Trade Capacity Building: Foreign Assistance for Trade and Development
Trade Capacity Building:
Foreign Assistance for Trade and Development
Updated February 5, 2008
Analyst in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Trade Capacity Building:
Foreign Assistance for Trade and Development
Trade capacity building (TCB) is a form of development assistance provided by
the United States and other donors to help developing countries participate in and
benefit from global trade. In addition to helping developing countries negotiate and
implement trade agreements, TCB includes development assistance for agricultural
development, customs administration, business training, physical infrastructure
development, financial sector development, and labor and environmental standards.
Some experts believe that TCB is necessary for developing countries to adjust to
trade liberalization and achieve trade-led economic growth.
In FY2007, the United States obligated about $1.4 billion in TCB worldwide.
The U.S. Agency for International Development (USAID) funds and implements the
majority of U.S. TCB programs. In FY2005, the Millennium Challenge Corporation
(MCC) began to fund TCB activities, and in FY2006 and FY2007 it overtook USAID
as the agency with the highest TCB obligations. Other agencies also provide TCB,
including the U.S. Department of Agriculture, the Department of Commerce, the
Treasury Department, the Department of Labor, and the U.S. Trade and Development
Agency (USTDA). The United States also contributes to multilateral funds for TCB,
and it contributes to multilateral development banks such as the World Bank, which
also provide TCB programs.
Congress has played a key role in TCB by providing funding through
appropriations legislation. In the 109th Congress, the House passed a measure to
create a Trade Capacity Enhancement Fund in the 2007 Foreign Operations
Appropriations Bill (H.R. 5522), but this measure was not included in the Senate bill.
The 110th Congress directed the administration to use at least $550 million of foreign
aid appropriations for TCB in the Consolidated Appropriations Act of 2008 (P.L.
110-161). TCB may become a key part of the 110th Congress’ discussions on
potential free trade agreements (FTAs) with developing countries, renewal of trade
promotion authority (TPA), and U.S. involvement in the Doha round of WTO
negotiations. The 110th Congress may also be interested in using TCB to increase the
effectiveness of trade preference programs initiated through legislation such as the
African Growth and Opportunity Act (AGOA).
In the past, Congress has passed legislation restricting the use of foreign
assistance for certain activities promoting trade in developing countries. While TCB
generally has trade-promoting motivations, any resulting increased import
competition could also raise Congressional concern.
This report describes trade capacity building and discusses the history of TCB
in foreign assistance. It also provides an overview of U.S. bilateral TCB assistance,
as well as multilateral and bilateral TCB assistance from other donors. There is also
a discussion of legislation affecting TCB, including appropriations and legislative
restrictions on foreign assistance. Finally, this report highlights some of the policy
issues concerning TCB. This report will be updated as events warrant.
In troduction ......................................................1
Categories of TCB.............................................3
Why Trade Capacity Building?.......................................5
Market Access May Be Insufficient ...............................5
Adjustment Costs .............................................6
The Historical Context for TCB......................................7
Overview of U.S. Bilateral Trade Capacity Building......................8
U.S. Agencies in Trade Capacity Building.............................12
The U.S. Agency for International Development (USAID).............14
The Millennium Challenge Corporation (MCC) ....................16
U.S. Department of Labor .....................................17
The U.S. Department of State ..................................18
The Export-Import Bank ......................................19
The Department of Transportation................................19
The U.S. Trade and Development Agency.........................19
The U.S. Department of Agriculture ..............................20
Other U.S. Agencies Providing TCB Assistance ....................20
Trade Capacity Building by Non-U.S. Donors..........................21
Multilateral Trade Capacity Building.............................21
Aid for Trade Initiative....................................22
The Integrated Framework..................................23
Other Donor Bilateral Trade Capacity Building.....................24
Legislation on Trade Capacity Building...............................25
Legislative Limitations on TCB..................................26
Motivations for Trade Capacity Building..........................27
Challenges for Trade Capacity Building...........................28
List of Figures
Figure 1. U.S. Trade Capacity Building Assistance
(in millions of U.S. dollars).....................................9
Figure 2. U.S. Trade Capacity Building Assistance by Region
(in millions of U.S. dollars).....................................9
Figure 3. U.S. Trade Capacity Building Assistance by Category
(in millions of U.S. dollars).....................................12
Figure 4. Share of FY2007 TCB Funding..............................13
Figure 6. USAID TCB Funding by Category, FY2003-2007
(in millions of U.S. dollars).....................................15
Figure 7. U.S. Department of Labor: TCB Project Implementation by Year,
FY1999-2007 (in millions of U.S. dollars).........................18
Figure 8. Distribution of U.S. Department of State TCB Funding, FY2007....19
List of Tables
Table 1. Largest Recipients of U.S. TCB Assistance since FY2005..........11
Table 2. Selected U.S. Agencies with TCB Programs, FY2006 and FY2007...14
Table 3. MCC Compacts and Elements of TCB.........................17
Table 4. 2005 Commitments of TRTA/TCB by Donor, for Selected Donors..24
Trade Capacity Building: Foreign
Assistance for Trade and Development
Trade capacity building (TCB) can be broadly defined as development
assistance aimed at helping countries build the physical, human, and institutional
capacity to participate in global trade. It includes assistance to negotiate, implement,
and benefit from trade agreements, such as agreements within the World Trade
Organization (WTO), and regional and bilateral free trade agreements. Many experts
consider TCB to be vital for developing countries to benefit from trade liberalization
and to participate actively in the global economy. In turn, trade liberalization and
participation in the global economy are considered important factors in promoting
economic growth and poverty reduction. This report examines key issues in TCB,
provides an overview of U.S. and international TCB programs, and explores
Congressional involvement in TCB.
