Aid for Trade and the Private Sector Supply & Conformity Challenges

ODI-IEDG Conference: Aid for Trade: One year on. How much, for whom, and the institutional challenges? London, 24 May 2007 Aid for Trade and the Private Sector Supply & Conformity Challenges Dr. Lalith Goonatilake Director UNIDO Trade Capacity-Building Branch tcb@unido.org

Global Trade Growth & Marginalisation Concerns 10,000 World exports, 1980-2004 (US$ billion) 9,000 8,000 World billion US$ 7,000 6,000 5,000 4,000 3,000 2,000 Developing economies Developed economies 1,000 LDCs 0 1980 1985 1990 1995 2000 2001 2002 2003 2004 Source: UNCTAD, 2005 Over 75% of global trade is in manufactures (industrial goods) Share of developing countries in global trade only 26% Every 1% growth in Trade, LEADS TO one-half % Income increase No.3

Global Trade Participation Challenges: Tariffs Reduced Other Barriers SUPPLY SIDE DEVELOPMENT: LDCs have neither the surplus of capacity of exportable products nor the production capacity to take immediate advantage of new trade opportunities (responding to EBA) Kofi Annan - UN SG, Financial Times, 5 Mar 2001 STANDARDS & CONFORMITY: US$ 1.75 bn. exports from developing countries have been disrupted in 2001, due to SPS (food safety) non-compliance. While only US$ 53 mn. spent by donors on SPS support. Steven Jaffee & Spencer Henson, Standards and Agro-Food Exports from Developing Countries Rebalancing the Debate, World Bank 2004 TRADE FACILITATION / INFRASTRUCTURE: for 168 out of 216 US trading partners, transport cost barriers clearly outweigh tariff barriers. For the majority of Sub-Saharan African countries, tariffs amounted to less than 2%, while transport cost incidence often exceeded 10%. Since the introduction of AGOA, transport costs have risen relative to tariffs. World Bank Trade Note 15; May 10, 2004 No.4

Developing Supply Capacity Immediate Opportunities: Agro-Food Exports

Global Trade Participation: Developing Country Private Sector Challenges End of domestic tariff protection Key Challenge: Competing in a globalized market place Trade governed by Global Value Chains Upgrading & Modernizing to COMPETE Meeting Quality Challenges within WTO TBT/SPS Need for Public-Private-Partnerships Absence of supportive PUBLIC GOODS No.6

Agro Food Exports: Achieving and Proving Compliance Regulatory Environment for Compliance WTO TBT/SPS Agreements (Jan 1995) TBT Agreement on Technical Barriers to Trade SPS Agreement on Application of Sanitary & Phytosanitary Measures WTO TBT & SPS agreements compliance/conditions to export agro-food: Products sourced from areas free of pests & diseases Fruits/vegetables - minimum pesticide residue standard Meats/fish meet minimum antibiotic residue requirement Standards of hygiene applied in manufacturing (HACCP/ISO 22000) Development of accredited labs - an immediate requirement No.7

Fair Trade for All : Priority Areas to meet Product Standards Requirements Developing countries lack the ability to assist their producers to meet product standards, which often act as a barrier to developing country exports Significant assistance from developed countries is required to build up their capabilities to conform to product standard requirements UNIDO recommends the following priority areas for assistance 1. A national/regional standards/standardization body 2. A national/regional metrology system 3. A certification/conformity assessment system 4. An accreditation system Source: J. Stiglitz & A. Charlton, Fair Trade for All How Trade can promote Development, Oxford University Press, 2005 No.8

Fair Trade for All : Priority Areas to meet Product Standards Requirements QUALITY INFRASTRUCTURE: a Public Good in Developed Countries (e.g. BSI, UKAS, NPL, etc.) ABSENT in Developing World No.9

