|return to Articles & News
The Value Of Development Experience For Building Trade Capacity
old division of the world into two power blocs, East and West, has
subsided. Now the big
challenge and threat is the gap in wealth and health that separates rich
and poor. [….] Here is the greatest single problem and danger facing
the world of the Third Millennium.
growing divide between wealth and poverty, between opportunity and
misery, is both a challenge to our compassion and a source of
instability. We must
confront it. We must
include every African, every Asian, every Latin American every Muslim,
in an expanding circle of development. […] Trade is the engine of
development. And by
promoting it, we will help to meet the needs of the world’s poor.
The tragic and ruthless
acts of terror, death and destruction perpetrated on September 11, 2001,
by alienated and determined extremists have definitively ended the
debate on whether we are witnessing the end of history.
In 2002 we know that the consolidation on a global scale of
peace, security, democracy and economic well-being is far from
We also recognize that the continued exclusion of large numbers
of people and, indeed, entire countries from the experience of human
progress poses a challenge to the security of people and countries
throughout the world.
globalization argue for an expansion of participation in a global
economy that is open to the free flow of capital, goods and services and
driven by knowledge, technology, market forces and international
Other voices question the assumption of the globalists that
industrialized and developing countries can have shared values and
interests that will work for the benefit of people everywhere.
The anti-globalists find current trends unjust.
They point to the wide disparity in wealth and economic growth
between rich and poor as evidence of systemic deficiencies and argue
that globalization causes inequality, not convergence.
disparity in wealth and incomes between rich and poor countries cannot
However, recent analysis has pointed out that the last 50 years
have witnessed unprecedented advances in longevity, health, education,
housing, nutrition and reductions in extreme poverty.
In addition, there is persuasive evidence that developing
countries that are able to open their economies to trade and investment
achieve faster growth and poverty reduction and experience reduced
These findings support a policy of facilitating the integration
of poor countries into the global economy, an inclusive approach to
globalization, as an important strategy for advancing human well being
within a framework of stable, safe and just societies.
international community, support remains strong for the inclusion of
developing countries in the global economy.
The Declaration of the November 2001 World Trade Organization
Ministerial Meeting at Doha contained numerous references to what the
declaration called the “development dimensions of the multilateral
trading system,” including extensive provisions on technical
cooperation and capacity building.
The principal multilateral agencies in this field (World Bank,
International Monetary Fund, United Nations Development Program, World
Trade Organization, United Nations Conference on Trade and Development,
International Trade Centre) have renewed their combined efforts in the
Integrated Framework for Technical Assistance to Least-Developed
The bilateral donors have also come together in the Development
Assistance Committee of the Organization for Economic Cooperation and
Development to adopt a statement of development ministers and aid agency
heads and a related set of guidelines on strengthening trade capacity
Developing countries joined in hopeful statements about global
interdependence at the tenth session of the United Nations Conference on
Trade and Development in February 2000 at Bangkok
and the Third United Nations Conference on the Least Developed Countries
in May 2001 at Brussels.
Most recently, 51 heads of State and Government joined with hundreds of ministers and representatives of civil society at the International Conference on Financing for Development in Monterrey, Mexico, in March 2002. There, they adopted the Monterrey Consensus, a commitment to a fully inclusive and equitable global economic system. In that context, they committed themselves to implementation of “the decisions of the World Trade Organization to place the needs and interests of the developing countries at the heart of its work programme.” They pledged to implement the commitments made in Doha and underscored “the importance of effective, secure and predictable financing of trade-related technical assistance and capacity building.”
The DAC Guidelines are
expressly based on five premises that fairly represent the thinking
behind all of the aforementioned international initiatives:
Together, these five
premises reflect notions of interdependence, inclusive globalization and
shared values and interests. These
are notions that are all under challenge.
The test for the worldview they represent will be whether they
can be given effect so as to contribute to broadly based economic
growth. Whatever the
secondary benefits, trade and investment are supposed to achieve
economic results. Yet,
economic growth has been the most elusive goal of development efforts in
It will be a formidable
challenge to implement the many programs intended to strengthen the
trade-related capacities of developing countries in a manner that
contributes to increased convergence in the values and interests of
people and governments and advances human dignity, freedom and economic
well-being. How well we all
respond to that challenge will have historic implications.