TCB is provided by bilateral donors such as the United States, the European
Commission, individual European countries, and Japan, Korea, and Canada.
Multilateral institutions such as the World Bank, the Inter-American Development
Bank (IDB), the World Trade Organization (WTO), and the United Nations also
provide TCB. Direct recipients of TCB include government ministries, customs
officials, business owners, local non-governmental organizations (NGOs), and
farmers. TCB can take the form of workshops, on-the-job training, data collection,
feasibility studies, infrastructure upgrades, and efficiency improvements in
procedures. Ideally, developing countries incorporate TCB needs in their national
development plans, and TCB programs are planned in partnership between recipient
and donor countries.
The U.S. government provides TCB assistance to developing countries
worldwide on a bilateral basis, and through contributions to multilateral
organizations and established global TCB trust funds. The U.S. Agency for
International Development (USAID) has historically provided the bulk of U.S. TCB
assistance, but other agencies such as the U.S. Department of Agriculture (USDA),
U.S. Department of Commerce, and U.S. Trade and Development Agency (USTDA)
also provide such assistance. The Millennium Challenge Corporation (MCC) first
provided TCB assistance in FY2005, and in FY2006 and FY2007 its TCB funding
obligations surpassed those of USAID. U.S. TCB is not currently a discrete line item
with its own budget; it is funded through several different initiatives within USAID
and other agencies. In FY2007, U.S. government agencies reported obligating nearly
$1.4 billion to TCB, of which over $1 billion was obligated by the MCC and
USAID.1 According to the Organization for Economic Cooperation and
Development (OECD), the United States allocated about 25% of its total official
development assistance (ODA) to TCB between 2002 and 2005.2
Interest in TCB has grown in the donor community, both in the United States
and abroad. As developing countries become more involved in trade negotiations,
trade capacity becomes a higher priority issue for them and for donors. Developing
countries from every region have entered free trade agreement (FTA) negotiations
with the United States or the European Union. They have also been heavily engaged
in the Doha round of WTO negotiations. In order to conclude the Doha round and
other trade negotiations, developing country needs may require consideration, and
that may include additional resources for TCB.
Congress has several policy interests in TCB. First, TCB may be included in
some potential free trade agreements (FTAs). The United States has concluded FTA
negotiations with some developing countries, and Congress may be asked to consider
implementing legislation for these potential FTAs. Congress also appropriates funds
for TCB through USAID and other budgets. Congress may play a role in oversight
of TCB programs, to ensure effectiveness and adherence to U.S. interests. TCB is
also considered a compliment to U.S. trade preference programs such as the African
Growth and Opportunity Act (AGOA), which Congress oversees. Finally, TCB is
provided to developing countries through their participation in the WTO, and has
been a topic of discussion in the Doha Development Agenda (DDA) round of
negotiations.3 Congress may consider implementing legislation for a WTO
agreement, and TCB could be important in that discussion.
Defining Trade Capacity Building
There is no set definition of TCB in trade and development public policy
discourse. A narrow definition of TCB might include only assistance directly related
to trade agreements, such as assistance to negotiate and implement such agreements.
