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Aid for Trade: Integrating global value chains

16 January 2013

Today’s post from Gunnar Oom, State Secretary to Sweden’s Minister for Trade Ewa Björling, is the last in a series published to coincide with the 2013 Dialogue on Aid for Trade taking place at the OECD on January 16-17, in collaboration with the Government of Sweden and the Overseas Development Institute, with the support of the European Commission.

Sweden has a vision of an international trading system that embraces all nations of the world, not only those that are already well-off. That is why free trade coupled with trade-related development cooperation is a priority for the Swedish Government. This is also why I, as State Secretary to the Swedish Minister for Trade, am pleased that Sweden is co-arranging this Policy Dialogue on Aid for Trade in Paris on 16–17 January.

Economic growth, including trade and market development assistance, continues to be a priority for Swedish development cooperation. Economic growth is a prerequisite for combating poverty, and so trade, leading to increased growth, can be a powerful tool for reducing poverty.

The overall target of Swedish Aid for Trade is to strengthen the least developed countries’ integration in world trade and their ability to take advantage of the opportunities of the multilateral trading system. Swedish Aid for Trade also aims to support and promote responsible business practices in accordance with the UN Guiding Principles on Business and Human Rights, the principles of UN Global Compact and the OECD Guidelines for Multinational Enterprises. There is a connection between trade and social and environmental concerns. Responsible business practices, with companies that follow international guidelines and the principles of corporate social responsibility, CSR, can increase the impact of Aid for Trade.

This is also why the engagement of the private sector in the Aid for Trade framework is crucial. It is essentially companies, not governments or countries, that trade with each other. It is firms that know what challenges they face when it comes to market access and integration in global production networks. Access to export markets is essential for low- and middle-income countries to develop their trade and make use of the potential for increased growth that trade can offer.

Sweden’s own vision of Aid for Trade has been bold since the adoption of the Aid for Trade recommendations. Between 2010 and 2011, Sweden almost doubled its Aid for Trade disbursements to trade-related assistance, from SEK 592 million to SEK 1.1 billion. We have scaled up and stepped up, and will continue to be an ambitious free trade nation.

The Swedish International Development Cooperation Agency (Sida) is instrumental in transforming our ambitions on Aid for Trade into action. It bases its work on the demands and needs of partner countries and Sweden’s comparative advantages.

The Swedish National Board of Trade is another important Swedish actor in Aid for Trade. As the Swedish expert authority, the National Board of Trade builds capacity in trade-related areas such as rules of origin, trade facilitation, technical barriers to trade and WTO matters. The National Board of Trade hosts Open Trade Gate Sweden, a one-stop information centre for exporters in developing countries.

Looking ahead, it is important to focus on the quality of Aid for Trade in order to ensure that resources are used efficiently. Global efforts on Aid for Trade must be efficiently monitored and evaluated.

The principles of ownership and donor coordination in the Paris Declaration are central. Sweden is increasingly moving towards joint integrated trade programmes, channelling funds through co-funded programmes with other bilateral donors, multilateral organisations, regional development banks, research networks and universities, and Swedish trade support agencies and institutions.

We also need to become better at linking our efforts to reality on the ground – to the possibilities and constraints faced by poor women and men. Understanding the long- and short-term linkages between trade and poverty as well as the gender dynamics behind these linkages will help us address the challenge of making trade a powerful engine for poverty reduction.

A large part of trade today takes part within value chains. This means that the production of goods and services is fragmented and separated in different parts of the world. Value chains underline the need and importance of open markets, not least the importance of imports. Though not a new phenomenon, value chains have become increasingly visible. Reduced costs for trade, transport, international standards and new communication and technology solutions have fostered international production networks and increased specialisation.

Value chains offer opportunities for low- and middle-income countries to access global markets and integrate with the world economy. They have decreased the importance of access to raw materials and a large domestic market. I believe this is how we need to see value chains in the Aid for Trade context: value chains can attract investment in low- and middle-income countries, competitiveness can be highlighted, production can be advanced and specialisation can be promoted.

At the same time, value chains impose increased demands for smooth cross-border trade, so that goods do not get stuck at borders. Integration in the value chain means meeting increased quality-related demands such as certification requirements, as well as requiring well-functioning institutions and infrastructure.

Moreover, value chains highlight the need for services, the glue of the value chain. Services such as research and development, commercial services and marketing, transports, logistics etc. are central. These requirements are likely to have positive effects throughout the economy, leading to increased growth in low- and middle-income countries.

So Aid for Trade should be used to oil the process of integration in the global economy, to address the obstacles to integration in the value chain faced by low- and middle-income countries.

Important challenges lie ahead in ensuring the efficiency of Aid for Trade. May the OECD Policy Dialogue be an inspiration to us to continue to discuss and shed light on how results can best be achieved and evaluated. Input from our partner countries as well as the private sector is crucial. Sweden will continue to make every effort to ensure that Aid for Trade is a driving force for development!

Useful links

Sweden provides a voluntary contribution to the OECD project on aid for trade, global value chains and trade facilitation, which will published a two-page brief on Trade Policy Implications of Global Value Chains to coincide with the launch of a new Trade in Value Added database later today.

Sweden also supports the following initiatives:

Trade Facilitation Implementation Guide

World Bank Trade Facilitation

Trade Policy Training Centre in Africa (Trapca)

Trade Law Centre for Southern Africa (Tralac)

WTO Doha Development Agenda Global Trust Fund (DDAGTF)

UN Global Compact Trust Fund

 

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