Regional perspectives on aid for trade

222 Pages·2014·6.3 MB·English

by  OECD

The Development Dimension T
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Regional Perspectives on Aid for Trade D
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p The Development Dimension
Following up the OECD’s joint work with the WTO on aid for trade, this book examines how policy reforms m
and aid for trade can be most effective for achieving economic growth, poverty reduction and development. e
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Once a country has identifi ed the most binding constraints to its trade expansion, it should implement reform t D
designed to tackle these specifi c constraints, making sure that the reform is both sustainable and supported im Regional Perspectives
by complementary reforms that will increase the impact on economic growth. This analysis is supported by e
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detailed econometric work underlining the importance of tackling a broad range of issues that impinge on the s
io on Aid for Trade
successful design and sequencing of aid for trade. It is made more concrete by a careful examination of the n
conditions for success in groups of developing countries with particular characteristics: landlocked countries,
small and vulnerable economies, and commodity exporters.
Contents
Overview
Chapter 1. Regional aid for trade in a broader context
Chapter 2. How aid for trade facilitates regional co-operation
Chapter 3. Strategies for mainstreaming regional aid for trade
Chapter 4. Case study of Southeast Asia
Chapter 5. Case study of the Economic Community of West African States
Chapter 6. Case study of Mesoamerica
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Consult this publication on line at http://dx.doi.org/10.1787/9789264216037-en. a
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This work is published on the OECD iLibrary, which gathers all OECD books, periodicals and statistical databases.
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ISBN 978-92-64-21602-0
43 2014 05 1 P

The Development Dimension
Regional Perspectives
on Aid for Trade
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Pleasecitethispublicationas:
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FOREWORD –

