Aid for trade and trade policy in recipient countries

ABSTRACT

This article explores the impact of Aid for Trade (AfT) flows on trade policy in 123 recipient countries over the period of 2002 to 2015. It shows empirical evidence that AfT interventions are conducive to trade policy liberalization. These results apply to both the entire sample and to the sub-sample of least developed countries (LDCs). Additionally, the analysis shows that the lower the development level, the higher the positive impact of AfT inflows on recipient countries’ trade policy liberalization, although above the US$ 4,885.40 threshold of real per capita income, AfT inflows exert no significant impact on trade policy.

KEYWORDS:

• Aid for trade
• developing countries
• trade policy

Acknowledgments

The author would like to express his gratitude to the anonymous referees for their comments that helped to greatly improve the quality of the article. This article represents the personal opinions of individual staff members and is not meant to represent the position or opinions of the WTO or its Members, nor the official position of any staff members. Any errors or omissions are the fault of the author.

Notes

¹ Data on this index can be found at http://www.freetheworld.com/release.html.

² Data on this index can be found at http://www.freetheworld.com/release.html .

³ Hühne, Meyer, and Nunnenkamp (2014) find evidence that AfT increases recipient exports to donors as well as recipient imports from donors, with the former tending to dominate the latter. They conclude that this result contradicts the sceptical view that donors grant AfT primarily to promote their own export interests.

⁴ The list of LDCs used can be found online at: https://www.un.org/development/desa/dpad/wp-content/uploads/sites/45/publication/ldc_list.pdf.