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.

Executive Summary 1. Background -Background -Trade for growth -The Aid for Trade Initiative 2. Trade objectives of the Aid for Trade Initiative -Trade Objectives of the Aid for Trade Initiative -Increasing trade -Diversifying exports -Maximising linkages with the domestic economy -Increasing adjustment capacity 3. Increasing the benefits of trade for the poor -Trade, growth and poverty: the role of Aid for Trade -Connecting the poor to markets -Trade and inequality -Mitigating the costs of adjustments -Global approaches, local solutions 4. Constraints on expanding trade -Binding constraints on trade expansion -Available diagnostic tools and methods -The growth diagnostics framework adjusted for trade 5. Conclusion