As historian David Landes said in the passage quoted at the
beginning of this paper, the gap between rich and poor is “the
greatest single problem and danger facing the world in the Third
Nature Of The Development Process
Trade, of course, is
only one among many aspects of development, and trade-related capacity
building cannot be isolated from other development efforts.
International cooperation in support of trade capacity building
must be viewed within the context of the broad consensus that has
evolved over the past decade about the nature of development and
development cooperation. That
consensus is centered around what has been described as a
“differentiated partnership approach,” a concept that emphasizes
coordinated international support for local capacity, responsibility and
ownership of integrated strategies to achieve agreed objectives.
Its partnership aspect reflects its focus of donor support on
agreed objectives and agreed priorities.
Its differentiation comes from the adaptation of efforts in each
case to the realities of local circumstances.
This approach is found in policy documents of the United Nations,
the OECD, the World Bank and many developing countries.
The basic principles of
the differentiated partnership approach can be summarized as follows:
- Development is a process by which societies become stable, prosperous, safe and just, with shared basic values and interests grounded in human freedom and opportunity. Such societies are foundations of human security, well-being and fulfillment, and form the base of a peaceful and productive global community.
Development comes from within a society.
In must be based upon local responsibility for and commitment to
integrated policies and strategies that are results-oriented over the
long term. These policies
have economic, social, political, environmental and security dimensions,
all of which must be heeded.
International support for such locally led efforts can be
effective in accelerating and increasing positive development outcomes.
Such support should be based on shared goals, an agreed division
of labor, adequate resources, coherent policies and effective
Development cooperation is more than aid.
It needs to be integrated into a broader framework of policies to
facilitate greater participation by poor countries in the global
community and greater participation by poor people in their societies.
Experience has shown
that partnerships should be based on realistic assessments of available
capacities and commitments of the parties.
Cooperation might involve large or small objectives, a broad or a
narrow range of activities. Partnerships
might involve working more with government actors or more with civil
society. Objectives need to
be set and activities designed to be compatible with the capacities and
commitments of the local actors and the environment in which the work is
to take place, as well as the capacities and commitments of the external
In an ideal situation, the host government would be at the center, consulting with civil society and international donors and guiding the implementation of a coherent development program. This ideal is intended to offer an alternative to unsatisfactory earlier approaches to development cooperation. Purely need-based assistance had tended to foster dependency, while externally imposed conditions tended to foster resentment and rationalization. Of course, the ideal is only rarely seen. Developing countries often have weaknesses that limit their ability to be effective partners. Likewise, few donors allocate their resources exclusively on the basis of objective calculations about the need, capacity and will of their partners. The day-to-day challenge is to make the best policy and program decisions in less than ideal conditions, balancing the needs for local ownership, realistic objectives and efficient implementation.
Importance Of Trade-Related Capacities For Development
With respect to the
link between development and trade, a new World Bank study estimates
that those countries that deepened their integration with the global
economy during the 1990s have seen their incomes rise at more than three
times the pace of those that did not integrate.
Developing countries as a whole increased their market share in a
growing volume of non-energy merchandise trade by about seven per cent,
and have experienced even faster growth in trade in services.
However, statistics about overall growth rates include both
outstanding performance by some countries and stagnation or lost ground
by others. The poorest
countries were among the weakest performers.
The proposal by
President Bush in March 2002 for a new compact for global development,
supported by a $10 billion Millennium Challenge Account, and the heightened
attention to the importance of development assistance achieved at the
Monterrey Conference on Financing for Development,
offer some hope for a reversal in the decade-long trend of stagnation
and decline in aid volume. However,
the prospects for substantial and sustained growth of official
development assistance remain uncertain.
Private flows, while
highly concentrated, and domestic resource mobilization have taken on
increasing importance as sources of development finance.
It seems evident that poor countries will need to finance more and more
of their development by increasing productivity, attracting investment
and expanding trade. At the
same time, the poorest countries are the most dependent on official
flows and the least able to attract private capital.
Some of the obstacles
developing countries will face derive from constraints on their access
to markets. These external
obstacles, such as production subsidies, tariff spikes and tariff
escalation by industrialized countries, need to be addressed through
trade negotiations. Poor
countries need to be able to negotiate for better treatment.
