Overview of U.S. Trade Capacity Building (TCB)
Trade capacity building (TCB) is a critical part of the United States' strategy to enable developing countries to negotiate and implement market-opening and reform-oriented trade agreements and to improve their capacity to benefit from increased trade. Providing developing countries with the tools to maximize the benefits of trade opportunities and improve the linkage between trade and sustainable development is critical to securing broad-based reforms. Absolute poverty rates for globalizing countries have fallen sharply over the last 20 years and the World Bank reports that per capita real income grew nearly three times faster for developing countries that lowered trade barriers relative to other developing countries. A recent study published by the Institute for International Economics found that trade barrier elimination in conjunction with related development policies would accelerate the decline in the number of people living in poverty over the next 15 years by an additional 500 million - greater than the entire population of the United States.
U.S. aid for trade is about giving countries, particularly the least trade-active, the training and technical assistance needed to: make decisions about the benefits of trade arrangements and reforms; implement their obligations to bring certainty to their trade regimes; and enhance such countries' ability to compete in a global economy. Accordingly, U.S. assistance addresses a broad range of issues, so rural areas and small businesses, including female entrepreneurs, benefit from ambitious reforms in trade rules that are being negotiated in the World Trade Organization (WTO) and in other trade agreements. The United States increased its annual TCB spending to almost $2.3 billion in 2008, an increase of about 60 percent from the 2007 fiscal year. Total U.S. funding for TCB activities from 2000 to 2008 surpassed $9.7 billion. In 2008, TCB funding was distributed as follows:
- Asia: $266 million, for a total of $1.14 billion since 2001
- Central and Eastern Europe: $32 million, for a total of $438 million since 2001
- Former Soviet Republics: $49 million, for a total of $848 million since 2001
- Latin America and Caribbean: $174 million, for a total of $2.1 billion since 2001
- Middle East and North Africa: $602 million, for a total of $1.6 billion since 2001
- Sub-Saharan Africa: $1 billion, for a total of $2.6 billion since 2001
The United States has and will continue to support the WTO's catalytic role in aid for trade as well as the Enhanced Integrated Framework that aims to help the least trade-active countries participate in the global trading system.
Coherence: An important element of this work involves coordination with regard to technical assistance activities among international institutions in order to identify and take advantage of donor complementarities in programming and to avoid duplication. Such institutions include the WTO, the World Bank, the International Monetary Fund (IMF), the regional development banks, and other donors. The United States works in partnership with these institutions and with other donors to ensure that international financial institutions offer trade-related assistance as an integral component of development programs tailored to the circumstances within each developing country, including by increasing awareness of existing mechanisms and programs.
The United States' efforts build on its long-standing commitment to help all countries benefit from the global trading system, including through mechanisms such as the Enhanced Integrated Framework (EIF); contributions to the WTO's Global Trust Fund for Trade-Related Technical Assistance; assistance to countries acceding to the WTO; targeted assistance for developing countries participating in U.S. preference programs, such as the $200 million African Global Competitiveness Initiative helping sub-Saharan African countries benefit from AGOA; coordination of assistance through Trade and Investment Framework Agreements (TIFAs); TCB working groups that are integral elements of free trade negotiations; and Committees on TCB created to aid in the implementation of a number of FTAs, including the FTAs with the Dominican Republic and Central America, and Peru. Similar committees will also aid in the implementation of FTAs with Colombia and Panama as those enter into force. Other TCB assistance is helping developing countries to work with the private sector and non-governmental organizations to transition to a more open economy, to prepare for FTA and WTO negotiations and to implement their trade obligations.
Millennium Challenge Corporation
The Millennium Challenge Corporation (MCC), established by the United States in 2004, provides a significant source of bilateral assistance for trade capacity building efforts for eligible countries. The purpose of the MCC is to ensure that its programs - development compacts - are implemented in a manner in which "greater contributions from developed countries [are] linked to greater responsibility from developing nations." By giving eligible countries the opportunity to identify their own priorities and develop their own proposals for reducing poverty and spurring economic growth, the MCC enables countries to address long-term development obstacles, including in the area of trade. The U.S. Trade Representative is a member of the MCC's Board of Directors.
