Trade-related Development Cooperation
Participation in international trade can have a positive impact on the economic development of poor countries. The German Federal Government thus set itself the goal in 2011 of comprehensively integrating trade-related activities into its development cooperation. A DEval study analyses whether the BMZ Aid for Trade strategy paper meets this requirement. The evaluation was completed in 2015.
The World Trade Organisation (WTO) established the Aid for Trade initiative in 2005, aiming to support developing countries in achieving welfare gains through the liberalisation of world trade. In addition, it aims to reduce the losses that may arise as a result of introducing trade agreements.
Since the beginning of the initiative, numerous efforts to promote trade have been made at international level. For example, the European Union has established regional economic partnerships with several regional African organisations, and numerous countries are promoting Aid for Trade initiatives as part of their bilateral development cooperation.
In the area of this trade-related development cooperation, Germany is one of the three main donor countries worldwide, alongside Japan and the US. Moreover, the Federal Ministry for Economic Cooperation and Development (BMZ) drew up an Aid for Trade strategy paper in 2011, stipulating that the issue of “trade” is to be anchored as a cross-sectional issue in development cooperation. According to this paper, trade-related aspects should be taken into account in projects and programmes where this is appropriate to their content and requested by the partner countries.
In its study, DEval investigated whether the present Aid for Trade approach is coherent and whether trade-related aspects really have been comprehensively integrated into German development cooperation. The evaluation was completed in 2015.
Results and Recommendations
- Internationally, Germany plays a pioneering role in promoting trade-based development policy.
However, the Aid for Trade strategy paper drawn up in 2011 needs to be revised, placing a greater emphasis on topical issues such as sustainable and inclusive growth, social standards, and the coherence of trade and development policy. It should also highlight the importance of promoting trade, both for the development of the partner countries and for German companies.
- In BMZ’s country strategies and in the sector strategies that broach the issue of promoting the private sector, appropriate attention is paid to trade aspects.
However, this does not apply to the area of agriculture, where the contribution that regional and international trade could make to agricultural development and food security needs to be discussed and taken into account accordingly in the strategies.
- In 2008, the Organisation for Economic Cooperation and Development (OECD) introduced a “trade development marker”.
Development organisations should use it to uniquely identify projects and activities of relevance to trade and report this accordingly to the OECD. However, development organisations use this marker inconsistently, thus limiting the comparability of the data.
The evaluation was completed in 2015. This is a summary of the results and recommendations; you can find the complete results and recommendations in the report.
Objectives of the Evaluation
The DEval study analyses and assesses German support for Aid for Trade. There is generally a great interest in learning more about the German Aid for Trade support that is implemented on behalf of BMZ by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), the Kreditanstalt für Wiederaufbau (KfW), the Physikalisch-Technische Bundesanstalt (PTB), the Deutsche Investitions- und Entwicklungsgesellschaft (DEG) and the Federal Institute for Geosciences and Natural Resources (BGR). The BMZ Aid for Trade strategy, which steers this initiative, plays a major role here.
The results are intended to portray how Aid for Trade as a cross-sectional issue in development cooperation has developed over the period under review. German development cooperation can use the results and the lessons learned from the study to further develop and specify the German Aid for Trade approach.
The goals of the study were as follows:
- To assess whether the present German Aid for Trade approach is coherent with regard to its goals and its theoretical and organisational structure.
- To provide a general overview of the Aid for Trade portfolio with a view to assessing whether Aid for Trade – as intended in the BMZ Aid for Trade strategy – has been successfully incorporated into German development cooperation through “mainstreaming”.
In the data analysis, the study concentrated on the years from 2008 to 2012, as differentiation in Aid for Trade in the narrower and broader sense was only possible as of 2008. Aid for Trade in the narrower sense (trade-related assistance) comprises DC categories with a specific trade relevance, whereas Aid for Trade in the broader sense aims to establish favourable framework conditions for international trade (above all creating productive capacities and trade-related infrastructure). The document analysis comprises reports from 2006 onwards, as these reports should already take trade-related aspects into account.
The Aid for Trade initiative was instigated in 2005 in the context of the World Trade Organisation (WTO) Ministerial Conference. The initiative supports developing countries in realising potential welfare gains from trade liberalisation, and compensates them for losses that may arise as a result of introducing trade agreements.
The exact definition, features and benefits of the Aid for Trade initiative have been the subject of intensive discussions since the initiative began. In general, Aid for Trade is neither a new global development fund nor a new category in development cooperation. Rather, Aid for Trade is very broadly defined and is a fixed component of the existing programmes in official development assistance (ODA).
Germany has made considerable efforts to integrate the Aid for Trade initiative into German development cooperation on the basis of the BMZ Aid for trade strategy paper drawn up in 2011. Germany is one of the three main Aid for Trade donor countries, alongside Japan and the US. With the exception of a German Development Institute study conducted by Voionmaa and Brüntrup in 2009, the German Aid for Trade approach has not been analysed up to now. Nearly a decade after the introduction of the Aid for Trade initiative, therefore, it was high time to examine and assess the Aid for Trade approach.