The discussion on Aid for Trade (AfT) started towards the end of the World Trade Organisation's (WTO) Uruguay Round. The importance of trade for development was emphasised by the international community at the 2002 UN Conference on Financing for Development in Monterrey, Mexico. In 2005 the United Nations (UN) Millennium Project Task Force on Trade examined what developing countries could gain from the Doha Development Round and concluded that AfT was an essential part of the package and specifically recommended that such funding be additional to current aid flows. A dedicated WTO Task Force developed recommendations for AfT which were adopted by the WTO General Council in October 2006.
However, definitions of AfT still differ significantly, with donors focusing on a narrow definition which comprises of trade development and trade policy and regulations, while the WTO Task Force, in which developing countries had a strong voice, adopted a wider definition, including trade-related infrastructure, building productive capacity, trade-related adjustments and other trade-related needs. Given that different players refer to one or the other definition, it is difficult to measure the amounts spent in this area. A further obstacle in collecting data lies in the fact that the official databases are not completely reliable. Therefore the exact figures should be looked at with caution and should only be used as guidance. Pledges to increase spending are equally problematic, given that there is no certainty regarding the current level of funding in this area and for which definition. For this research, data has been analysed exclusively for the European Union, particularly the European Commission, the Netherlands, the United Kingdom and Belgium. These donors appear to start from the assumption that trade expansion and liberalisation leads to economic growth, which ultimately should reduce poverty. AfT is being pushed to help stimulate this growth. The EU joint
AfT Strategy does also acknowledge that AfT should have a pro-poor focus. It is important to keep in mind that, for growth to be pro-poor, it must benefit the poorest sections of society proportionately more than it benefits the better-off1. More often then not, small producers are part of this poor section of society in developing countries and this is the sector that has been chosen as a focus in this paper. However, although the EU institutions have repeatedly acknowledged the strategic importance of small producers and their strategic role in alleviating poverty, it appears that this importance is neither reflected in the AfT policy approach nor in the reality of funding.
European Commission
The European Commission's (EC) main focus for AfT seems to be extremely large regional projects, supporting non-Less Developing Countries (LDCs) and supporting the top end of the production chain. This appears to be in stark contrast to the EC's information policy: In 2006, the Commission published a brochure about their activities in this area, presenting 14 case studies of EC trade-related assistance2. 7 of these examples were supporting small producers. Another brochure, published in 2008, presented 18 case studies of EC trade-related assistance. In 8 of these examples, small producers and local market development were mentioned3. Both these documents give the impression that EC AfT helps particularly these groups. However, it has been found that between 2001- 2005 only 2% of AfT from the EC went directly to help small producers.
United Kingdom
While nearly 50% of past United Kingdom (UK) funding is open to small producers to benefit from, it seems from an evaluation into its past AfT activities that only a small number of projects had an explicit focus on poverty reduction and being pro-poor.4 Small producers were mentioned in a number of projects but there was no rationale of focusing on these groups and therefore in practice small producers may not be able to benefit from the aid in a meaningful way. 'This ambivalence may reflect internal discussions within DFID (Department for International Development) on the benefits of adopting a broader enabling approach supporting mostly large producers who can more easily access foreign markets vs. a more focused approach developing the export capacity of small producers'.5
The Netherlands
Although the Netherlands (NL) hints at the importance of supporting small producers and pro-poor growth, the government has a more pro-growth focus, encouraging the increase in overall exports. This also indirectly benefits small producers but only a few amongst a number of economic operators. As with the other donor strategies studied in this research, this lack of focus on small producers and encouraging pro-poor initiatives could leave them vulnerable due to lack of resources, to being left out of decision making processes and not being able to know about projects and programmes they could take advantage of.
Belgium
Having said that, some EU Member States have nevertheless put a special focus on small producers and local trade development in the past and have included them in their AfT strategies. In Belgium (BE), for example, small producers are one of the two priority groups and it seems that 14% of past AfT (2001-2005) was directly targeted at them. Small producers experience numerous supply side constraints, and there are many interventions and pro-poor policy measures that could be created to help overcome these constraints and stimulate pro-poor growth. These range from support to developing and strengthening producer organisations, access to pre-financing and micro-financing to general policy changes that are supportive of small producers. Already there is a wide range of examples that could be used as best practices in how to develop pro-poor measures and as a way of helping small producers overcome their supply side constraints. This research focuses on a few case studies to draw attention to the wide range of projects that have been funded under AfT and to highlight that all four donors have at some point funded a few projects that support small producers even if the overall proportions are small. Impact assessments have found some of these projects to be successful: They show that support to small producers can increase their efficiency to trade, build local markets, empower entrepreneurs and help them to trade themselves out of poverty. As a recent study from the World Bank states, 'as far as formulating programmes during this time of economic crisis, local conditions matter a lot...Any kind of [aid] packages have to reach the local level in a way that people will have access.'6
RECOMMENDATIONS
General Policy
1．To help reduce poverty, encourage pro-poor growth and reach the Millennium Development Goals as objectives of AfT, any AfT strategy must be directed towards and benefit the poor sectors of societies. This means AfT should encourage local, national and regional market development and not only focus on enhancing export orientation. AfT must expressly address the production and trading constraints affecting the sectors and industries important to the poorest groups.
