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Trade for Growth and Poverty Reduction

How Aid for Trade Can Help

image of Trade for Growth and Poverty Reduction

Trade promotes economic growth, alleviates poverty and helps countries reach their development goals. However, developing countries – in particular the least developed – face difficulties in making trade happen and turning trade into economic growth. The Aid for Trade Initiative – launched at the 2005 World Trade Organisation conference in Hong Kong – aims at helping these countries to take advantage of trade opportunities and to reap the benefits of their integration into the world economy. The Initiative has been a success: it has not only raised awareness among both donors and developing countries about the role of trade in development, but also helped secure increased resources.

Trade for Growth and Poverty Reduction: How Aid for Trade Can Help explains how Aid for Trade can foster economic growth and reduce poverty, and why it is an important instrument for a development strategy that actively supports poverty alleviation. Unlocking this potential requires carefully designed and sequenced trade reforms. While developing countries have many trade-related needs, but financial resources and political capital for reforms are limited, it is an important priority to tackle the most binding constraints to trade expansion. This report describes the diagnostic tools available, evaluates their strengths and weaknesses, and suggests a dynamic framework to guide the sequencing of reform and donor support.

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Acknowledgements

This report was written by Jean-Jacques Hallaert ([email protected]) of the OECD Trade and Agriculture Directorate and Masato Hayashikawa ([email protected]) of the OECD Development Co-operation Directorate, under the supervision of Doug Lippoldt and Bill Nicol. It was commented by the joint meeting of the OECD Development Assistance Committee and the Working Party of the Trade Committee. The authors are grateful to John Smith for editing the report, to William Hynes, Gimin Kang, Frans Lammersen, Laura Munro, and the participants of the Fourth China-ASEAN Forum on Free Trade and Poverty Reduction in Guilin, China, for their valuable inputs and comments on earlier drafts, and to Isabel Huber for editing support. Valuable assistance was provided by Jacqueline Maher of the OECD Trade and Agriculture Directorate, and by Sandra Hassine and Susan Hodgson of the OECD Development Co-operation Directorate.

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