A number of
industrialized countries (and some developing countries) have undertaken
unilateral liberalizations of market access, especially for least
These measures can provide a valuable stimulus and produce early
results. For example, in
the first six months of 2001 United States trade with Africa rose by 17
per cent over the comparable period in 2000.
This appears to be at least partially attributable to the African
Growth and Opportunity Act. Similarly,
exports by Caribbean Basin countries to the United States in 2000 were
2.5 times greater than in 1984 when the Caribbean Basin Initiative
entered into force.
However, annual exports by all Sub-Saharan African countries to
the US are only about $20 billion and the exports from CBI countries are
of comparable amounts.
By contrast, the OECD estimates that gains for developing
countries from full liberalization of merchandise trade and trade in
services, with dynamic effects, would exceed $500 billion.
Relying on unilateral concessions by rich countries is not an
adequate alternative to the negotiation of better terms of trade for
poor countries in a new development round.
Other obstacles derive
from limited internal capacities of developing countries to make good
use of opportunities to benefit from trade:
Governments often lack the ability to participate in the
international system and negotiate for better treatment in international
Governments also often lack the ability to formulate and carry
out appropriate national policies to provide a favorable economic
environment for investment, production and trade.
Firms often lack the ability to produce and sell goods and
services that will be competitive in international markets and lack
access to information and services that would help them to be more
These are limitations
of political will as well as limitations of information, technical
ability and business acumen. Addressing
these obstacles is a highly complex process to achieve increased public
sector knowledge and analytical abilities, heightened expectations of
government by citizens, enhanced competitiveness by local producers and
service providers, and capable political leadership.
As discussed below, the three kinds of capacity limitations
outlined here should be the focus of assistance to strengthen
There are indications
that donors are receptive to the need to support trade-related capacity
indications include the aforementioned effort to revitalize the
multilateral Integrated Framework,
the declaration and guidelines adopted by bilateral donors,
and the numerous commitments contained in the Doha Ministerial
and the Monterrey Consensus.
The United States alone has increased its assistance for building
trade capacity from $327 million in fiscal year 1999 to $457 million in
2000 to $556 million in 2001.
Converting interest and resources into results will require
effective development strategies.
If poor countries are
to benefit from the international trading system they will need both the
capacity to produce and the opportunity to compete.
Without opportunity, there will be no incentive to build
capacity; without capacity, opportunity will remain an unfulfilled
promise. Progress in both
must proceed in tandem. This
demands much of developing and industrialized countries, including a
measure of coherence in their trade policies and their development
* James Michel is an independent consultant in international development cooperation. In his career in the United States Government he held senior positions in the Department of State and the Agency for International Development and also as a U.S. Ambassador. From 1994 until 1999 he served as Chair of the Development Assistance Committee of the Organization for Economic Cooperation and Development.
 Landes, David S., The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor, W.W. Norton & Company, Inc., New York, 1998, p. xx.
 Bush, George W., Remarks on Global Development, March 14, 2002, www.whitehouse.gov. The theme of trade as an engine for development was agreed to in the Monterrey Consensus at the March 2002 International Conference on Financing for Development. See text accompanying note 14, infra.
 A thoughtful commentary by David Rothkopf suggests: “We may not know the region from which the next Marx will hail or his particular approach. But we can be sure that someone, somewhere will offer an alternative vision.” Rothkopf, David J., Washington Post “Outlook,” January 20, 2002, p. B1.
 See, e.g., OECD, The World in 2020: Towards a New Global Age, OECD, Paris, 1997; OECD, Open Markets Matter: The Benefits of Trade and Investment Liberalization, OECD, Paris, 1998.
 See, e.g., International Forum on Globalization, A Better World Is Possible: Alternatives to Globalization, International Forum on Globalization, San Francisco, 2002 (forthcoming), www.ifg.org; website of the World Social Forum, www.forumsocialmundial.org. At the extremes, there are proponents of globalization who would make no effort to shape it as a force for greater justice and participation and there are opponents of globalization who reject any effort to make it an instrument of human progress. As economist Amartya Sen summarized these extreme views in a recent article, “promotion of gloom and doom, thus, joins hands with impervious complacency.” Sen, Amartya, “Addressing Global Poverty,” The World in 2002, The Economist, London, 2002.