Foreword
Increased trade of goods and services has played a big part in the enormous
development progress we have seen over the past decades. China alone has lifted more
than 600 million people out of poverty after they opened up their economy in the late
1970’s and surged ahead to become the world’s largest exporter. But there is still much
progress to be made. Global incomes could be increased by USD 400 billion simply by
improving trade rules. Aid for Trade has been a great success and contributed to increased
trade in developing countries.
As we approach the deadline for the implementation for the Millennium Development
Goals, it is becoming increasingly important to provide regional perspectives on the post
2015 development agenda. Progress achieved in the implementation of Millennium
Development Goals has been mixed. We see that different regional circumstances require
different approaches. The need to adapt global goals to regional and national ones will
therefore be an important part of the new post 2015 sustainable development goals. This
report on regional approaches to aid for trade is therefore timely and offers practical
advice on how developing countries can set regional priorities and co-ordinate better with
their neighbours. It is also important that development assistance providers align behind
the priorities of developing country governments to promote regional integration. The
beginning of a new railway connecting landlocked Burundi, Rwanda, South-Sudan and
Uganda with the Kenyan port town of Mombasa is a great example. This Chinese funded
project will cut transport costs in half, increase regional trade and improve access to the
sea and global trade for four landlocked East African countries.
The same factors that contribute to higher trade costs also inhibit regional integration.
While there is significant theoretical and empirical evidence to support the view that
developing countries can accrue huge benefits from regional cooperation, the
‘groundwork’ of economic integration needs to be in place. This includes transport
networks and other infrastructure, human-resource capacity, trade facilitation, and a
trade-enabling environment for regional integration. In just five years, exports from
Colombia, Mexico and the Central American countries increased by 50% as a result of
regional efforts to improve infrastructure and regulatory frameworks. The USD 155
billion of added trade is more than the combined gross domestic products of Belize, Costa
Rica, El Salvador, Guatemala, Honduras and Nicaragua!
The degree to which countries can benefit from regional integration will be a function
of whether they can effectively overcome such trade constraints. As regional
development banks and regional economic commissions have long argued, there is a
strong case for regionally focused Aid for Trade. For example, the case study on the
Economic Community for West African States shows that African countries have for
many years embraced a variety of bilateral and regional accords. Still, there is much room
for improvement, with intra-African trade remaining well below its potential.
REGIONAL PERSPECTIVES ON AID FOR TRADE © OECD 2014
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–FOREWORD
Studies have underlined that African countries could improve regional integration
with measures related to hard and soft infrastructure, capacity, trade-related information
and contacts, and trade facilitation related issues. Governments, it seems, also tend to be
hesitant about funding projects ifthey are unable to capture all the benefits themselves. In
addition, implementing regional strategies is complicated by membership of overlapping
regional organisations, lack of implementation of regional agreements, poor articulation
within national strategiesand national and regional capacity constraints.
Yet when developing countries work together and donors support their efforts, the
case studies and case stories in this book show that aid for trade initiatives can be
effective. As we have seen in Asia and Latin-America, regional aid for trade programmes
can help promotegrowth that embraces profits, people and planetary concerns. In the post
2015 development agenda, aid for trade will have a key role to play and in particular in
addressing the constraints to regional integration and development.
Erik Solheim
Chair of the Development Assistance Committee
REGIONAL PERSPECTIVES ON AID FOR TRADE© OECD 2014
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ACKNOWLEDGEMENTS–
Acknowledgements
This study was made possible by a generous grant from the European Union. The
principal consultant and main author of this study was Michael G. Plummer, Professor of
International Economics, the Johns Hopkins University, SAIS Europe. Consultants for the
project included Alissa Tafti (now at the International Trade Commission),
RebeccaFreeman (the Johns Hopkins University, SAIS), and Michael Cornish
(University of Adelaide). The case studies were undertaken by Federico Macaranas
(Professor, Asian Institute of Management), Bernardin Senadza (Senior Lecturer,
University of Ghana),and Jorge A. Tovar (Associate Professor of Economics, Los Andes
University, Bogota), who were authors of Chapters 4, 5, and 6, respectively. The study
benefited from extensive input at all phases of the project from DCD staff, in particular
from Frans Lammersen, William Hynes, and Ann Gordon.
Earlier drafts of the study were presented at several international conferences, from
which the study team was able to receive extremely useful input. These conferences
included the OECD Policy Dialogue on Aid for Trade (January 2013, Paris), the WTO
Fourth Global Review of Aid for Trade (July 2013, Geneva), the Bali Trade and
Investment Forum at the WTO Ninth Ministerial Meeting (December 2013, Bali), and the
Experts Group Meeting on Regional Aid for Trade (December 2013, Bologna). The study
benefitted greatly from ideas and suggestions from the very diverse views of participants
at these meetings, including public officials from OECD, emerging-market, and other
developing countries; international organisations; aid-related organisations; private-sector
representatives; aid for trade experts; and NGOs.
The study also profited from the numerous stakeholders consultations undertaken in
Africa, Latin America, Asia, Europe, and the United States for the project. Insights
gleaned from these consultations proved to be invaluable. In particular, the study team
would like to thank Steven Groff (ADB), Antoni Estevadeordal, (IDB),
JoaquinTresViladomat (IDB), Ganeshan Wignaraja (ADBI), Alisa DiCarprio (ADB),
Mia Mikic (ESCAP), Alfredo Perdiguero (ADB), Michael Roberts (WTO),
MatthewWilson (ITC), Luciana Garcia Nores (IDB), Lilia Mercedes Cordoba
(APC-Colombia), Ramesh Subramaniam (ADB), Jerry Odotei (National Development
Planning Commission, Ghana), Michael Assibi (Ministry of Foreign Affairs and Regional
Integration, Ghana), Obideyi Gbenga (ECOWAS), Kolawale Sofola (ECOWAS),
VictorHugo Arellana (SIECA), Reinaldo Morales (OIRSA), Jesús del Barrio Mañas
(UE), Rene Rivera (IICA), Walter Leyva (SICA), S.K. Alabo, Lydia Amartey
AlaindeRemes, Alejandro Guevara, Alejandro Sarasti, Alexandra Thorsberg,
ÁngelAlberto Arita, Carolina Ramirez Patiño, Diego Gonzalez, Fransico Olivett,
JorgeAsturias, Juan Carlos Montufar, Laura Escalante, Maria L Ortiz, Martha Zamora,
Moises Arquímedes, Regina Vargas, Sandra Orozco, Silvia Constain, and
MariaConcepción Alvarez.
REGIONAL PERSPECTIVES ON AID FOR TRADE© OECD 2014

