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OECD Creditor Reporting System (OECD CRS)

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Monitoring Aid for Trade

The WTO Task Force on Aid for Trade recommended establishing two accountability mechanisms to track progress in implementing the initiative and to enhance its credibility; at the local level, to foster genuine local ownership and ensure that trade needs are integrated into national development strategies and adequately addressed; and at the global level, to increase transparency about what is happening, what is not and where improvements are required.

Following these recommendations, the OECD and the WTO established an aid for trade monitoring framework. The objective of the framework is to promote dialogue and encourage all key actors to honour commitments, meet local needs, improve effectiveness, and reinforce mutual accountability.

The WTO and OECD periodically review aid for trade to monitor what is happening, what is not, and where improvements are needed. This transparency helps to underwrite progress in the Aid-for-Trade Initiative, facilitating dialogue and holding all stakeholders to account. The monitoring provides general impressions and allows progress to be assessed at the global level. It is based on self-assessment, complemented by independent evaluation findings and academic research.

The original aim of monitoring was focused on the measurement of flows, raising awareness about the role of trade in development and creating a community of best practice. It has subsequently evolved to examine implementation, effectiveness and results. Since 2007, the monitoring framework has broadened the global aid-for-trade partnership. Efforts to monitor aid for trade have been successful with strong participation from the donor community, partner countries and providers of South-south cooperation.

The WTO has decided that Global Value Chains and Private Sector Development will be the central themes of the 4th Global Review of Aid for Trade which will took place in July 2013. This will explore how aid for trade is supporting private sector development activities in developing countries, and in particular LDCs, in the context of expanding global and regional value chains. Other themes such as Regional Trade integration and the Impact of aid for trade will remain important. The sub-section below reviews the OECD contribution to monitoring. This includes providing a quantitative assessment of donor support through reporting of aid-for- trade flows and qualitative assessment of partner country and donor agency engagement based on local accountability and global review. The last sub-section concludes that the approach to monitoring has worked but it must continue to evolve to meet the changing demands of the aid-for-trade community.

OECD Contribution to Monitoring Aid for Trade

The OECD report on Aid for Trade: Making it Effective published in 2006, provided the parameters of the aid- for-trade monitoring effort. The report suggested that aid for trade should be guided by the Paris Principles of Aid Effectiveness. The Paris Declaration committed countries and organisations to increase efforts in harmonisation, alignment and managing aid for results with a set of monitorable actions and indicators. One of the key issues that the Task Force had to investigate was a definition of aid for trade. In the end, the accepted definition was based on the Paris Principles. Projects and programmes should be considered as aid for trade if these activities have been identified as trade-related development priorities in the recipient country’s national development strategies, e.g. trade-related infrastructure, adjustment and technical assistance (WTO, 2006b). Such definitions enable partner countries to tailor aid for trade to their national conditions and needs and enable better management of the programmes which are designed to achieve the desired results. The benchmarks below were selected. They include ODA for:

  • Technical assistance for trade policy and regulations: for example, helping countries to develop trade strategies, negotiate trade agreements and implement their outcomes;
  •  Trade-related infrastructure: for example, building roads, ports and telecommunications networks to connect domestic markets to the global economy;
  • Productive capacity building (including trade development): for example, supporting the private sector to exploit its comparative advantages and diversify its exports;
  • Trade-related adjustment: helping developing countries with the costs associated with trade liberalisation, such as tariff reductions, preference erosion, or declining terms of trade; and,
  • Other trade-related needs: if identified as trade-related development priorities in partner countries’ national development strategies (OECD/WTO, 2009:52).

Tracking the flows

The official collection of aid-for-trade data originated from a decision made by WTO members at the Joint OECD/WTO Trade Capacity Building meeting on 4 May 2007. It was decided to use the OECD-DAC Creditor Reporting System (CRS) for the collection and monitoring of the broader aid-for-trade agenda instead of the Trade Capacity Building Database (TCBDB) which catered for the more specialised reporting on trade-related technical assistance and capacity building (TRTA/CB). The CRS aid activity database, contains detailed quantitative and descriptive data on individual aid projects and programmes. CRS data are used to analyse the sectoral and geographical breakdown of aid for selected years and donors, to examine aid that promotes specific policy objectives (gender equality, environmental sustainability, untying, aid for trade) and monitor donors’ compliance with various international recommendations in the field of development co-operation.

The CRS data are the unique source for official, standard and comparable statistics on Official Development Assistance. The OECD Development Assistance Committee (DAC) collects aid flows at activity level through the annual DAC Questionnaire. The data collection is based on a standard methodology and agreed definitions. Detailed information on ODA eligibility, classifications and collection methods are given in the Reporting Directives. Data can be used to analyse trends and compare the efforts of donors. Governments, organisations and researchers make frequent use of it, and for the OECD, the CRS serves as a tool for monitoring specific policy issues, including aid for trade. The Reporting Directives undergo constant review and scrutiny by the DAC Working Party on Statistics. Classifications (e.g. DAC List of ODA Recipients, DAC List of ODA- Eligible International Organisations, DAC sector/purpose classification) are updated on a regular basis.