Since 2004, MCC programs have been a significant component of U.S. contributions to TCB, channeling funds to low and lower middle income countries that demonstrate a strong commitment to investing in their people, ensuring political justice, encouraging economic freedom, and promoting sustainable natural resource management policies. The primary vehicle for delivering this assistance is through a "compact"- a multi-year agreement between the MCC and an eligible country to fund specific programs targeted at reducing poverty and stimulating economic growth. To provide further incentive for reform and help additional countries qualify for compacts, the MCC provides "threshold" assistance to countries that fall just short of compact eligibility to help them address specific areas of policy weakness. The MCC has 18 compacts and 20 threshold agreements with 34 countries totaling more than $6.8 billion of which more than $3.7 billion is trade-related. In March 2008, the MCC Board decided to invite the Philippines to negotiate a compact. In December 2008, the MCC Board announced that, in FY2009, Colombia, Indonesia, and Zambia will be eligible to negotiate a compact for development assistance with the MCC and Liberia and Timor-Leste will be invited to propose Threshold programs.
The Enhanced Integrated Framework
The Integrated Framework for Trade-Related Assistance to Least-developed Countries (IF) is a multi-organization (including the WTO, World Bank, IMF, UNCTAD, UNDP, and the International Trade Centre), multi-donor program that operates as a coordination mechanism for trade-related assistance to least developed countries (LDCs) with the overall objective of integrating trade into national developmentplans. The mechanism incorporates a country-specific diagnostic assessment and action plan formulated by one of the international organizations in cooperation with the subject LDC. The action plan, consisting of needs identified by the diagnostic assessment, is offered to multilateral and bilateral donors. Project design and implementation can be accomplished through the resources of the IF Trust Fund or multilateral or bilateral donor programs in the field (as the United States does through its development assistance programs). The IF is exclusively for the LDCs, with the goal of getting the least trade-active more involved. Of the 50 LDCs, 48 have joined the IF.
Following discussions in the World Bank's Development Committee and the WTO, a process to enhance the IF was launched in early 2006. The United States was an active member of the Task Force created to guide this process and is an active participant in the implementation phase of this effort. The process focused on three elements to accelerate and improve the IF process: (1) increasing resources for followup; (2) building the in-country capacity of countries to benefit from the IF; and (3) improving IF governance, including monitoring and dissemination of best practices. The Task Force concluded its work in May 2007 with a recommendation that an Enhanced Integrated Framework (EIF) program be established. The new EIF was formally launched in May 2008, an executive director was named to lead the EIF Secretariat, and the United Nations Office for Project Services began work as the new manager of the EIF Trust Fund in October 2008. The EIF is expected to be fully operational by early 2009. The United States Agency for International Development's (USAID) bilateral assistance to LDC participants supports initiatives both to integrate trade into national economic and development strategies and to address high priority "behind the border" capacity building needs designed to accelerate integration into the global trading system.
Total U.S. Government TCB support to IF countries was $993 million in 2008, which is predominantly bilateral assistance. The MCC is substantially engaged with 19 IF participants through compacts or threshold programs totaling about $3.3 billion of which about $1.7 billion is trade-related. Many IF countries also benefit from part of the $47 million in regional assistance provided by USAID.
World Trade Organization-Related U.S. TCB
International trade can play a major role in the promotion of economic growth and the alleviation of poverty. The WTO's Doha Development Agenda (DDA) recognizes that TCB can facilitate the more effective integration of developing countries into the international trading system and enable them to benefit further from global trade. The United States provides leadership in promoting trade and economic growth in developing countries through comprehensive TCB programs. The United States also directly supports the WTO's trade-related technical assistance.
Global Trust Fund: The United States supports the trade-related assistance activities of the WTO Secretariat through contributions to the Doha Development Agenda Global Trust Fund. With an additional contribution of nearly $1 million in 2008, total U.S. contributions to the WTO amount to almost $8 million since the launch of DDA negotiations.
Aid for Trade: The WTO's Hong Kong Declaration created a new WTO framework in which to discuss and prioritize aid for trade. In 2006, this framework created an Aid for Trade Task Force to operationalize aid for trade efforts and offer recommendations as to how to improve the efficacy and efficiency of these efforts among WTO Members and other international organizations. The United States continues to be an active partner in the aid for trade discussion.
The year 2008 saw an active agenda to implement many of the Task Force's recommendations. Significant work occurred during 2008 on the development of the monitoring framework envisioned in the Task Force report. The monitoring framework includes global monitoring of aid flows using the data resources of the OECD's Development Assistance Committee, country-level monitoring of progress in mainstreaming/integrating trade in national development plans, and case studies of best practices.
WTO and Trade Facilitation: The United States committed over $300 million in FY2008, for a total of over $2 billion since 2000, to trade facilitation activities. In doing so, the United States has supported the WTO Doha discussions by providing assistance to developing countries that seek help in responding to the regulatory proposals made by members in the Negotiating Group on Trade Facilitation.
