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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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Trade Objectives of the Aid for Trade Initiative

The WTO Hong Kong Ministerial Declaration clearly makes the expansion of developing countries’ trade the core objective of the Aid for Trade Initiative. However, as emphasised by the Task Force on Aid for Trade the purpose of the Initiative is not to support trade per se, but trade inasmuch as it contributes to growth and poverty reduction. This chapter examines the four objectives which are among the most common and mirror those that find strong support in the trade and growth literature.

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