However, TCB is usually defined more broadly to include all types of development
assistance that directly affect a country’s capacity to participate in trade. This
broader definition of TCB is assumed for the purpose of this report (see the box on
page 4 for elaboration on the various areas of TCB assistance). The assistance
contained within the broad definition of TCB includes addressing the regulatory
environment for business, trade, and investment, supply-side constraints such as low
productive and entrepreneurial capacity, and inadequate physical infrastructure such
as transport and storage facilities. The goals of TCB include overcoming adjustment
costs from liberalized trade; offsetting high implementation costs of trade
1 Data was self-reported by U.S. government agencies and can be found on the U.S. Trade
Capacity Building Database website, [http://qesdb.usaid.gov/tcb/index.html].
2 Aid for Trade at a Glance 2007: 1st Global Review, Organization for Economic
Cooperation and Development and the World Trade Organization. November 2007.
3 For more information on the Doha round negotiations, see CRS Report RL32060, World
Trade Organization Negotiations: The Doha Development Agenda, by Ian Fergusson.
agreements; offsetting preference erosion from multilateral liberalization; offsetting
lost tariff revenue; improving negotiating capacity; and addressing supply-side
constraints that make it difficult for developing countries to compete in world
A risk of defining TCB too broadly is that almost any assistance activity can be
loosely defined as TCB. There are many areas of assistance that focus on domestic
policy and capacity issues in a developing country, for example, business regulatory
regimes, but also have direct consequences for trade. However, there are other areas
of assistance, such as providing training to local microenterprises that are not likely
to engage in international trade, where the linkage to trade is often not clear. In some
cases, two similar projects in different countries can be similarly described on paper,
but may be implemented with different objectives in mind. One project may be
strongly trade-related, while another may not qualify strongly as TCB. This poses
a problem when examining the aggregate TCB data. It is useful to know the total
amounts of TCB assistance provided to different countries for summary purposes, but
this data should be viewed as an inexact estimate of TCB, rather than as a definitive
tool for measuring TCB assistance.
Trade capacity building has some synonyms. It is also referred to as aid for
trade or trade-related technical assistance (TRTA), especially within the context of
the WTO. Some distinctions can be made between these terms, but since there is no
agreement on them they are treated as interchangeable within this report.
Categories of TCB
Most developing countries lack the physical, institutional, or human capacity to
participate effectively in world trade. Physical capacity includes infrastructure
essential to trade such as ports, roads, and storage facilities. Institutional capacity
refers to the business and trade policy environment, in addition to the strength of the
financial sector. Institutional capacity relates to the existence of effective
administrative and regulatory regimes, including property rights and formal business
registration procedures. Human capacity refers to the technical competence of
individuals such as government officials, entrepreneurs, and producers to contribute
to international trade. The box on the following page breaks down further the
different categories of TCB.
4 International Lawyers and Economists Against Poverty (ILEAP), “Aid for Trade — Why
Areas of TCB Assistance:
Trade Facilitation: Improving the efficiency of international trade flows, through
reducing the costs and time required for goods to cross borders. Mainly achieved through
simplification and harmonization of fees and procedures.
Customs Operation and Administration: Assistance to help countries modernize and
improve their customs offices. Part of trade facilitation.
Export Promotion: Includes assistance to increase market opportunities for developing
country and transition economy producers.
Business Services and Training: Includes support to improve business sector
associations and networks, and to enhance the skills of business people in trade.
Regional Trade Agreements (RTA): Includes assistance to an RTA, or to an individual
country, to help an RTA facilitate trade.
Human Resources and Labor Standards: Supports labor standards and worker rights
enforcement; development of trade unions and dispute resolution mechanisms; workforce
development; and elimination of child labor.
Physical Infrastructure Development: Assistance to establish trade-related
telecommunications, transport, ports, airports, power, water, and industrial zones.
Trade-Related Agriculture Development: Support for trade-related aspects of the
agriculture and agribusiness sectors.
Environmental Sector Trade and Standards: Assistance to establish environmental
standards or to promote environmental technology.
Financial Sector Development and Good Governance: Support for financial sector
work, capital markets, and monetary and fiscal policy.
Competition Policy and Foreign Investment: Support for the design and
implementation of antitrust laws, as well as investment laws and investor protections.
Services Trade Development: Includes support to help developing countries and
transition economies increase their services trade flows.
WTO Awareness and Accession: Assistance to help countries benefit from membership
in the WTO or understand the benefits of WTO membership. Also assistance to help
countries in the WTO Accession process meet the requirements of accession.
Specific WTO Agreements: Assistance that enables countries to better participate in,
and benefit from, particular WTO Agreements. These agreements include Agreements
on Trade in Goods; Agreement on Agriculture; Agreement on Sanitary & Phyto-Sanitary
(SPS) Measures; Agreement on Technical Barriers to Trade (TBT); Agreement on Trade-
Related Investment Measures (TRIMs); etc.