UNIDO: Survey on Africa Quality Infrastructure 2006 UNIDO AU EXPERT GROUP MEETING Standards Compliance and Conformity Assessment for the Development of Sustainable Trade in Africa 22-24 February 2007, Tunis - African Union, ECOWAS/UEMOA, COMESA, CEMAC, SADC - Participation of International Bodies (ISO, IEC, ILAC, IAF, BIPM) and Donors Outcome: Concrete Action Plan for Africa No.10

Achievements of Aid for Trade: Supply side development and Compliance highlighted Facilitating inter-agency cooperation, synergies AfT compendium supporting also the UN Delivery as One) TFED Mapping on-going Emphasize need for Regional TCB (RECs, EU EPA support = EU A4T) not just national (timely WTO Regional Reviews) Facilitating EIF re-focus Increase Donor focus on Trade issue No.11

WTO Work Programme on Aid for Trade UN CEB High-Level Committee on Programmes Rome, 20-21 March 2007 WTO Mandate on Aid for Trade*: * Source: UN CEB HLCP 13 th Session, Rome, CEB/2007/HLCP-XIII/CRP.3 help developing countries, particularly LDCs, to build the supply-side capacity and trade related infrastructure that they need to assist them to implement and benefit from WTO Agreements and more broadly to expand their trade Compete Conform - same TRTA focus as UNIDO: supply-side capacity and infrastructure/ldcs - need for improved monitoring and evaluation improved transparency - make existing mechanisms work effectively coherence critical to Aid for Trade (include private sector) No.12

Aid for Trade Advisory Committee First Meeting 19 March 2007 (WTO Director-General Pascal Lamy's newly-minted advisory group was created at the recommendations of the Task Force set up after the December 2005 Hong Kong Ministerial Conference to determine how Aid for Trade "might contribute most effectively to the development dimension of the Doha Development Agenda ) Mandate of the new consultative group: take the Aid for Trade Task Force recommendations to the implementation stage & Regional Development Banks The advisory group comprises most major international organizations involved in trade and development, i.e., the World Bank, the International Monetary Fund, the UN Development Programme, the Organization for Economic Cooperation and Development (OECD), the UN Industrial Development Organization (UNIDO), the International Trade Center, UNCTAD, and regional development banks. * Source: International Centre for Trade and Sustainable Development (ICTSD) reporting, 28 March 2007 No.13

Aid for Trade: Fostering UN-wide Coherence in Trade Capacity-Building - Inaugural meeting: 15 September 2006, Vienna - Participants: FAO, ITC, UNCTAD, UN Regional Commissions, WB Main Objectives: - Develop greater cooperation on TCB in the context of market efficiency and integration - Agencies service mapping - Need to define common understanding on Trade Development/Trade Capacity-building No.14

Integrated Framework (IF) - as initially designed 1. Institution building for trade policy/ WTO entry 2. Strengthening export supply capacities - Policy, competitiveness of enterprises, investment 3. Strengthening Trade Support Services - Product development, technology, business information - Standards advice, quality control, packaging - Supply management, marketing, trade promotion 4. Strengthening Trade Facilitation capabilities - Reform of customs, simplifying import/export procedures 5. Training and human Resource Development for 1-4 above Compete Conform Emphasis on trade facilitation (Customs, ASYCUDA, Transport) 6. Creation of trade-related regulatory/policy framework *October 1997 Integrated Framework WTO, UNCTAD, ITC, UNDP, World Bank, IMF (WT/LDC/HL/1/Rev.1, 23 October 1997) No.15

A4T: Framing EU regional EPA support (SADC, ESA, CariCom, Ecowas, CEMAC, Pacific) In 2005 the EU committed to raising its annual aid for trade effort to 2 billion by 2010. The Commission is proposing an intermediate target of 600 million for the Member States in 2008, a sizeable proportion of the resources being earmarked for the ACP countries in the context of the Economic Partnership Agreements (EPA) (Source: EC Press Release IP/07/478, Brussels, 04/04/2007) ACP - EPAs are promoted as vehicles for addressing supply-side constraints and institutional shortcomings UNIDO INTERVENTION: ENTERPRISE UPGRADING & QUALITY INFRASTRUCTURE Private sector development, Investment, Agro processing, TBT/SPS Compliance UNIDO s Assistance in the EPA Framework REGION CENTRAL AFRICA EAST & SOUTHERN AFRICA SOUTHERN AFRICA (SADC Group) WEST AFRICA CARIBBEAN PACIFIC Upgrading & Modernization Programme X X X X X Quality Programme X X X Programme Formulation Timeframe September 2007 November 2007 September 2007 August 2007 November 2007 No.16