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TABLE OF CONTENTS–
Table of contents
Acronyms and abbreviations.........................................................................................................11
Executive summary........................................................................................................................17
Overview..........................................................................................................................................19
Chapter 1 Regional aid for trade in a broader context................................................................33
Introduction...................................................................................................................................34
The economics of aid for trade.....................................................................................................36
Trade, structural change and development...................................................................................37
Why regional aid for trade matters in fostering development.......................................................41
Regionalism and development......................................................................................................41
Static and dynamic effects of regional co-operation.....................................................................43
Regional co-operation and integration..........................................................................................45
Conclusions...................................................................................................................................53
Notes.............................................................................................................................................53
References.....................................................................................................................................54
Chapter 2 How aid for trade facilitates regional co-operation...................................................59
Introduction...................................................................................................................................60
Boosting value chains via regional aid for trade...........................................................................62
Regionalism and production networks in developing economies.................................................64
What do partners report as main challenges?................................................................................70
Meeting the regional challenge: Situating regional aid for trade in overall flows........................73
Notes.............................................................................................................................................80
References.....................................................................................................................................81
Annex 2.A1 Regional aid for trade flows by commitments..........................................................82
Chapter 3Strategies for mainstreaming regional aid for trade..................................................87
Introduction...................................................................................................................................88
Regional aid for trade summary and synthesis of the case stories................................................88
Conclusions...................................................................................................................................94
Notes...........................................................................................................................................104
Annex 3.A1 Multi-country and regional aid for trade projects...................................................105
Economic infrastructure..............................................................................................................105
Building productive capacity......................................................................................................108
Trade policy and regulations.......................................................................................................115
Trade-related adjustment............................................................................................................124
Chapter 4Case study of Southeast Asia......................................................................................125
Introduction.................................................................................................................................126
Regional co-operation and integration initiatives in Southeast Asia..........................................128
Opportunities and challenges in regional integration.................................................................132
REGIONAL PERSPECTIVES ON AID FOR TRADE© OECD 2014
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Regional aid for trade in Southeast Asia.....................................................................................135
The case stories...........................................................................................................................141
Creating a higher profilefor regional aid for trade.....................................................................145
Co-operation and competition strategies....................................................................................148
Good practices............................................................................................................................149
Conclusions.................................................................................................................................152
Notes...........................................................................................................................................155
Annex 4.A1 Lessons learnt from case stories on binding constraints in Asia.............................157
Chapter 5Case study of the Economic Community of West African States...........................161
Introduction.................................................................................................................................162
Regional co-operation and integration initiatives in Africa........................................................163
Regional co-operation and integration initiatives in West Africa...............................................164
Regional aid-for-trade in ECOWAS...........................................................................................167
Summary.....................................................................................................................................174
Challenges to regional aid for trade in ECOWAS......................................................................175
Lessons learnt.............................................................................................................................178
Conclusions.................................................................................................................................179
Notes...........................................................................................................................................180
References...................................................................................................................................181
Chapter 6Case study of Mesoamerica........................................................................................183
Introduction.................................................................................................................................184
Mesoamerica in the global context.............................................................................................184
Aid for trade in Mesoamerica.....................................................................................................194
The status of regional and multi-country projects......................................................................201
Implementation issues and challenges of aidfor trade in Mesoamerica.....................................205
Lessons learnt.............................................................................................................................209
Conclusions.................................................................................................................................212
Notes...........................................................................................................................................216
References...................................................................................................................................218
Tables
Table 2.1. Overview of constraints to intra-and extra-regional trade.......................................71
Table 4.1. SWOT matrix for increasing regional aid for trade to ASEAN.............................145
Table 5.1 Exportsof ECOWAS to the ECOWAS sub-region and the rest of the world........166
Table 5.2. Sub-regional aid for trade disbursements...............................................................168
Table 5.3. Aid for trade flows to ECOWAS sub-region, 2006-11..........................................169
Table 6.1. Roads in Mesoamerica (2009)................................................................................191
Table 6.2. Infrastructure, business and trade facilitation indicators........................................194
Table 6.3. Aid for trade strategy priority ranking....................................................................197
Table 6.4. Project distribution per sector.................................................................................201
Table 6.5.A. Mesoamerican FTA agreements compared to rest of world...................................214
Table 6.5.B. Trade agreements within Mesoamerica..................................................................215
Table 6.5.C. Infrastructure, business and trade facilitation indicators: Mesoamerica.................215
REGIONAL PERSPECTIVES ON AID FOR TRADE© OECD 2014