Source: Adapted from TCB Category Definitions on the USAID TCB Database website.
Why Trade Capacity Building?
Trade capacity building is based on the premise that trade liberalization leads
to economic growth for both developed and developing countries, but developing
countries do not have the capacity to achieve trade-led economic growth without
assistance. On a more basic level, TCB assumes that donors can have an impact on
trade capacity in developing countries. TCB is often cited as an important
complement to market access, which is believed to be necessary but insufficient for
developing countries to increase participation in trade. Other reasons given for TCB
are to offset preference erosion and the adjustment costs of trade liberalization.
Market Access May Be Insufficient
Increased market access through preferential treatment, trade agreements, and
other programs may not be sufficient to increase developing countries’ participation
in international trade. Beginning with the Generalized System of Preferences (GSP)5
in the 1970s, the United States and other developed countries have provided
increased market access to products from developing countries through trade
preference programs. Trade preference programs provide duty-free and/or quota-free
access to certain products from certain developing countries, with stated limitations
such as rules of origin. Despite the GSP and other trade preference programs such
as the African Growth and Opportunity Act (AGOA),6 most developing countries
have not substantially increased their trade globally or with the United States.
Perhaps more importantly, many developing countries have not diversified their
exports out of primary commodities. Low income developing countries have faired
the worst: between 1990 and 2003, low income developing countries only increased
their share of the global market for non-oil trade by one half a percentage point and
least developed countries (LDC) have only maintained their market share. During
the same time period, middle income countries increased their market share by about
14 percentage points.7 A few exceptions have occurred in countries that have
attracted investments in textile and apparel manufacturing.
Some critics blame the lack of trade growth on the preference programs
themselves, arguing that the rules of origin are too stringent or that the programs
exclude products in which developing countries have a competitive advantage.8
Also, the temporary nature of preference programs may add greater uncertainty to an
already risky business environment, discouraging both foreign and domestic
5 See CRS Report 97-389, Generalized System of Preferences, by William H. Cooper.
6 AGOA (PL 106-200) was signed into law in 2000. See CRS Report RL31772, U.S. Trade
and Investment Relationship with Sub-Saharan Africa: The African Growth and Opportunity
Act and Beyond, by Danielle Langton.
7 Richard Newfarmer and Dorota Nowak,”The World Bank in Trade: The New Trade
Agenda,” in Richard Newfarmer (ed), Trade, Doha, and Development: A Window into the
Issues. World Bank. November 2005.
8 Bernard Hoekman and Susan Prowse, “Policy Responses to Preference Erosion: From Aid
as Trade to Aid for Trade,” Presented at the international symposium Preference Erosion:
Impacts and Policy Responses, Geneva, June 13-14, 2005.
investment. Other experts believe that trade capacity is a more important factor than
any of the above. It is broadly accepted that many developing countries have not
benefitted from market access opportunities because of inadequate knowledge of
these opportunities, non-competitive production capacity, lack of the necessary
exporting infrastructure, inability to meet prevailing standards in high value export
markets, and being crowded out of some markets by domestic support and export
subsidies of developed countries.9 This view is not new: a 1980 Congressional
Budget Office (CBO) report found that “actual exports depend on the ability of the
economy to produce competitively, and preferences of the sort granted by GSP may
not be sufficient to compensate for the differences in competitiveness among
countries, or between U.S. producers and those in developing countries.”10
Trade Preference Erosion
Trade preference erosion is a concern in the few countries where preference
programs have had a significant impact, such as in Lesotho and Bangladesh, where
booming apparel industries have increased incomes and employment. Trade
preference erosion may cause a decline in the emerging apparel industries in these
and other countries, because as trade liberalization occurs their margin of preference
is reduced.11 The margin of preference is the difference between the cost of the duty
and/or quota for most favored nation (MFN) exporters and the developing country
exporters receiving preferential treatment. With a reduced margin of preference the
developing countries may no longer be competitive with more developed, lower-cost
producers (such as China). This prospect has prompted certain developing country
WTO members to oppose tariff reductions in certain goods on the basis that it would
diminish their preferences. TCB may mitigate the effects of trade preference erosion,
by helping developing countries to increase their competitiveness in the industries in
question and diversify into other areas. Some observers consider it to be more
politically feasible than monetary compensation, which has been proposed by some
developing countries as a possible solution.
The United States and other donors may provide TCB to help developing
country economies overcome adjustment costs and facilitate a smooth transition to
liberalized trade. Adjustment costs occur when certain sectors of the economy are
negatively affected by trade liberalization, even though the economy as a whole may
benefit through increased growth. Trade may cause decreased production in the least
efficient sectors of the economy and increased production in the more efficient
sectors. During the transition period, land, labor, and capital resources that had been
9 International Lawyers and Economists Against Poverty (ILEAP), “Operational Modalities
for the Aid for Trade Initiative,” Background Brief No. 11, April 2006.