 See World Bank, Global Economic Prospects and the Developing Countries, 2002: Making Trade Work for the World’s Poor, Table A3.2, “Growth of real per capita GDP, 1971-2010, Washington, 2002, p. 235.
 Fox, James W., “Development Overview,” in Development Assistance in the 21st Century, USAID, Washington (forthcoming).
 Dollar, David and Aart Kraay, “Spreading the Wealth,” 81 Foreign Affairs 120, 2002, and Growth IS Good for the Poor, World Bank, Washington, 2001; OECD, The Development Dimensions of Trade, OECD, Paris, 2001; Foreign Policy, “Measuring Globalization,” Foreign Policy, January-February 2002, p. 56. See also, A.T. Kearney/Foreign Policy Magazine Globalization Index, www.foreignpolicy.com.
 Ministerial Declaration, Doha WTO Ministerial, adopted November 14, 2001, www.heva.wto-ministerial.org, especially paragraphs 35-44. See also, communiqué of the 61st meeting of the Development Committee, adopted April 17, 2000, paragraphs 5 and 6, “Trade, Development and Poverty Reduction,” World Bank, Washington, 2000, www.worldbank.org.
 See United Nations Development Program Press Release, “Heads of International Agencies Agree to New Approach on Trade-Related Technical Assistance for Least Developed Countries,” www.undp.org/dpa/pressreleases/releases/2000/july; World Bank Policy Brief, “Integrated Framework for Trade-Related Technical Assistance,” 2002, www.worldbank.org/wbiep/trade/Integrated_framework.
 “Trade and Development in the New Global Context: A Partnership for Building Trade Capacity,” Statement by the DAC High Level Meeting upon endorsement of the DAC Guidelines on Capacity Development for Trade in the New Global Context, in OECD, The DAC Guidelines, Strengthening Trade Capacity for Development, Paris, 2001, www.oecd.org.
 Bangkok Declaration: Global Dialogue and Dynamic Engagement, adopted February 18, 2000,
 Brussels Declaration, adopted May 20, 2001, UN Doc. A/CONF.191/12, www.unctad.org/ldcs.
 Monterrey Consensus, adopted March 22, 2002, UN Doc. A/CONF.198/3, www.un.org/esa/ffd. See also, Report of the High-Level Panel on Financing for Development, June 22, 2001 (The Zedillo Panel), www.un.org/reports/financing/report_full.
 OECD, note 11, supra.
 See Bhagwati, Jagdish, Free Trade Today, Princeton University Press, Princeton, 2002; Irwin, Douglas, Free Trade Under Fire, Princeton University Press, Princeton, 2002.
 See Easterly, William, The Elusive Quest for Growth: Economists’ Adventures and Misadventures in the Tropics, MIT Press, Cambridge, 2002.
 See quoted text accompanying note 1, supra.
 See, e.g., the views reported in Kostecki, Michel, Technical Assistance Services in Trade Policy: A contribution to the discussion on capacity building in the WTO, International Centre for Trade and Sustainable Development, Geneva, 2001.
 See United Nations Millennium Declaration, UNGA Res. 55/2, September 18, 2000; Annan, Kofi A., We the Peoples: The Role of the United Nations in the 21st Century, United Nations, New York, 2000, and Road Map Towards Implementation of the United Nations Millennium Declaration, UN Doc. A/56/326, United Nations, New York, 2001; World Bank, Comprehensive Development Framework: Meeting the Promise? Early Experience, and Emerging Issues, World Bank, Washington, 2001; OECD, Shaping the 21st Century: The Contribution of Development Cooperation, OECD, Paris, 1996; Faure, Jean-Claude, “On Common Ground: Converging Views on Development and Development Cooperation at the Turn of the Century,” in OECD, Development Cooperation 1999 Report, 1 DAC Journal 121, OECD, 2000.
 See Killick, Tony (with Romani Gunatilake and Ana Mair), Aid and the Political Economy of Public Change, Routledge, New York, 1998.