WTO Accession: The United States provides technical support to countries that are in the process of acceding to the WTO. For example, in 2007, USAID and the U.S. Department of Agriculture (USDA)provided WTO accession and implementation services to Ukraine and Cape Verde, which became the 152nd and 153rd Members of the WTO in 2008. In 2008, the United States completed its accession assistance to Montenegro, which finished its accession negotiations at the end of the year. WTO accession support was provided to Iraq, Lebanon, Yemen, Afghanistan, Ethiopia, Bosnia and Herzegovina, Serbia, Kazakhstan, Tajikistan, Azerbaijan, Liberia, Comoros, Seychelles, and Sao Tome in 2008.
TCB Initiatives for Africa
The United States has aggressively funded programs and developed several new initiatives at the multilateral and bilateral levels to address the specific needs of sub-Saharan African countries with respect to reducing poverty and spurring economic growth. U.S. assistance more than doubled in FY2008 relative to the previous year, increasing to over $1 billion in FY2008, for a total of nearly $2.6 billion since 2001.
African Global Competitiveness Initiative: In July 2005, the United States announced the African Global Competitiveness Initiative (AGCI) to help build sub-Saharan Africa's capacity for trade. The five-year, $200 million AGCI was designed to help expand African trade and investment with the United States, with other international trading partners, and regionally within Africa through improving the competitiveness of sub-Saharan African enterprises. AGCI's objectives are: (1) to improve the business climate for private sector-led trade and investment; (2) to strengthen the knowledge and skills of sub-Saharan African private sector enterprises to take advantage of market opportunities; (3) to increase access to financial services for trade and investment; and (4) to facilitate investments in infrastructure. One major focus of AGCI programs is to help African countries make the most of the trade opportunities available under the African Growth and Opportunity Act (AGOA) preference program.
AGCI supports AGOA through programs carried out by four USAID-funded Regional Hubs for Global Competitiveness - in Botswana, Kenya, Ghana, and Senegal - as well as via programs carried out by USAID bilateral missions. The Hubs have helped African countries to expand and diversify their exports to the United States. For example, the two trade hubs in West Africa have created and expanded export markets for Senegalese seafood and markets have expanded for shea butter from Ghana as well. In East Africa, the trade hub is helping to find and expand export markets for cut flowers from Kenya, Ethiopia, Burundi and Uganda. In Southern Africa, the trade hub is harmonizing and speeding up customs procedures within the region. Under an agreement with USAID, USDA continues to address sanitary and phytosanitary issues under AGCI, specifically in the areas of food safety and plant and animal health and the U.S. Department of Commerce's Commercial Law Development Program is working to improve protection of intellectual property rights.
Assistance to West African Cotton Producers: During 2008, the United States continued to fully mobilize its development agencies to address the obstacles faced by West African countries - particularly Benin, Burkina Faso, Chad, Mali and Senegal - in the cotton sector. The MCC, USAID, USDA, and the United States Trade and Development Agency all continued work on a coherent long-term development program based on the priorities of the West Africans. The United States will continue to coordinate with the WTO, World Bank, the African Development Bank, and others as part of the multilateral effort to address the development aspects of cotton. This includes active participation in the WTO Secretariat's periodic meetings with donors and recipient countries to discuss the development and reform aspects of cotton.
The centerpiece of U.S. assistance to the cotton sector in West Africa is USAID's West Africa Cotton Improvement Program (WACIP). The WACIP was launched in November 2005 with initial funding of $7 million. In June 2006, total funding was increased $27 million over the three year life of the program.The program is aimed at helping to improve the production and marketing of cotton in five countries:Benin, Burkina Faso, Chad, Mali, and Senegal. The WACIP is designed to help achieve the following objectives: (1) reduce soil degradation and expand the use of good agricultural practices; (2) strengthen private agricultural organizations; (3) establish a West African regional training program for ginners; (4) improve the quality of West African cotton through better classification of seed cotton and lint; (5)improve linkages between U.S. and West African research organizations involved with cotton; (6)improve the enabling environment for agricultural biotechnology; and (7) assist with policy/institutional reform.
In early 2007, implementation of the main component of WACIP began in earnest in the field. Through extensive consultation with stakeholders - government, farmers, and other involved parties - in the country, three main intervention areas were identified to fulfill the objectives outlined above:
• Creating momentum for longer term policy and institutional changes that will encourage investment and value-addition;
• Improving value addition by exploiting niche processing and marketing opportunities for cotton-based products; and
• Increasing productivity of cotton, the quality of cotton lint, and farmers' income from cotton and other crops in the cotton rotation.