10 Congressional Budget Office, Assisting the Developing Countries: Foreign Aid and Trade
Policies of the United States, September 1980.
11 Bernard Hoekman, Will Martin, and Carlos A. Primo Braga, “Preference Erosion: The
Terms of the Debate,” in Richard Newfarmer (ed), Trade, Doha, and Development: A
Window into the Issues. World Bank. November 2005.
employed in the least productive sectors may become idle. This translates to land
and capital investments losing value, and workers becoming unemployed. As
production increases in the more efficient sectors of the economy throughout the
transition, workers may find new jobs, and other resources are expected to regain
value as they are put to use in growth sectors. In developing countries, this transition
period can be especially slow and difficult, and may never really end. Certain
regions, especially in rural areas, may not attract new industries to replace
employment opportunities lost from the less efficient sectors. Therefore, TCB aims
to help developing countries cope with this dislocation.
The Historical Context for TCB
The development community was skeptical about using trade as a vehicle for
economic growth and development in the 1960s and 1970s. At the time, import
substitution industrialization (ISI), where developing countries limited imports of
manufactured products to foster a domestic manufacturing sector, was the prevailing
theory in trade and development. Aid was used to support industrialization, and not
to foster trade. In the 1980s, after the apparent failure of ISI policies, there was a
shift in mainstream development thinking to the view that removing barriers to trade
and other market distortions would foster growth. As the expected gains from trade
and economic reforms did not materialize, another shift in development thought took
place in the late 1990s. The development agenda changed its focus to strengthening
institutions that support markets and trade-led growth. Development experts
recognized that liberalized trade was necessary but not sufficient for increased12
growth and poverty reduction. At the same time, capacity development became a
popular term during the 1990s, reflecting the need for demand-driven assistance as
opposed to assistance imposed from outside and based primarily on what donors
were willing and able to provide.13 TCB grew from these ideas about trade and
Since the beginning of U.S. development assistance in the 1950s, U.S.
development programs have had elements of what we now refer to as TCB
assistance. The types of TCB assistance provided, from agricultural development to
transportation infrastructure, have changed based on the evolving focus of overall
U.S. development assistance. The composition and focus of such assistance over the
last 60 years have been determined mainly by changes in U.S. foreign policy,14
prevailing theories of development, and domestic administrative realities.
12 Eric Miller, Achievements and Challenges of Trade Capacity Building: A Practitioner’s
Analysis of the CAFTA Process and its Lessons for the Multilateral System, Occasional
Paper 32. Inter-American Development Bank. October 2005.
13 Jan Ubels, Thomas Theisohn, Volker Hauck, Tony Land, From local empowerment to
aid harmonization. Published by ECDPM, SNV, UNDP, 2005.
14 For more information about the history of U.S. foreign assistance, see Samuel Hale
Butterfield, U.S. Development Aid — An Historic First: Achievements and Failures in the
Twentieth Century. Praeger: Westport, CT, 2004.
TCB emerged as a concept in U.S. development assistance parlance around
1999, even though many of the programs included in TCB had been ongoing for
years. Before TCB, the terms used for similar assistance were generally technical
assistance or technical cooperation. The development of TCB as a concept brought
some changes to the planning and implementation of TCB programs. In the past,
these programs were conceived as general economic development programs, and not
necessarily formed with a wider trade agenda in mind. More importantly, capacity
building relies on a partnership with beneficiaries, involving a variety of actors,
including government, private sector, and non-governmental organizations (NGOs).15
TCB programs are also meant to be planned in coordination with trade policy. With
TCB on the agenda, trade officials, both in the United States and in developing
countries, may have a greater influence on development policy than they did
Overview of U.S. Bilateral Trade Capacity Building
According to the USAID Trade Capacity Building Database,16 U.S. government
agencies obligated $1.4 billion in TCB assistance worldwide in FY2007. TCB is
funded through a variety of U.S. agencies and budgets, and includes a variety of
programs, from agricultural development to WTO accession. The United States
began tracking its TCB assistance in 1999, and according to the TCB database it
climbed steadily every year until FY2006, from $370 million in 1999 to $1.4 billion
in 2006 and 2007. It is possible that this apparent four-fold increase over seven years
is partly due to greater reporting of TCB assistance by the responsible agencies, as
well as an inclination to include more activities within the definition of TCB.
