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  • 100% AID FOR TRADE

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    100% Aid for Trade

     

     
     
    International Trade Forum - Issue 2/2009 , Trade Forum Editorial Team

    © Event Fotografen /R. Hausmann

    Patricia Francis, executive director of ITC, speaks candidly about aid for trade, opportunities in this financial crisis and the role of ITC.

    TF: What precisely is Aid for Trade?

    PF: We have seen many attempts at aid for trade over the years. We've had lots of interventions in various countries talking about building productive capacity, looking at the business environment, helping entrepreneurs to connect to markets. But there were very few countries where you could clearly see a coherent link between development goals and trade.

    At the World Trade Organization's Ministerial Conference in Hong Kong in 2005, it was decided to focus on the relationship between trade and development and this has converged around the concept of Aid for Trade. The idea is to build consensus between the finance minister, the development minister and the trade minister on priorities which will contribute most to development.

    TF: So Aid for Trade and development aid are not different things?

    PF: I see Aid for Trade as a building block for development, one element of it.

    TF: Is ITC is at the forefront of pushing Aid for Trade?

    PF: Yes, definitely. We consider ourselves 100% Aid for Trade. There are five building blocks on which Aid for Trade is based: trade policy and regulations; trade development; building productive capacity; trade-related adjustment; and trade-related infrastructure. And three of those blocks are related to ITC's three strategic objectives.

    We are one of the players pushing for Aid for Trade because we believe it can have real impact. We're looking at how it can actually translate into opportunity for the private sector on the ground, how it can translate into benefits for communities and how it can translate into options for women, which I also think is critically important.

    TF: In the four years since it became a specific strategy, how has Aid for Trade fared?

    PF: It has increased, and indeed it's good to see that aid flows have increased by about 20 per cent over the period from 2005.

    TF: And has that rate of increase continued in the last 18 months, since this recession began?

    PF: There has not been a fall-off. The pace of growth has not been quite the same, but it has not fallen off, which is very good news and very heartening. You will recall that at the G-20 meeting earlier this year in London, there was a call again to ensure that Aid for Trade did not diminish. In fact, there was a pledge to provide $250 billion in trade finance, which was very important.

    TF: How can ITC deliver on Aid for Trade?

    PF: Well, for example, the Government of Uruguay has decided, in the midst of this crisis, that one of the most important things they can do is understand markets better. We've been working with them to build a trade intelligence system. This is something people from developed countries might take for granted. But not many developing countries have such a system in place. In the past, developing countries' diplomatic services were solely political, not really trade related. What we're doing with Uruguay is building the capability within their foreign service to understand markets and be able to do the work of trade commissioners.

    It is amazing the difference that understanding the nuances of the market can make, recognizing where the market is going, where the opportunities are, why competitors are selling and you're not, why they are getting better prices than you are, and then being able to take decisions and actions with that information. Particularly at this point in time.

    TF: What are the specific challenges posed by "this point in time"?

    PF: Impacts vary from country to country. I recently returned from Cambodia where 90,000 people in the garment sector have been laid off, 80 per cent of whom are women. You can imagine, in a least developed country, what that does in terms of a multiplier in the economy.

    The economy was not very well diversified, so its exports are concentrated in garments and the fall-off in demand has had a massive impact on society as a whole. Not only are foreign receipts falling, but you have this huge unemployment problem and people are moving back into the rural areas where they came from. So now you have to ask, what are your policy options? This crisis is focusing governments' minds on the poli-cy options they have and where they should put the emphasis in their economies.

    Then there's the question of what does pro-poor development mean when you come from a least developed country? That is something we are looking at very, very closely in terms of the kind of advice that we are giving people on export strategies. What are your pro-poor options? How are you targeting development of the poor? How do you deal with foreign direct investment? What mix will help you minimize risk? So that's about policy and how it is applied.

    TF: What about the issue of trade facilitation? Is that something individual countries should be addressing right now?

    PF: Absolutely. When you look at competitiveness, trade facilitation and business environment are the two things people ought to be working on at this point in time.

    If you look at the data put out by the World Bank, you'll see that production-wise, Africa's cost per unit is about the same as Asia. But you have an add-on of up to 20, sometimes 30 per cent in the cost of taking it to market. When you sell into a particular market segment against companies from countries where the business environment works for exports and where trade facilitation works, it will be almost impossible to compete only on price. So it would be important to target domestic administrative procedures and regulations that can contribute to trade competitiveness.

    This requires effort from both government and the private sector. In many cases what you find is the World Bank will come in and support the modernization of customs and hard infrastructure like roads. But your soft infrastructure provided by freight forwarders, customs brokers, shipping agents, also needs to be optimized. So the entire supply chain needs to be addressed if countries are to be competitive - and this is even more critical for landlocked countries.

    TF: Which countries are more likely to capitalize on the opportunities presented by the crisis?

    PF: Clearly, it will be those countries that understand competitiveness and micro-competitiveness issues. They will hold on to their market positions and, right now, that's what it's all about. And for those people that have cash and the ability to increase market share, this is the time to do it.

    It's also important that governments find a way to keep some level of liquidity in their trade finance arena now. Trade finance from buyers has dried up so it's important that governments provide a level of liquidity that gives their companies the ability to sell into markets which are still active.

    Also keeping a face in the market. If you have the ability and resources to be marketing, it's good to do it now because it will benefit you later on.

    TF: And what are the most important ways ITC can help?

