Aid for Trade and the Post-Washington Confusion

Abstract

The paper examines the rationale for ”aid for trade” (AfT), starting with a review of developments in the field and institutions involved. A statistical analysis attempts to trace for which countries there has not been a positive relationship between trade and development. The results indicate that for 40 countries, representing 2/3 of the world population, there has been a positive relationship between trade openness and growth. The relationship has however been negative for 15 countries representing 3% of the world population, and not so clear for the rest (around 100 countries, covering 30% of the world population). For the negative cases, the ”problems with trade” are the same as the ”problems with growth”, so AfT should be granted in conjunction with help for economic development in general. AfT related to supply-side limitations should be given not only to the LDCs (Least Developed Countries); other classifications in fact serve better in order to trace those with the greatest need for AfT.