2．To make sure that small producers and communities benefit from AfT, they should be involved at all levels of decision making, including designing of projects that are not directly targeted at them. At present it is difficult to see how they are involved, apart from the small amount of projects that are directly designed for them. Otherwise, AfT projects could miss possible development impacts for this important sector or exacerbate negative outcomes.
3．It is important to focus on developing and uplifting supply 'value chains' with a pro-poor focus. This focus encourages all actors in the chain to build together a sustainable supply chain. Any AfT project should build a framework that encourages the development and support of all in the supply chain. 4 Following extensive consultations, this paper recommends that any AfT strategy should include measures that provide support to small producers through: ‧ Developing and strengthening associations and cooperatives so they can build institutional and productive capacities. This support to cooperatives may enable smallholders to be empowered, increase awareness and participate in trade, e.g. through bulking and facilitating access to standardised EU markets, through advocacy and lobbying, through negotiating prices and through purchasing inputs in large quantities; ‧ Access to pre-finances to help fund inputs and grants to work towards compliance with standards and regulations through micro-financing institutions and innovative financial services; ‧ Access to pre-financing for the purchase of inputs and to trade financing for marketing purposes, via existing micro-finance institutions; as well as access to grants to improve compliance with standards and regulations; ‧ Access to cost effective transport and improved infrastructure and technology; ‧ Access to information to monitor changes in processing and consumer demands in export markets, as well importing channels, market price information systems, competition and business opportunities; ‧ A general policy change: national and regional policies that are supportive of small producers, Micro and Small Enterprises (MSEs) and the informal sector and that encourage the Fair Trade principles including fair wages, labour rights, and environment practices.
European Union
5．The EU's AfT strategy fails to address the needs of small producers. Even though the EU institutions have repeatedly acknowledged the strategic importance of these groups for sustainable development and overcoming poverty in developing countries, the strategy does not provide a basis for a pro-poor EU AfT approach. This is a missed opportunity, given that many EU Member States are still in the process of developing their own AfT strategies and should have been supported by a forward-looking EU approach. Therefore, the EU AfT strategy should be revised to include more systematically support to small producers and other poor sectors of society.
European Union Member States
6．Each EU Member State needs to develop a demanddriven AfT strategy with measurable targets that has a specific focus on empowering the poor population, especially small producers. The demands from small producers described in this research can be used as a basis of what is needed. Some EU Member States have supported small producers and local trade development in the past, such as the Belgian government, and have included them explicitly in their AfT strategies. These can be taken as benchmarks and a starting point for future strengthening.
Southern Governments and European Union
Delegations in the South
7．Efforts should be made to ensure that small producers are truly represented at national stakeholder meetings when discussing issues such as trade and development. Many issues and constraints that they face are unique to them and their voice should be part of the development of further strategies and for the allocation of funds.
Methodology of Aid for Trade
8．The expansion of the definition of AfT reflects the priorities of developing countries. There needs to be an increase in volume of aid to the 'wider definition' of AfT, as requested by the WTO AfT Taskforce. These categories, specifically infrastructure and productive capacities, are also important for small producers to take advantage of and are part of the demands of small producers.
9．There needs to be clarity in the conceptual and operational dimensions of AfT. To be effective there needs to be a more specific definition with clear objectives and funding commitments for each of the categories. AfT needs more quantitative and micro-level monitoring and evaluation. The most effective forum for this clarity is the WTO.
10．There needs to be a more systematic collection of data that includes not only quantitative but also qualitative information. The most comprehensive database has still proved it difficult to get a full picture of past AfT spending. The categories are too loose, meaning that information in actual AfT spending could be misrepresented. The fact that this research had to develop its own categories shows this huge gap, and means that other researches will have to do this in future, leading to possible squired results. There is a great need for transparency and accountability to go hand-in-hand with monitoring, that is conducted at all levels, and includes all stakeholders, with special attention to small producers. |