However, there has also been increased interest in TCB which may have led to
greater funding for more programs.
From FY1999 to FY2005, USAID funded the majority of TCB assistance. In
and around 70% in previous years. In FY2006, the MCC became the largest U.S.
government funder of TCB, with $610.3 million or 44% of total U.S. TCB (as
compared to $473.1 million from USAID). In FY2007, the MCC funded even more
TCB: $775.4 million, or 55% of total U.S. TCB. The MCC first obligated funds for
TCB in 2005.
15 Michel Kostecki, Technical Assistance Services in Trade-Policy: A contribution to the
discussion on capacity-building in the WTO. International Center for Trade and Sustainable
Development (ICTSD). 2001.
16 Unless otherwise noted, all figures and data in this section are compiled and calculated
from the USAID Trade Capacity Building Database. This database provides self-reported
data from U.S. agencies on their TCB activities. Agency officials include particular
activities in the database at their own discretion. Therefore, the database may understate
U.S. TCB assistance, but it probably does not overstate such assistance. Available online
Figure 1. U.S. Trade Capacity Building
Assistance (in millions of U.S. dollars)
1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: CRS based on data from USAID TCB Database [http://qesdb.cdie.org/tcb/index.html].
The United States provides TCB to a range of developing countries around the
world, including potential FTA partners. In developing countries where the United
States is negotiating an FTA, the Office of the United States Trade Representative
(USTR) coordinates TCB assistance through TCB working groups, consisting of U.S.
government interagency representatives and partner country government
representatives. The CAFTA-DR TCB working group was the first such working
group, and it met concurrently with the FTA negotiations. The working group was
institutionalized as a committee in the text of the negotiated agreement. Since the
passage of the agreement, the CAFTA-DR TCB committee will reportedly focus its
work on coordinating TCB programs for implementing the agreement and addressing
concerns regarding the transition to free trade.
Figure 2. U.S. Trade Capacity Building Assistance by
Region (in millions of U.S. dollars)
EasternSovietAmerica &East &Saharan
Europe Republi cs C ari bbean No r th Africa
20 04 20 05 20 06 20 07
Source: CRS based on data from USAID TCB Database [http://qesdb.cdie.org/tcb/index.html].
As shown in Figure 2, TCB funding trends since 2004 have varied by region.
The Middle East and North Africa region received much less TCB assistance in 2006
and 2007 than in the previous two years because of a decline in TCB assistance in
2006 to Iraq (from $101 million in 2005 to $3 million in 2007), Egypt (from $69
million in 2005 to $18 million in 2007), and the West Bank/Gaza (from $35 million
in 2005 to $0 in 2007). The regions of Sub-Saharan Africa and the former Soviet
Republics both saw a surge in TCB assistance in 2006 because of MCC-funded TCB
activities: $276 million to Cape Verde and Benin in Sub-Saharan Africa; and $280
million to Armenia and Georgia in the former Soviet Republics. In FY2007 the
former Soviet Republics received more typical levels of TCB assistance because the
region had no new MCC compacts, whereas Ghana and Mali in Sub Saharan Africa
signed new compacts, inflating the region’s TCB funding. The Latin America and
Caribbean region had a similarly high level of TCB assistance in 2005 and 2007, as
a result of MCC funded assistance. No MCC funds for TCB were obligated to the
Latin America and Caribbean region in 2006.
TCB assistance is often provided on a regional level to improve efficiency and
encourage regional economic integration. Some projects are also provided on a
global level, or they may be recorded as global projects in the database while
focusing on individual countries in different regions.
Table 1. Largest Recipients of U.S. TCB Assistance
(in millions of U.S. dollars)
Rank a Country F Y 2007 F Y 2006 F Y 2005
2 Ghana 248.2 7.4 6.9
3 M ali 137.6 3.2 5.1
4 Colombia 49.8 58.1 50.6
5 Afghanistan 27.7 66.6 50.4
6Central America ns21.366.834.4
10 Egyp t 17.6 29.7 68.8
11 Ukraine 16.5 11.8 27.7
16 Georgi a 11.89 189.1 5.0
19 Nicaragua 9.0 15.2 132.7
21 Peru 8.8 32.4 10.9
33 Arme nia 6.3 99.1 5.1
39 Honduras 5.1 7.1 202.1
52 Ir aq 2.9 9.5 101.3
74 Madaga scar 1.2 0.9 58.3
111 Roma nia 0.1 4.0 27.9
a. Rank is by FY2007, out of 115 countries and regions that received TCB funding obligations in
FY2007 (43 countries and regions received no TCB funding obligations in FY2007).