Succeeding Trade Participation: UNIDO 3Cs Approach Countries must have marketable products for exportation COMPETITIVITY of productive capacities Products must conform to requirements of clients and markets CONFORMITY with standards Rules for trade must be equitable and customs procedures harmonized P R O D U C T S Develop Competitive Manufacturing Capability Products to Market Prove Conformity with Market Requirements Connect to the Market Compete Conform Connect M A R K E T S CONNECTIVITY to markets.by upgrading supply capacities and standards infrastructures PRODUCTIVITY (enterprise) COST OF EXPORTING (support services) No.17

Aid for Trade : UNIDO s Main Contribution SUPPLY CAPACITY, COMPETITIVENESS & CONFORMITY SUPPLY CAPACITY Capacity upgrading, productivity development (Process technology, cleaner production, quality management) Development of advisory capacity for enterprises to meet technical requirements Compete Cluster development Export consortia support Business partnerships for investment, sub-contracting, trade CONFORMITY INFRASTRUCTURE Establish access to and harmonization of standards & technical regulations TBT, SPS, MRL, etc., support to standards bodies Conform Establishment of legal & regulatory frameworks and harmonized national/regional schemes for conformity assessment, inspection Upgrading of laboratories for conformity assessment, product certification towards international recognition (accreditation), calibration chain Training of auditors (internal, external) for ISO 9001, ISO 14001, ISO/IEC 17025 and inspectors Pilot activities at enterprise level for on-the-job training of institutional service providers No.18

A need for Strategic Partnerships for Trade Capacity-Building

UNIDO - WTO Agreement September 2003 The WTO UNIDO agreement is a formal recognition that assisting developing countries to build capacities to produce exportable goods is an important part of trade-related technical assistance and capacity building Cancun, September 2003 Remove supply side constraints Programme modules Module I Module II Module III Prove Conformity with Technical Requirements Integrate into the multilateral trading system Introduce supporting legislation, policies and institutional reform Strengthen supply capacity to improve competitiveness Set up accreditation/ certification systems Support compliance with international standards Strengthen capacity for implementation of the WTO agreements and trade negotiations UNIDO WTO The resulting technical cooperation programme involves focus on: Supply Chain Constraints Lack of Conformity Capacity to Int l Standards and Technical Requirements Marginalization in the Multilateral Trading System Pilot countries involved are: Armenia, Cambodia, Cuba, Egypt, Ghana, Kenya, Mauritania No.20

Integrating into Value Chains: Need for Standards, Quality, Compliance Metrology/ Calibration Quality/Hygiene management Standardization Conformity assessment - Testing - Inspection International Accreditation ensures ensures ensures ensures ensures ACCURACY of manufacturing, of testing PREDICTABILITY of production system GOVERNANCE of Value Chain COMPLIANCE with VC specifications COMPARABILITY of VC input testing No.21

Value Chains - Private Sector Participation Challenges Supplier face of firm Customer face of firm Auditing the Value Chain Compliance to Standards Firm Product/Process standards (ISO/IEC) Quality Standards (ISO 9001) Environment Standards (ISO 14001) Food Safety Standards (ISO 22000) Labour Social Standards (SA 8000) Safety Standards (OSHAS) Testing (ISO/IEC 17025) Calibration Traceability (Farm-to-Fork) Private Standards (EUREPGAP) Developing Compliance Infrastructure COST OF COMPLIANCE TO FOOD SAFETY RULES - UNIDO Estimates Shrimp exports to the EU - Testing and Compliance cost adds 2.8% Enterprise Quality/safety set up cost adds 5% to product cost National Quality & Testing infrastructure US$ 5.0 million to US$ 25.0 million No.22

