The sixth aid-for-trade monitoring report has been published by the WTO and OECD under the title “Aid for Trade at a Glance: Promoting Trade Inclusiveness and Connectivity for Sustainable Development. The Aid for Trade initiative, launched in 2005, aims to help developing countries participate in global trade by assisting with the supply side and addressing trade-related infrastructure constraints. The report notes that more than USD 300 billion has been devoted to programs and projects since the initiative was launched.

The focus of the latest edition is on physical and digital connectivity. Trade connectivity is essential for inclusiveness, sustainable growth and reduction of poverty. Digital networks are essential to trade and are interlinked with the physical trade infrastructure. Without an affordable internet connection the market place of the world-wide web cannot be accessed. The report points out that around 3.9 billion people remain offline.

As a result of digitalization a larger number of low-value transactions and small shipments cross national borders, and goods are increasingly combined with services. Services therefore represent a growing share of exports of manufactured products.  New technology lowers the cost of supplying cross-border services and facilitates connections between parts of the supply chain. This does not eliminate comparative advantage or other constrains from information symmetries and trade barriers; but many of the constraints of international trade are being overcome and new business models are being created.

The 2030 Agenda for Sustainable Development has set targets for universal, affordable access to the internet. Although mobile broadband networks are available to more than 50% of people in the less developed countries (LDCs) the devices and network connections are still expensive and coverage is limited. The high costs of digital connections can be seen as trade costs that exclude firms and consumers from the online market for goods and services.

Measures are required to improve the supply side of digital connectivity including ICT infrastructure and availability of network coverage; and the demand side such as affordability and internet usage. This involves mobilizing additional finance to develop infrastructure, ICT services markets and regulatory environments. Aid for Trade supports governments in their efforts to bridge the digital divide.

There is also a digital trade policy divide. Developing countries must consider the trade policy aspects of digitalization. Digital connectivity alone is not sufficient without additional policies to develop the potential of e-commerce, including technical and financial assistance to develop human, institutional and infrastructure capabilities.

Commerce is hindered by border clearance delays and inadequate physical infrastructure. Digitalization of customs services can make the customs and border agencies more efficient. The report emphasizes the need to streamline customs services for micro, small and medium enterprises (MSMEs). Many of these concerns will be addressed by the WTO Trade Facilitation Agreement.

The Trade Facilitation Agreement aims to simplify and harmonize international trade procedures, speeding up the movement and clearance of goods. Complete implementation of the agreement could lower trade costs by 16.5% for low income countries and 17.4% for lower middle income countries. The TFA covers a range of trade facilitation measures including customs cooperation, customs procedures, freedom of transit, formalities, appeals procedures and fees and charges. Countries self-assess and declare their ability to implement each measure.

Services trade is important in growing connectivity as services support trade in goods, supply chains and manufacturing activities. They are also involved in the infrastructure enabling e-commerce and online services. Governments need to help promote the development of e-commerce strategies supporting trade logistics, development of e-commerce skills, adequate legal frameworks, online payments and access to finance. These combined with an increase in connectivity can increase e-commerce possibilities, generating economic growth and employment.

E-commerce can raise productivity in developing countries across all economic sectors, including MSMEs and enterprises owned by women, by connecting to customers and suppliers worldwide. Governments need to promote internet access and training to ensure that existing inequalities of access do not increase. The private sector is also important in supporting MSMEs and individuals to become connected to the global economy.