Figure 3. U.S. Trade Capacity Building Assistance by Category (in
millions of U.S. dollars)
sioninistratierce &romoti Trainins (RTacilitatiotandardsvernanstructurStandarInvestmricultu Sect Servicesy Coorther TC
cces Admommport Pces &ementde Fr S Go Infra & eign ted AgourismthergencO
-CExerviAgreTra & Labo Goodysical Trade& ForRelaTOnter-A
ess, and Aperation &Eess Srade urcesctor &Phentallicy rade-e & I
arens Ousin Tso Seironm PoTanc
, AwstomBegionalan RecialEnvtitionovern
en ts Cu R H um F inan ompe G
Source: CRS based on data from USAID TCB Database [http://qesdb.cdie.org/tcb/index.html].
U.S. Agencies in Trade Capacity Building
A variety of U.S. agencies have a role in providing TCB assistance. All U.S.
government TCB assistance is coordinated by a TCB Interagency Group, which is co-
chaired by USTR and USAID. The Interagency Group meets monthly to coordinate
on general TCB issues including free trade negotiations, WTO issues, the Integrated
Framework (IF), preference programs, and performance measures.
Figure 4 below shows a breakdown of the different agencies’ shares of TCB
funding in 2005. Some agencies implement TCB funded by other agencies, so
Figure 5, which illustrates TCB assistance implementation rather than funding,
shows a slightly wider distribution of TCB implementation across agencies. For
example, the Department of Labor and the Department of Agriculture both fund their
own programs and implement TCB activities funded by other agencies such as
USAID and the State Department. This interagency cooperation is an example of
agencies coordinating their activities through the Interagency Group. The “other”
category represents a greater share of TCB program implementation, because many
agencies with relatively small TCB programs are funded by other agencies. A low
level of TCB funding by a particular agency may not be indicative of inconsequential
involvement in TCB; some important TCB programs require less funding than others.
Infrastructure development is inherently more expensive, and workshops are less
expensive. One U.S. government office with a significant role in TCB is not
included in the U.S. TCB database — that is USTR, which has an Office for Trade
Capacity Building, but does not implement or fund any TCB programs. USTR
exclusively plays a role in coordinating TCB. Negotiating offices within USTR
occasionally advise TCB implementors when they are providing assistance related
to a particular agreement or negotiation.
Figure 4. Share of FY2007 TCBFigure 5. Share of FY2007 TCB
Funding Implementa ti on
US DA0%Ot h e r0%OPIC Labor Sta t e OPIC Ot her1% LaborUS DA1%
2% 4% 7% 2% 4% Sta t e
Co mme r c eTr eas ur y1% C o mme r c eTr eas ur y1%
US A ID28% US A ID
US T DA2%
US T DA2%
MC C56 % MC C
Source: CRS based on data from USAID TCB Database [http://qesdb.cdie.org/tcb/index.html].
The fact that TCB is provided by many different U.S. government agencies has
been cited as both an advantage and a source of concern. On the advantage side,
more agency involvement means greater support from a wider pool of expertise and
funding options. In some cases expertise is at least as important as funding, and it
can be helpful to have U.S. regulatory agencies understand TCB objectives. One
example of this benefit is the U.S. Department of Agriculture’s Animal and Plant
Health Inspection Service (APHIS). APHIS is primarily a regulatory agency with the
responsibility of protecting U.S. agriculture from foreign pests and diseases.
Obtaining clearance from APHIS has been notoriously difficult for agricultural
producers from developing countries. Some have argued that bringing APHIS into
TCB has not only benefitted developing countries by providing additional expertise,
but has raised awareness of this problem within APHIS.
The issue of regulatory agencies providing TCB has raised some concerns.
Some observers caution that the mission of regulatory trade agencies, generally to
protect the United States from potentially harmful imports, conflicts with that of
TCB, generally to encourage imports from developing countries. This conflict of
interest may result in either ineffective TCB or protection, or both. The other major
concern about the variety of U.S. government agencies in TCB is that it can be
difficult to coordinate activities across the agencies.
