs (in days, log) (0.322)(0.431)(0.384)(0.448) DB - Total export time (minus customs, days, log) (0.557)(0.392)(0.481) DB - Total import time (minus customs, days, log) (0.507)(0.451)(0.478) AFT – Hard Infrastructure (Current US$, log) 0.195* *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) (0.124)(0.132) (0.117)(0.126) Population (log) (0.324) (0.314) GDP (current, log) (0.512) (0.509) Imports (current, log) (0.606) (0.635) Exports (current, log) (0.450) (0.449) Landlocked dummy * ** * (0.453)(0.578)(0.437)(0.463)(0.490)(0.547)(0.432)(0.447) Number of countries R