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Fireworks at Kansalaistori Square, Helsinki, to celebrate a century of Finnish independence (Photo: Finland 100)

Fireworks in Helsinki, to celebrate a century of Finnish independence (Photo: Finland 100)

How Aid for Trade creates jobs, and enhances sustainable development

EU Trade Commissioner Karel De Gucht recently said, "One thing is for sure: no country has ever lifted itself out of poverty without international trade. Trade is key to help countries develop. So, we need to make sure that people in the world's poorest countries have access to markets, to create jobs and encourage growth as a result."

That's where Aid for Trade (AFT) comes in. AFT is a generic term for development cooperation that aims to strengthen developing countries’ productive capacity and ability to engage in foreign trade in order to achieve sustainable economic development, the eradication of extreme poverty, and to secure a life of human dignity. It also includes trade policy and regulations, trade economic infrastructure, building productive capacity and trade-related adjustment - which includes, for example, compensation for lower customs revenues.

The AFT Global Reviews have shown that the programmes have bettered the lives of many men and women in developing countries, and that the Initiative has not only resulted in trade becoming a development strategy priority, but also in terms of commitments being increased with the aim of reducing the barriers to local producers' access to regional and global markets.

The poorest developing countries need special assistance in order to be able to benefit from international trade. Finland's Aid For Trade Action Plan (2012–2015) responds to this challenge in a comprehensive way, renewing the commitment in line with the Finnish Government’s Development Policy Programme, which includes supporting the trade capacity of developing countries.

Cooperation for opportunity

Trade and economic growth is an important element, also, in development policy and development cooperation - that cooperation being human rights-based, with particular attention to employment and entrepreneurship opportunities for women and young people, as well as supporting the poorest countries in their efforts to benefit from trade and investment. Investing increasingly in improving gender equality and the status of women, reducing inequality and ensuring climate sustainability is a core focus of Finland's AFT.

Finland’s Under-Secretary of State at the country's Ministry for Foreign Affairs, with responsibility for Development Cooperation and Development Policy, Anne Sipilainen recently underlined the importance of AFT and cooperation, saying, "The whole concept and architecture of aid is changing. Business collaboration and multistakeholder partnerships for development are gaining importance significantly."

Sipilainen was in Addis Ababa in June 2013, heading the Finish business delegation to the Ethio-Finnish Trade and Business Forum held under the theme of 'Inclusive partnership for sustainable growth'. In her speech,the Under-Secretary expressed her belief that the Finnish Government and the private sector in Finland had a role to play in supporting Ethiopia in strengthening her overall economic and trading capacity.

"Today’s seminar is particularly important for both the Finnish and Ethiopian stakeholders as we need to identify new ways to contribute to the people’s welfare," she said.

Encouraging the exchange of ideas for long-term partnershipsFinnish Under-Secretary of State Anne Sipiläinen

The forum was held in a bid to bring some interested companies from Finland to Ethiopia to see that the ample business opportunities in the country.

"I really encourage all of you to network, exchange ideas and sow the seeds for long-term partnerships. We will certainly also continue making Ethiopia known to the Finnish business sector and the entire society also after this seminar," she said. "We all have a role to play in supporting Ethiopia in strengthening her overall economic and trading capacity. This concerns the trade between Ethiopia and Finland as well as the rest of the European Union - but, perhaps even more importantly, the growing trade between Ethiopia and the other countries in the greater Africa−Middle East−Asia region."

AFT essentially contributes to decent employment and,in a long run, to improved domestic resource mobilisation in developing countries.

"Roughly some 20 per cent of Finland’s development cooperation can be classified as Aid for Trade,"she added.

Finland is of the opinion that developed countries have an obligation, amongst other things, to grant the least developed countries longer transition periods or technical assistance to implement certain agreements. The country has influenced the development of the international Aid for Trade initiative by actively participating in the work of the EU, OECD, WTO and UN. Finland’s own AFT activities have increased in recent years, and Finland has become a significant donor to and actor in many key multilateral trade and development organisations and programmes. Finland’s AFT disbursements increased from approximately 32 million euros in 2006−2007 (annual average) to nearly 120 million euros in 2010−2011 (annual average). Building productive capacity accounts for some two-thirds of all AFT support, with a particular focus on supporting trade development. The volume of projects with the main objective of trade development averaged seven million euros in 2010−2011. The AFT has, in general, gained broad support - and Finnish expertise has been globally recognised as excellent.

Finland's Action Plan is also based on the belief that the private sector in developing countries will create the majority of jobs in the future - and Finnish society can contribute in two ways. On the one hand, Finland can help developing countries develop inclusive green economies through AFT, to promote employment and use natural resources in a sustainable manner. On the other hand, the Finnish private sector can build partnerships directly with companies in the countries, or together with the public sector and civil society organisations. This will create the basis for future successful responsible business in new emerging markets.

Addis Ababa, at the heart of the debate on collaboration for development (Photo: Sam Effron) Resources to meet societal challenges

 It seems that Aid for Trade is an initiative that combines the objectives of  both development policy and trade policy in an ideal way. However,  development aid alone is not enough to meet the challenges of the poorest  developing countries. It is, therefore, important that development  cooperation works more as a catalyst to increase other resource flows, such  as export revenues, investments and other private financial flows.

 Broad-based sustainable economic development is a precondition for  achieving the UN Millennium Development Goals (MDGs). Economic  development is sustainable when it generates wealth and wellbeing in a  society in a just manner, whilst also maintaining and increasing society’s  opportunities to produce wealth and wellbeing in the long-term. Sustainable  economic development creates decent jobs and opportunities for  entrepreneurship, reduces poverty and promotes human rights, equality and  stability, increases tax and export revenues, as well as investments in  developing countries - enabling them to reduce inequality and aid  dependency.

Above all, the prosperity and wellbeing of developing countries is generated through their own people’s work. Trade and improved production capacity creates decent jobs and reduce poverty, which in turn reduces aid dependency. Economic development is also a catalyst for the realisation of democracy, human rights, equality and human development.

For the business to flourish and be able to create jobs, the basic conditions should be right. Essentially, a favorable business environment comprises well-maintained infrastructure, functioning market institutions, healthy business competition and good governance. In a desirable business environment, goods and people move freely, institutions function properly, and companies are able to produce products that are demanded by the consumers.

An agenda for assistance

The international Aid for Trade initiative was born from the negotiations of the WTO Doha round, shortly before the Hong Kong ministerial conference in the autumn of 2005. The theme has since featured on the agenda of almost all the main trade, economic and development conferences. AFT is not an individual funding programme, but a more general policy initiative. Its aim is to increase the amount and improve the quality of AFT as a part of official development assistance and cooperation. The most important international AFT pledge concerns trade-related technical assistance. Its share of total development aid is monitored by indicator of the eighth MDG. While, the scope of AFT development, economic infrastructure, has been mutually agreed by the OECD. According to the OECD, AFT had increased at a global level by 82 per cent by 2010 since the launch of the initiative, in comparison to the reference period of 2002−2005 reaching nearly a quarter of official development assistance.


Meskerem Lemma