Aid for Trade - does it help the poor?

Since the World Trade Organization launched its Aid for Trade initiative in 2005, an estimated US$200 billion dollars of development funding has been mobilized for the programme. But some NGOs are asking whether Aid for Trade really helps reduce poverty.

Two of those NGOs, Traidcraft and the Catholic Agency For Overseas Development, commissioned a study of British and European Aid for Trade assistance, looking at whether the donors have assessed the impacts of these projects on the poor.

The study, carried out by Saana Consulting, points out that the majority of funding goes to middle-income countries rather than low-income countries, and finds little evidence to demonstrate what impact the programmes have had on poverty.

The study reveals most reviews are completed within the lifetime of a project or at the end - too soon to see any real impact. It adds that “by and large, causal linkages between what a project delivers and the impact on poverty are based on a series of assumptions, and in some cases a leap of faith.”

Little known about poverty effects

The assumption underlying Aid for Trade is that “a rising tide floats all boats,” that more trade brings greater national wealth, and that everyone - including the poor - will benefit.

Liz Turner, one of the study’s authors, does not dispute this notion. She says that, generally speaking, trade is good. But, she says, “looking at the effects of Aid for Trade in the long term, we end up defaulting back to macro-economic analysis and this issue around the winners and losers from growth. Even if you know that the net effects of a project are going to be positive, wouldn’t it be wiser to find out if there are going to be any losers?”

Aid for Trade supports all kinds of projects: road building and port upgrading, providing technical support for trade negotiations and regulatory frameworks, designing better border posts, and teaching Ugandan farmers how to produce dried fruit for the lucrative European breakfast cereal market. But only the latter kinds of projects are likely to get evaluated for their effects on poverty reduction.

Kerry Hamilton manages the UK’s Food Retail Industry Challenge Fund, which supports such projects. She told IRIN, “The whole idea is that by doing this, there will be a developmental impact on the farmers and workers involved in that trade. All our projects have a monitoring and evaluation framework, and we ask for baseline data and a set of indicators against which we can measure its success.

“The difficulty is in the time scales. Projects included in our fourth round of funding have to be completed within 18 months, and by the end of that period, the impact on poverty is going to be minimal. Ideally we should go back in two years’ or five years’ time, but because of the way the funding works, once the project has finished we probably won’t.”

Hidden losers

Asked by IRIN for an example in which trade support was shown to have an impact on poverty, the head of Aid for Trade at the UK Department for International Development (DFID), Adaeze Igboemeka, cited a project to speed border and customs procedures in the Democratic Republic of Congo.

“What it focused on was gender and the informal traders,” Igboemeka said. “We used methods like changing the actual structure of the border offices, adding glass panels. Officials working at the border were less likely to ask for bribes, and some of the sexual violence that affects women traders - we saw a very important decrease there. And just having clear procedures made it easier for poor, informal traders to trade.”

But at a meeting to discuss the study at the Overseas Development Institute (ODI) in London, ODI researcher Yurendra Basnett used border post projects as an example of aid that produces losers as well as winners, notably in the communities that spring up to provide services to people waiting at congested borders.

“I was involved in designing a project in South Sudan aimed at improving customs administration,” said Basnett. “Now, from improving customs capacity, how do you go to saying this will have a poverty impact? In the long term it may, and you can make these assumptions, but it is a massive leap of faith, and there are tensions… Now if, for example, you are working on a border post and reduce the transit time from three days to three hours, then a lot of informal traders lose their livelihoods.”

The University of Manchester also found both winners and losers emerging from trade programmes. After trade sanctions on South Africa were lifted in the early 1990s, its fruit growers became major exporters and a lot of work was done to meet the standards demanded by European supermarkets. Growers were under pressure meet social standards, which had some positive effects for workers, including higher wages and the provision of clinics.

But the demand for cheaper produce also led growers to cut staff and use more temporary workers, often migrants from Zimbabwe or Mozambique, who are paid less and enjoy fewer benefits.

Not enough information

Donors admit that poverty impacts are very hard to track, especially for broader attempts to support trade.

William Hynes, of the Organisation for Economic Co-operation and Development (OECD), says most smaller donors don’t even attempt to evaluate these impacts. They only monitor that the money was spent on what it was intended for.

“Impact evaluations are costly. They are burdensome, lengthy, and not necessarily aligned with the project managers’ incentives. They do help get across this idea that we should prioritize learning over accountability. But getting at the poverty impacts of a project would probably involve a household survey. A baseline and final survey for 500 households would cost around $300,000, so for most activities that is simply off the table straight away.”

And Igboemeka concedes that, in most cases, the effects of Aid for Trade on the poor are difficult to nail down. “The poverty impact is indirect, and we are very clear about that. The assumption is - and there is a lot of evidence to support it - that if a country is able to trade more, it will grow, and that will create jobs and increase incomes and lead to poverty reduction. That’s a very long results chain, so we don’t try to make a direct attribution of the direct poverty reduction impact. We don’t have enough information to do that robustly.”

All this uncertainty worries campaigners like Gareth Siddorn of Traidcraft. “I know Aid for Trade is just one part of an aid portfolio,” he told IRIN, “but I was struck by the recognition, by colleagues from both DFID and OECD, that it might not be the most effective way of directly benefitting poor people. And from an NGO perspective, that isn’t just one indicator among many - it’s the primary purpose of aid and development policies.”

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