 Collier, Paul and David Dollar, Globalization, Growth and Poverty: Building an Inclusive World Economy, World Bank, Washington, 2002.
 World Bank, op. cit., note 6, supra, pp. 37, 71.
 Specifically, the new compact for global development contemplates an increase in the volume of US development assistance that over three years, by 2006, would total $10 billion. At that point, the annual volume of ODA would be $15 billion, an increase of 50 per cent over the current level of $10 billion. The additional funds would be held in a Millennium Challenge Account, which presumably would receive an additional $5 billion in each succeeding year. Funds in the Millennium Challenge Account would be reserved for countries that, by their performance (not just their words), demonstrate a commitment to good governance, the health and education of their people and sound economic policies. As President Bush explained the concept:
that live by these three broad standards – ruling justly,
investing in their people, and encouraging economic freedom –
will receive more aid from America.
And, more importantly, over time, they will really no
longer need it, because nations with sound laws and policies will
attract more foreign investment.
They will earn more trade revenues.
And they will find that all these sources of capital will
be invested more effectively and productively to create more jobs
for their people.” Note
Op cit., note 14, supra.
 See “Perspectives on Financing the Millennium Development Goals,” Chapter III in OECD, Development Co-operation 2001 Report, 3 DAC Journal 56, OECD, Paris, 2002. In particular, Table III-1 (at page 65) shows the pattern of total net resource flows from DAC Member countries and multilateral agencies to aid recipients from 1993 to 2000. During that period, direct private investment grew steadily from 25 per cent to 63 per cent of the total while official development assistance fell from 34 per cent to 26 per cent.
 Examination of net flows from DAC Member countries as a percentage of the GDP of individual developing countries reveals the marked dependency of least developed countries on external financing, almost all of which is from official sources. In 1995, official development assistance to the least developed countries exceeded 20 per cent of GDP, but amounted to only 2 per cent of GDP of low-middle income developing countries and a mere 0.2 per cent of GDP of upper middle income developing countries. OECD, Development Cooperation 1997 Report, OECD, Paris, 1998, Table III-2 at p. 47. See also, UNCTAD, Least Developed Countries 2000 Report, UNCTAD, Geneva, 2001; World Bank, World Development Indicators, World Bank, Washington, 2002; Birdsall, Nancy, “Global Finance: Representation Failure and the Role of Civil Society,” in Scholte, J.A. and A. Schnabel, eds, Civil Society and Global Finance, Routledge, London, 2002 (forthcoming); “Towards Sustainable Financing in Less Advanced Developing Countries,” Chapter III in Development Cooperation 2000 Report, 2 DAC Journal 75, OECD, Paris, 2001.
 See Michalopoulos, Constantine, Developing Countries in the WTO, Palgrave, New York, 2002; Supper, Erich, Is There Effectively a Level Playing Field for Developing Country Exports?, Policy Issues in International Trade and Commodities Study Series No. 1, United Nations Conference on Trade and Development, Geneva, 2001. See also OECD, op. cit, note 26, supra, pp. 36-40. Collier and Dollar estimate that the annual cost to poor countries of rich country protection is $100 billion, roughly twice the amount provided as development assistance. Op cit, note 22, p. 53.
 Recent undertakings by Canada, the European Union, Japan, Korea, New Zealand, Norway and the United States are described in a World Bank/IMF staff paper entitled “Market Access for Developing Countries’ Exports,” dated April 27, 2001.
 Remarks by President George W. Bush at the African Growth and Opportunity Forum, October 29, 2001. www.whitehouse.gov.
 Office of the United States Trade Representative, Fourth Report to Congress on the Operation of the Caribbean Basin Economic Recovery Act, USTR, Washington, December 31, 2001.
 OECD, op. cit., notes 8 and 26, supra. See also World Bank, op. cit, note 6, p. 168.
Op. cit., note 10, supra.
 OECD, op. cit., note 11, supra.
 Op. cit., note 9, supra, paras. 2, 16,21, 24, 26, 27, 33, 38-43.
 Op cit, note 14, supra, especially paras. 26-38 regarding international trade as an engine for development.
 United States Agency for International Development, United States Government Initiatives to Build Trade-Related Capacity in Developing and Transitional Countries, USAID, Washington, 2001.
|return to Articles & News|