    PF: We are focused on export competitiveness; internal mechanisms within companies. This is where - and when - companies can tighten their belts and also be smarter about how they run their companies.

    We have the trade data, we have the information companies can draw on and we have the ability to do specific analysis in various markets for countries. Being able to access just-in-time information is an important piece of the puzzle.

    We also have critical supply chain management capabilities. We recently had a conference where BP told us that through our courses they were able to reduce the cost of doing business in Latin America by 30 per cent, just by making their supply chain that much more efficient.

    Product adaptation is another way we can help. You may be selling spices, for example, but are you selling them as an ingredient, a ready-to-eat or ready-to-apply product, or are you selling them as part of a meal? Taking a product and looking at the opportunities is important. As is value-addition - asking, "What can I do with my product?" Get it to market fresher, make it more interesting to the marketplace, package it differently, make it more customer-friendly. Those are the kinds of things that ITC can really help you with.

    And, of course, at the policy level, helping governments to understand what business is going through and having this public-private dialogue is essential now, to bring the temperature down, to make decisions collectively about where we're going to spend the limited dollars that we have.

    This is one of the great strengths of ITC. You have to make choices in your life always, but at this point in time you have to really make very, very difficult choices.

    TF: These are the things ITC is doing right now, but how can its role and usefulness develop?

    PF: For me, I hope that we can bring ITC closer and closer to our client groupings, help the organizations focus and integrate, and deliver solutions.

    We are going to be a more customer-focused organization and are putting a level of flexibility into the organization that will enable us to respond more readily to the changing environment. This will make us better able to understand our clients and deliver a top-quality service by partnering with people who can help us to ensure that our footprint is actually felt in developing countries. Because it's not about a Geneva-based organization having a good reputation for producing a few things; it is about having impact on the ground.

    TF: Is ITC about numbers or people?

    PF: Absolutely about people. It's about making a difference in people's lives. If we manage to do that, in a sustainable way - and leave capacity behind that people can replicate and grow - this will be the mark of our success.

    F: Is that what inspires you personally?

    PF: People's desire to work for change really inspires me. You go out and you meet people who are dedicated and committed to improving the lives of their constituency or community, and that's what keeps you going. You find a huge number of people who have a desire to do better, and it is because of their limited access that they have not been able to accomplish as much as they could have if they had greater levels of access. And that's what we bring to the table, access.

    TF: Can you provide some examples of best practice in the field?

    PF: It's always interesting and inspirational when you work with people at the lowest end of the economic spectrum, and when you see their lives transformed, where they're now able to send their kids to school and have a much more stable life.

    At the other end of the spectrum, recently we had 100-plus lawyers from 51 countries who volunteered to come to ITC to work on trade law and on model contracts which could support companies in the developing world so that they wouldn't have to go and buy the services of lawyers to draw up contracts. Right across the world, those contracts are going to be invaluable.

    The same thing is true of our networks related to supply chain management - it shows the level of commitment that people have to ensuring the work of ITC is meaningful.

    So these amazing partnerships we have built up over time - these for me are the green shoots, because it means that you have a capacity and a capability which can work on their own and only just have a small stimulus from ITC every now and then to ensure that they're on track.

    TF: What are the most exciting ideas you see emerging?

    PF: I am driven by the fact that the companies that seem to be prospering in this crisis are the ones that think not only about their shareholders, but their stakeholders too. They don't give lip service to corporate social responsibility, but actually translate it into their everyday life and the way that their companies work. While making sure there is a return on investment for shareholders, they also ensure that products and services are sustainable and ethical, that their workforce is treated with care and respect, and that they consider the footprint they leave on society at large. These are the companies that seem to be prospering much more.

    And, therefore, when I think about this crisis, what brought us here and what measures are being taken to take us out of this crisis, I wonder, are we just looking to get back to the "good old days"?

    TF: And what do you think instinctively?

    PF: I think that most people are just trying to reboot the computer and are not thinking about the way the computer works.

    TF: And, presumably, you think that's wrong?

    PF: It is absolutely wrong because it will only take us back to where we were. So, these green shoots that people keep seeing are, in my view, not going to become branches. They will wither unless we rethink the way we do things, and I believe that we have to think about things in a much more inclusive manner if we are going to make these changes and make them sustainable.

    Clearly, if we don't begin to think this way - and I'm thinking of both the North and the South - and if China and India and Brazil expand their economies ad infinitum, in the way that countries did in the North, global warming will kill us. Maybe that's an exaggeration but the impact will be huge.

    Although developing countries weren't the cause of climate change, in the same way they are not the cause of the financial crisis, we all have to play a role in the solution. Growth without consequences is not possible, and therefore we need to find a way to grow that takes into consideration long-term sustainable development.

    That's why we have to think in a new way. As far as ITC is concerned, we are certainly trying to expose ourselves to people with different kinds of thinking, to see if we can contribute to a new model of doing business which is far more inclusive, far more sustainable and far more environmentally and socially responsible.

    TF: Is yours a minority voice in Geneva?

    PF: I don't think so, but everybody is grappling to figure out "well, what is this model that we're talking about?" At the UK Trade Week recently, Douglas Alexander [British Secretary of State for International Development] gave an important speech about this new inclusive model. If a lot more people start talking about it and if we start highlighting the success of some of those companies that are doing this, I think this is the way to expose people to the fact that there are alternatives.

    And I think that while people may wish to look at new alternatives, not many people are clear about what those alternatives are. Part of our role is to bring those alternatives to the table so that people can have choices in their decision-making.