Impacts of tangible and intangible elements of Aid for Trade on the globalisation of developing countries

• Published date: 01 August 2020
• Author: Hyo Won Lee,Youngwan Kim
• DOI: http://doi.org/10.1111/twec.12948
• Date: 01 August 2020

World Econ. 2020;43:2153–2171. wileyonlinelibrary.com/journal/twec

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2153

© 2020 John Wiley & Sons Ltd

Received: 28 September 2018

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Revised: 23 November 2019

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Accepted: 11 February 2020

DOI: 10.1111/twec.12948

ORIGINAL ARTICLE

Impacts of tangible and intangible elements of

Aid for Trade on the globalisation of developing

countries

Hyo WonLee1

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YoungwanKim2

1Yonsei University, Seoul, Korea

2Hankuk University of Foreign Studies, Seoul, Korea

Funding information

Ministry of Education of the Republic of Korea; National Research Foundation of Korea, Grant/Award Number: NRF-

2018S1A3A2075117

KEYWORDS

Aid for Trade, development, globalisation, trade, World Trade Organisation

1

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INTRODUCTION

Many have found that globalisation keeps developing countries in poverty and increases the income

gap between them and the rich countries. Because developing countries cannot escape globalisation,

some argue that rich countries should help them to successfully participate in it. The World Trade

Organisation (WTO) has put forward many ideas for promoting the participation of developing coun-

tries in the global market as part of its main task of protecting this market. One such effort along these

lines is the implementation of special provisions, such as special and differential treatment (SDT)

for developing and the least-developed countries. The purpose of these provisions is to mitigate the

negative impacts of globalisation on developing nations, while also stimulating their participation in

the global market. However, there are contending views regarding the efficacy of such efforts. Some

argue that these special provisions can help support developing countries' participation in the global

free market, producing a superior level of trade (Conconi & Perroni, 2015; Hasan, 2016; Jobim, 2013).

Others argue that the special provisions are selectively implemented and used by developed countries

to further their own interests (Kishore, 2014; Ornelas, 2016). This criticism led the WTO to devise

better policies to encourage the participation of developing and the least developed countries in global

free trade (Ismail, 2007).

In 2005, the WTO launched the Aid for Trade initiative at the Hong Kong Ministerial Conference

and established a task force to administer the initiative in 2006. This initiative is intended "to help

developing countries, particularly LDCs, to build the supply-side capacity and trade-related infra-

structure that they need to assist them to implement and benefit from WTO Agreements and more

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LEE and KIM

broadly to expand their trade."1 The task force proposed six categories of support to be offered for free

trade in developing countries: Aid for Trade policy and regulations, trade-related infrastructure, pro-

ductive capacity building, trade-related adjustments and other trade-related needs (Higgins & Prowse,

2010). These actions were intended to promote "coherence in global economic policy making",2 and

a monitoring system was established to see whether the Aid for Trade initiative was being successfully

implemented.

The WTO also worked in close cooperation with many other international institutions, such as the

OECD, UNCTAD, UNDP and IMF. The total amount of Aid for Trade increased tremendously be-

tween the starting years of the initiative and the 10th year. From 2006 to 2008, the average amount of

total Aid for Trade in terms of commitments was $29,343.8 million per year, whereas, in 2015, it was

$53,878.9 million. The share of Aid for Trade in terms of commitments in total Official Development

Assistance (ODA) also increased from 20% to 29.7% in the same periods (OECD/WTO, 2017). Then,

have these increases of Aid for Trade helped recipient countries to participate in the global market? In

other words, have the recipient countries increased their level of globalisation owing to Aid for Trade?

The existing literature, which is discussed in more detail in the next section, shows that Aid for

Trade has helped recipient countries develop their capacity and infrastructure for participation in the

global market. However, these works mainly focus on the impact of material or tangible elements of

Aid for Trade on recipient countries' economic globalisation, and accordingly, such studies generally

feature two main defects in their approach to the analysis of the impacts of the initiative on overall

globalisation. First, they usually do not consider the impacts of nonmaterial or intangible elements

of Aid for Trade, such as trade policy and regulation. This is a crucial defect because the intangible

elements are likely as important as or more important than its tangible elements in their effects on

recipient countries' globalisation. Second, previous works usually do not deal with the impacts on

overall globalisation. Rather, they only address impacts on the increase of recipient countries' trade or

economic globalisation. However, the globalisation that is investigated should not be limited to eco-

nomic globalisation alone; social and political globalisation are also important in this context.

The purpose of the study is to fill these two gaps in the existing literature by investigating the im-

pacts of both tangible and intangible elements of Aid for Trade on recipient countries' overall global-

isation, including not only economic but also social and political globalisation. Intangible elements of

Aid for Trade may be compared to software, while tangible elements are like hardware. The recipient

countries may require both elements to succeed in globalisation. Both kinds of aid may also help re-

cipient countries to globalise not only economically but also socially and politically. This study ex-

pands the scope of research on the impacts on globalisation by including both tangible and intangible

elements of aid as independent variables and both economic and sociopolitical globalisation as depen-

dent variables.3

We hypothesise that the tangible elements of Aid for Trade have a singular effect on the overall

level of globalisation. This is because the tangible elements are expected to increase globalisation only

in terms of economic aspects, as stated in many existing studies. Moreover, we expect that the intan-

gible elements of Aid for Trade will have multiple effects on the overall level of globalisation since

they have an impact on not only economic globalisation but also social and political globalisation. The

1Recommendations of the task force on Aid for Trade (WT/AFT/1),27 July 2006. (See https://www.wto.org/engli sh/tratop_e/

devel_e/a4t_e/imple menti ng_par57_e.htm)

2See the website of the WTO (https://www.wto.org/engli sh/tratop_e/devel_e/a4t_e/a4t_facts heet_e.htm).

3We offer our deepest gratitude to the anonymous reviewer for providing us with sophisticated comments.