UNIDO TCB Programmes (TA combining Supply & Conformity - on-going & planned programmes) UEMOA/ECOWAS Benin Mali Burkina Faso Niger Cape Verde Senegal Gambia Sierra Leone Guinea Togo Guinea Bissau Liberia Mauritania Haiti UEMOA/ ECOWAS Senegal CARICOM Afghanistan Ethiopia Nepal Bangladesh MEKONG SAARC Cambodia SAARC Bangladesh Bhutan Maldives Nepal MEKONG Delta Countries Cambodia Lao PDR CARICOM Haiti Source: OECD DAC List CEMAC CEMAC EAC EAC Tanzania Central African Rep. Uganda Chad Mozambique Tanzania SADC Madagascar Congo Burundi (2007) Rwanda (2007) Equatorial Guinea SADC Angola Malawi Congo Mozambique Lesotho Tanzania Madagascar Zambia Regional Programmes Country Programmes No.23

LDCs MAJOR UNIDO TCB PROJECTS APPROVED DURING 2002 to 2006 (ONGOING) Region/Country Amount (US$ millions Donor Afghanistan $1.00 World Bank (UNOPS) Algeria $1.50 France Algeria $1.00 Italy Argentina $3.50 Italy Bangladesh $9.00 EU Cambodia $0.60 Austria Central America $0.50 UNIDO EAC $2.60 UNIDO/Norway Ecuador $0.20 UNIDO Egypt $2.50 EU Egypt $3.10 Egypt Ethiopia $0.10 Denmark (DANIDA) Global $0.30 UNIDO (Trust fund) Global $0.01 UNIDO Guatemala $1.80 Guatemala Guatemala $0.20 Guatemala Lebanon $2.00 Swiss (SECO) Lebanon $0.30 Italy Libya $1.00 UNDP Mekong $2.50 Norway (NORAD) Mozambique $2.00 Swiss (SECO) Nigeria $0.40 Nigeria + UNIDO Pakistan $2.80 EU Senegal $1.40 France South Asia (SAARC) $0.20 India South Asia (SAARC) $2.50 Norway (NORAD) South Asia (SAARC) $0.50 UNIDO (Trust fund) Sri Lanka $2.40 Norway (NORAD) Syria $2.66 Italy Tanzania $2.00 Swiss (SECO) Tunisia $3.00 Italy UEMOA $11.97 EU UEMOA (upgrading) $10.00 EU UNIDO Trust Fund $0.70 UNIDO Uruguay $1.21 Italy Vietnam $1.00 Swiss (SECO) ONGOING - TOTAL: $78.45 UNIDO TCB Project Portfolio (TA combining Supply & Conformity) Total funding for TCB recent & ongoing projects: US$ 78.45 mn. LDC PORTFOLIO US$ 46.37 million (approx. 60% of all TCB TA) No.24

TCB Aid for Trade type Programmes (Supply & Conformity) Regional Trade: UNIDO/EU - UEMOA Programme Budget: 14.0 million Donor: EU Productive Capacities and Quality Promotion Food safety, productivity and quality promotion 68 pilot enterprises prepared for ISO 9001 National and regional Quality awards Training of journalists in consumerism and product quality In cooperation with: Standards and Conformity Assessment Harmonization of standards for export products Harmonization of testing procedures, reg. database on labs Upgrading of 50 laboratories, 24 for international accreditation Regional accreditation scheme Training of 16 Lab. auditors Training of 40 ISO 9001 auditors UEMOA Phase 2: under development ( 6.0 million) UEMOA Upgrading: funding received ( 10.0 million) No.25

