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Abstract:
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World trade ministers met during the 6th World Trade Organisation (WTO) Ministerial Conference in Hong Kong, China in December 2005 and reaffirmed that Aid for Trade should aim at helping developing countries, particularly LDCs, to build the supply-side capacity and trade-related infrastructure that they need to assist them implement and benefit from WTO Agreements and more broadly to expand their trade. This was in recognition to the fact that many poor countries see limited benefits from the round unless their supply-side capacity constraints are addressed. Others fear that they only stand to lose from preference erosion under multilateral liberalization, and that they would have to forego scarce fiscal revenue or suffer other adjustment costs. Addressing these concerns is an important part of ensuring overall success of the Doha Round and a strong and effective multilateral trading system both of which are very much in the interests of poor countries as well as of the global trade community as a whole. In order to reach the MDGs, growth must be accelerated in many countries. Trade can be an important engine of growth, but many poor countries lack the basic infrastructure to trade and face considerable supply-side constraints in participating in global markets. These difficulties can be compounded by own trade policy settings that create disincentives to enter international markets, such as maintenance of high unbound tariff. It is agreed that subsequent trade and associated economic policy reforms will require adjustment both economical and social costs especially from the conclusion of the Doha Development Round. For instance taking advantage of improvements in market access will entail additional domestic policy reform to facilitate trade as well as trade-related capacity building. In addition to addressing Institutional weaknesses a country like Malawi needs to tackle supply-side constraints of the economy that are crucial for it to diversify its production and export base, raise productivity and competitiveness, produce and market its products competitively and thus integrating in the global trading system. In this paper we identify Malawi’s economic and political rational for it’s “aid for Trade” and thus spell out conditions for its effective implementation. We argue that “aid for trade” should not be piecemeal, should be properly directed based on proper needs assessment. These needs include; capacity building for Malawi’s effective participation within the international trade, infrastructure development and human knowledge. We indicate that “aid for trade” will create more impact and achieve its objectives if its demand-driven, based on perceived capacity deficiencies and priorities of the recipient country in our case Malawi, we thus argue that the recipient country should take an upper hand in designing the implementation of this assistance. The paper puts forward a number of proposals for effective implementation and utilisation of “aid for trade” for Malawi, which include; utilisation of existing structures on the basis of Integrated Framework (IF) principles i.e. promotion of emerging aid framework, greater donor harmonisation (both bilateral and Multilateral), and provision of aid in the context of a country’s overall development strategy and poverty reduction objectives. Thus meaningful Aid for Trade for Malawi should be tailored to address the needs beyond those identified under the IF Diagnostic Trade Integration Study (DTIS) as it does not generally take into consideration vital infrastructure such as Roads, Energy, health and education etc which are the real impediments to production in LDCs. In addition Aid for Trade should differ from the IF process in terms of donor response after the identification of priority areas. |