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Aid for Trade at a Glance 2015

Reducing Trade Costs for Inclusive, Sustainable Growth

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The Aid for Trade Initiative has allowed for the active engagement of a large number of organisations and agencies in helping developing countries and especially the least developed build the infrastructure and supply-side capacity they need to connect to regional and global markets and improve their trade performance. The new development paradigm under the post-2015 Development Agenda requires an integrated approach to ensure that the aid for trade achievement leads to inclusive and sustainable development outcomes. Embedding trade cost at the centre of the Aid for Trade Initiative provides an operational focal point for such action among a broad collation of stakeholders.

The 2015 joint OECD/WTO publication Aid for Trade at a Glance focusses on how reducing trade costs will help in achieving inclusive and sustainable economic growth. The publication contains contributions from the Enhanced Integrated Framework, the International Trade Centre, the United Nations Conference on Trade and Development, and the World Bank.

 

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Why trade costs matter for inclusive, sustainable growth

International trade is not a seamless process. “Frictions” abound that give rise to trade costs. High trade costs effectively nullify comparative advantage by rendering exports uncompetitive. High trade costs deny firms access to technology and intermediate inputs, preventing their entry into, or movement up, global value chains. High trade costs also erode consumer welfare narrowing the range of good and services on offer and pushing up prices. While trade costs do not alone explain the development pathways of economies, they are a major factor explaining why some countries are unable to grow and diversify. The range of policies that affect trade costs is broad. Although trade costs are ubiquitous, they are not immutable. Action can, and is, being taken to reduce trade costs. Policy reforms are yielding positive impacts, although these cannot be assumed, with research suggesting that the lowest income countries stand to gain the most from enacting such reforms. Much work remains to be done to reduce trade costs further and integrate countries more completely into the global economy, but there are positive reasons to believe that developing countries and their partners are taking this issue seriously.

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