Aid for Trade

By Kevin Abraham

Reading through a couple of African business magazines, I see that one topic of discussion is about a couple of UK initiatives in terms of foreign aid. In a nutshell:

  • Approval of £228m in foreign aid to Ethiopia in its 2019/2020 budget, with the aim of developing infrastructure, and building “clean and sustainable energy” in several Ethiopian cities.
  • The allocation of £30 million to fund “training and mentoring to up to 10,000 budding female entrepreneurs and business women across Africa” with the stated goal of sharpening their business management skills.
  • Negotiated partnerships with several banks across Africa as a means to help incentivise lower borrowing rates for entrepreneurs and small businesses – with a focus on women. 
  • Facilitate a structure that will utilise the experience and expertise of business leaders in the UK and elsewhere in order to facilitate development in Africa and other emerging markets.

The UK’s stated goal is to help build, improve, and support infrastructure and expertise in developing countries, thereby creating better trading partners for Britain.

It sounds like a good idea, but it’s not a new one. The context is “Aid for Trade” – a World Trade Organization (WTO) initiative which has as its core strategy the goal of “encouraging developing country governments and donors to recognize the role that trade can play in development”. That initiative was launched in 2005/6, and it is a work in progress, regularly evaluated and evolving. It is not without its proponents and detractors – as we would expect.

With the understanding that the elements of Aid for Trade are quite complex, here’s my summary of it: 

Essentially, it’s about “providing financial and technical assistance to developing countries, especially the least developed countries (LDC’s), to help them build up their supply-side capacity and strengthen their trade-related infrastructure to enable them to produce and trade more”. (WTO)

  • Technical assistance — helping countries to develop trade strategies, negotiate more effectively, and implement outcomes.
  • Infrastructure — building the roads, ports, and telecommunications that link domestic and global markets.
  • Productive capacity — investing in industries and sectors so countries can diversify exports and build on comparative advantages.
  • Change assistance — helping with the costs associated with tariff reductions, preference erosion, or declining terms of trade.

That seems to tie in quite neatly with the UK’s initiative. In fact, quite recently, UK’s Department of International Trade delivered an official clarification: It intends to utilise funds to “help developing countries learn from UK expertise on trade deals and attracting foreign investment.” (BBC)

Challenges are many, but the idea resonates with me: “Rather than having developing countries dependent on the largesse of rich countries, we want them able to get sustainable development and trade their way out of poverty, and one of the ways in which we can do that is to give them the skills that will attract the investment into their country… to develop some of those attributes that helped us get investment into the UK and helps them get investment on a stable basis.” [DIT]

Just thinking:  Will Brexit accelerate this type of UK aid?  It might – and it could be quite a good thing. 

[Nod: Kede, S –  African Business Magazine, BBC, Google, DIT]