A key element of the WACIP program is the identification of specific policy priorities through National Advisory Committees. Composed of stakeholders in each country, these committees undertook work to identify the specific projects that would yield the assistance and results sought by participants.During 2008, a number of such projects were identified in the stakeholder consultations. Projects include those that focus on: improving producer incomes through training on integrated pest and soil fertility management; helping farmers control spiraling input costs and debt load through training and pilot programs testing alternative systems of input supply; developing organic cotton; and enhancing the capacity of the national agricultural research institutes to generate a steady stream of new cotton technologies through support for research,
The U.S. Government also provides complementary support to the cotton sector through other programs. During 2007, the MCC began implementation of compacts with Benin and Mali representing over $750 million in development assistance to be distributed in coming years, much of which is allocated to agriculture and infrastructure investment. In July 2008, the MCC signed a $481 million compact with Burkina Faso. The program will promote economic growth in the rural agriculture sector.
Free Trade Agreement (FTA) Negotiations
Although the WTO programs and the IF are high priorities, they are only part of the U.S. TCB effort. In order to help U.S. FTA partners participate in negotiations, implement rules, and benefit over the longterm,
USTR has created TCB working groups in free trade negotiations with developing countries and Committees on TCB to prioritize and coordinate TCB activities during the transition and implementation periods. USAID and USDA, their field missions, and a number of other U.S. Government assistance providers actively participate in these working groups and committees so that the TCB needs identified can be quickly and efficiently incorporated into ongoing regional and country assistance programs. The Committees on TCB also invite non-government organizations, representatives from the private sector, and international institutions to join in building the trade capacity of the countries in each region. Trade capacity building is a fundamental feature of bilateral cooperation in support of the completed Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR), and the signed free trade agreements with Colombia, Peru and Panama. USTR also works closely with the U.S. Department of State and other agencies to track the delivery of TCB assistance to Jordan, Morocco, Bahrain, and Oman.
Dominican Republic-Central America Free Trade Agreement
During the CAFTA-DR negotiations, the United States and other international institutions worked with the Central American countries and the Dominican Republic through a TCB working group to address trade capacity issues, such as rural diversification programs for agricultural products (e.g., coffee),strengthening of food and agriculture regulatory systems, market linkages for goods and services, food industry development, strengthening of labor and customs systems, and combating exploitive child labor. In order to build on the progress made during the negotiations, the CAFTA-DR established a Committee on TCB.
The CAFTA-DR was signed in 2004 and went into force for all countries except Costa Rica during 2006 and 2007. The Committee on TCB has convened three times: in Guatemala City, Guatemala in February 2007; in Washington, D.C. in November 2007; and in Santa Domingo of the Dominican Republic in November 2008. These meetings were attended by representatives of each of the member countries and by the Inter-American Development Bank (IDB), the World Bank, the Organization of American States (OAS), and the Economic Commission for Latin America and the Caribbean (ECLAC), providing the opportunity for the Committee to review updates of recipient members' trade capacity building strategies and priorities as well as U.S. donor agencies' and the international institutions' trade capacity building activities. They additionally provided the opportunity for in-depth discussions of particular assistance areas, such as rural development and sanitary and phytosanitary assistance.
The United States provided over $80 million in TCB assistance through bilateral and regional assistance programs to the CAFTA-DR countries in FY2008 from a broad spectrum of U.S. donor agencies, such as the MCC, USDA, USAID, the U.S. Department of State, and the U.S. Trade and Development Agency.
Peru Trade Promotion Agreement
In April 2006, the United States and Peru signed the United States-Peru Trade Promotion Agreement(PTPA). The PTPA includes a provision that creates a Committee on TCB to build on work done during the negotiations by the TCB working group. The working group included the IDB, World Bank, OAS, and ECLAC. The working group addressed a broad range of economic assistance issues, including programs to aid small and medium enterprises, rural farmers, food safety inspectors, and customs officials. These programs are intended to help Peru implement the obligations of the PTPA and to more broadly benefit from the opportunities created by the free trade agreement. The Agreement calls for the Committee to further refine and implement Peru's national TCB strategy as well as foster assistance to promote economic growth, reduce poverty, and adjust to liberalized trade.
Colombia Trade Promotion Agreement
In November 2006, the United States and Colombia signed a comprehensive free trade agreement - The United States-Colombia Trade Promotion Agreement (CTPA). As with the United States-Peru Trade Promotion Agreement, the CTPA includes the creation of a Committee on TCB to build upon the progress made by the preceding TCB working group on economic assistance and poverty alleviation.
Panama Trade Promotion Agreement
The United States and Panama signed the United States-Panama Trade Promotion Agreement on June 28, 2007. The Agreement also establishes a trade capacity building committee, which will aid Panama to implement its obligations and allow it to more broadly benefit from the opportunities that the free trade agreement will create.