The categories of aid for trade used for the purpose of tracking flows are often confused with the definition of aid for trade. Consequently, many commentators have made the case that the “definition” of aid for trade is too broad and this diminishes its effectiveness. The objective of monitoring flows was to assess additionality and to hold donors who made pledges at the Hong Kong Ministerial to account.[1] The starting point for this discussion was that it was impossible to define a priori what constituted aid for trade e.g. a component of an infrastructure project may be trade-related but it may also have other objectives.[2] Therefore a set of broad proxies in the CRS were selected corresponding to the categories listed above. Furthermore, members of the OECD Working Party on Statistics agreed to modify the CRS to accommodate the collection of aid-for-trade data by adding a trade-related adjustment code and a policy marker for trade development activities.

Local Accountability and Global Review

The implementation of the monitoring would be based on two accountability mechanisms: the first at national or regional level and the second at a global level. Local accountability involved the strengthening of local ownership and management for results. The Global Review would review progress at the regional and national level, provide a forum for corrective feedback and ensure that the needs identified at the local level – whether financial or performance related – are addressed. The WTO-OECD Monitoring Framework was established based on these two dimensions to help track progress in the implementation and enhance the credibility of the Aid-for-Trade Initiative.

The objective of the monitoring framework is to promote dialogue and encourage all key actors to honour commitments, meet local needs, improve effectiveness and reinforce mutual accountability. The value of this joint OECD-WTO monitoring framework lies in creating incentives through enhanced transparency, scrutiny and dialogue so as to foster synergies between trade and other economic policy areas in developing countries and improve the coherence of aid for trade with overall donor strategies. These are all essential components of effective aid delivery as embodied in the Paris Declaration on Aid Effectiveness (OECD/WTO, 2011). The various different elements of the monitoring mechanism can be described using a logical framework which ties together demand, response, outcomes and impact.

The logical framework to assess whether progress is being made towards the desired aid-for-trade goals consists of the following four elements:

  1. mainstreaming and prioritising trade (demand)
  2. trade-related projects and programmes (response)
  3. enhanced capacity to trade (outcome)
  4. improved trade performance and reduced poverty (impact)

Demand is obtained through partner-country self-assessments based on an OECD-WTO partner country questionnaire. In addition, these assessments also provide information about mainstreaming trade in development strategies, trade-related priorities, the delivery of aid for trade and co-operation between partner countries and donors.

Assessment of the response consists of the following:

  • Quantitative information (i.e. aid-for-trade flows) on trade-related projects and programmes is extracted from the OECD DAC Creditor Reporting System (CRS) database for the categories that are most closely related to the WTO Task Force definition.
  • Qualitative information concerning the response is derived from donor self-assessments, based on an OECD-WTO donor questionnaire. These self-assessments highlight the progress made by donors in developing operational aid-for-trade strategies, the extent to which these are implemented in line with the Paris Declaration on Aid Effectiveness, and the different steps taken to improve the quality of aid-for- trade programmes.

Trade-related outcomes such as improved logistics, lower transport costs, higher productive capacity and ultimately more trade are examined through trade-related indicators outlined in aid-for-trade factsheets, evaluation findings and eventually in 2011 a series of aid-for-trade case-stories (see below). Impacts are the longer term contribution of trade to development objectives such as poverty reduction and these can be assessed using the Millennium Development Goals.

Conclusions

The monitoring process has largely achieved its objectives. The OECD and WTO have put in place a credible and useful monitoring mechanism, vindicating the original recommendations of the WTO Task Force on Aid for Trade. Over the years the mechanism has been refined and expanded. The approach has succeed because monitoring has not been a passive activity, it has been complemented and reinforced by an active review process - one that promotes change by submitting feedback to donor and partner countries, providing an environment for dialogue, knowledge-sharing, exchange of good practice and information on trade-related assistance programmes.

In the last monitoring exercise, questions were asked about the usefulness of the global-level monitoring. The response was very supportive. Donor agencies almost universally consider the monitoring either very useful or useful. Providers of South-South co-operation and partner countries also view the exercise positively (WTO/OECD, 2011). The next monitoring exercise will further expand the reach of the spotlight to also cover the private sector. This poses new challenges for the aid-for-trade community and new strategic partnerships will be required to ensure a sufficient response rate from private sector actors. The next round of monitoring will provide a valuable update on where aid for trade stands, it will offer new approaches being developed to improve results, regional programmes and discuss ways to help developing countries to connect to global value chains.

 

[1] Specific pledges were made by the United States, Japan and the European Union. However some of these pledges may have been contingent upon a successful Doha outcome. Nevertheless, the Aid for Trade at a Glance Report in 2009 indicated that the Hong Kong pledges were successfully met.

[2] The LDC submission to the WTO Task Force expressed reservations about this practice, i.e. “OECD does not distinguish between what could be narrowly defined as a trade-related infrastructure from more general multi-purpose infrastructures. Under that practice, figures for infrastructure seem to be exaggerated”. However it would be extremely difficult to identify specifically the trade-related component in every project.

Selected TCB programmes and initiatives in this guide

Not listed in any categories