Barrier to Trade Survey Study on SPS Compliance for Exports Standards (PSQCA) Standards development Certification Body (Systems) Consumer affairs Product certification Metrology (NPSL) Lab upgrading, international accreditation Product Testing (MFD, PCSIR, etc): Fisheries, Food, Leather, Textile Lab upgrading, PT participation International accreditation Accreditation (PNAC) Organizational strengthening, international recognition National accreditation scheme Training of auditors Setting-up of PT schemes Quality/Hygiene (Private sector, FPCCI, etc.) Fish/food Management systems Good practices Compliance with market requirements Pilot certifications HACCP, ISO 9001, 14001, SA 8000) Pilot traceability systems www.unido.org TCB Aid for Trade type Programmes (Supply & Conformity) Supply and Conformity: Pakistan TRADE RELATED TECHNICAL ASSISTANCE PROGRAMME Budget: 5.0 million Donor: EU Boat hygiene Icing Landing Sites Inspection Auction Hall Processors Traceability No.26

TCB Aid for Trade type Programmes (Supply & Conformity) Supply and Conformity: Bangladesh BANGLADESH QUALITY SUPPORT PROGRAMME Budget: 7.5 million Donor: EU (co-funded by Norway) Quality Infrastructure (standard setting, laboratories infrastructure, certification, accreditation, metrology/calibration) Textile competitiveness (industrial upgrading, product development, technical and marketing training) Fish Inspection (Product testing and inspection services, laboratory accreditation, waste treatment, staff training) Export Diversification (ITC component) (access to regulatory market information, EUREPGAP, sectoral strategies, packaging) No.27

TCB Aid for Trade type Programmes (Supply & Conformity) Product Specific TRTA: Regional Cotton Programme - a key issue in Cancún Budget: 21.0 million Donor: under discussion with various donors Programme developed in cooperation with: - ACA (African Cotton Association) - ICAC (International Cotton Advisory Committee) Main activities: - Technical and managerial training - Pilot enterprise projects for productivity improvement - Cotton quality evaluation system - Upgrading of 11 cotton specialized laboratories - Cotton quality data base - Development of African Cotton Label - Enterprise partnerships (national and international) Impact expected: - Job creation in cotton/garment/textile enterprises - Productivity increase by 20-40% - Increased value added (+5%) in short term - Increased cotton transformation (from 5% to 25% by 2015) - Increased export revenues (+20-40% in medium term) 11 countries to be covered: Benin, Burkina Faso, Cameroon, Chad, Côte d Ivoire, Guinea-Bissau, Mali, Niger, Nigeria, Senegal, Togo No.28

Remaining Challenges for Aid for Trade: VOLUME Overall A4T estimated: US$ 2 billion UN System TA at present less than 10 % Who will implement A4T? PRIVATE SECTOR PARTICIPATION Private Sector as Actor of A4T not Factor/Beneficiary INCREASING REGIONALISATION Operationalize Regional A4T Approach VALUE CHAIN APPROACH Linking producers and buyers (value chains meeting market requirements ENABLING BUSINESS ENVIRONMENT Strengthening business support services for: Market Intelligence Achieving market requirements (quality and quantity) Proving Compliance No.29

Which Private Sector? More Private Sector Involvement: Developing countries producer, chambers Industrialized countries buyer Inspection agencies, transport providers, harbour management, consultancies for TA delivery How to facilitate: UN s A4T Contribution Provide Good Practice Linking Supply and Conformity Develop Good Practice TA Approach (up scaling, regionalize) Train private consultancy sub-contractors Link producers/buyers Provide public goods - Market intelligence, etc. (ITC) - Compliance services, export consortia, cluster development (UNIDO) No.30

CONCLUSIONS Key trade participation challenges: Lack of productive supply capacities Difficulty in meeting market compliance requirements WTO TBT/SPS compliance: vital for trade AID FOR TRADE Re-iterates support for SUPPLY CAPACITY & CONFORMITY Need for more Private Sector as Actor PRIVATE SECTOR CHALLENGES Upgrading competitive supply side Meeting Quality/Safety challenges within TBT/SPS regime Linking up to Global value chains New Regional Dimension: Tailoring A4T A4T + Private Sector = Trade Development No.31

Thank You for your attention!