Table 2. Selected U.S. Agencies with TCB Programs, FY2006
Agency(in millions)Areas of TCB Assistance
Millennium Challenge$600.2$757.1transportation infrastructure, financial
Corporation (MCC)sector, trade facilitation, agribusiness,
private sector capacity
U.S. Agency for$488.6$391.6trade negotiations, implementation of
Internationaltrade agreements, legal reform,
Development (USAID)governance, private sector capacity,
trade facilitation, financial sector,
market standards, market information,
agriculture, environment, labor,
governance, competition policy,
infrastructure, tourism, services
Department of State$92.4$71.8training on trade-related topics, private
sector development, governance,
contributions to multilateral TCB
funds, trade facilitation, labor,
environment, regional trade
Department of Labor$71.9$62.5reform and enforcement of labor laws
Department of$45.3$15.8agriculture, private sector capacity,
AgricultureWTO agreement on SPS
Trade and$23.6$23.3infrastructure, private sector capacity,
Development Agencytrade facilitation, environment
Department of the$20.0$18.4financial sector, governance
Overseas Private$20.6$27.2infrastructure, private sector capacity,
Investment Corporationfinancial sector
Department of$5.9$16.8WTO accession and agreements, trade
Commercefacilitation, legal reform, governance,
Peace Corps$2.3$2.1private sector capacity, tourism
The U.S. Agency for International Development (USAID)
TCB is one of the core strategies of USAID. The USAID strategy for TCB is
laid out in its March 2003 document, “Building Trade Capacity in the Developing
World.” According to this strategy document, the agency’s goal is to “increase the
number of developing and transition countries that are harnessing global economic
forces to accelerate growth and increase incomes.” USAID aims to achieve this goal
by supporting participation in trade negotiations, implementation of trade
agreements, and economic responsiveness to trade liberalization. The majority of
USAID TCB programs focus on improving economic responsiveness to trade
liberalization. Projects in this area include strengthening commercial laws and trade-
related services in the public sector, as well as working with businesses and
industries in the private sector to overcome supply-side constraints, such as access
to finance, meeting international market standards, and obtaining market information.
As the United States enters into more FTA negotiations with developing countries,
USAID will likely respond to greater demand for assistance with participation in
trade negotiations and implementation of trade agreements.
USAID plans, funds, and implements TCB activities at both the agency and
country levels. At the agency level, USAID targets TCB assistance toward countries
where governments are committed to reform and openness, or where such
governments are emerging, especially LDCs. When targeted in this way, projects are
expected to have the greatest impact on incomes. At the country level, individual
country needs vary greatly, and USAID field missions reportedly have the flexibility
to respond to these individual TCB needs. In planning their TCB assistance, USAID
field missions aim to consider a wide range of local trade and investment factors and
take advantage of opportunities presented by initiatives such as FTA negotiations and
the Integrated Framework for Technical Assistance to LDCs (IF).
Most USAID TCB programs are funded through the agency’s Development
Assistance (DA) account. Certain country missions may also fund TCB projects
through the Economic Support Fund (ESF).
Figure 6. USAID TCB Funding by Category, FY2003-
WTOacilitationerce & ITromotionTrainingeementsndardsvernancestructureironmentestmentgricultureServices & Coord.ther TCB
e F-Commxport P Svs & de Agrbor Star & Goal InfraEnvcy & InvAarencyO2003
TradEEinessal Tra & LaSectohysic Poliransp2004
Hum 200 7
Source: CRS based on data from USAID TCB Database [http://qesdb.cdie.org/tcb/index.html].
The Millennium Challenge Corporation (MCC)
In 2006 and 2007, the MCC committed the largest amount of TCB assistance
of any U.S. government agency.17 The MCC first offered TCB in FY2005, when it
signed its initial compacts with recipient countries. The MCC operates differently
than USAID and other agencies, in that it only provides assistance to a select group
of developing countries based on criteria involving governance and economic reform
measures. MCC-eligible countries must define their own development priorities and
submit a proposal for projects, which may include trade-related projects that are
considered TCB. These proposals form the basis for compacts, which are five-year
funding obligations negotiated between the MCC and the eligible country
government. The MCC will only disburse funds once the compact is approved and
signed. The compact development process occurs outside the U.S. TCB interagency
process, but there is some level of coordination since USTR sits on the MCC Board
In FY2005, the MCC committed TCB assistance to Honduras, Nicaragua, and
Madagascar totaling about $369 million (as reported on the USAID TCB database).
MCC TCB commitments in FY2006 totaled about $610 million and were made to
more countries, including Armenia, Benin, Cape Verde, Georgia, and Vanuatu. In
FY2007, the MCC obligated about $775 million in TCB funding to El Salvador,
Ghana, Guyana, Honduras, Mali, Moldova, and Ukraine. About 70% of these
commitments were for physical infrastructure development. The MCC may continue
to provide high levels of TCB assistance as more eligible countries sign compacts,
but the actual levels will depend on whether eligible countries include TCB as a key
component in their proposals. New compacts were recently signed with Lesotho,
Mongolia, Morocco, and Mozambique.
17 For more information about the MCC, see CRS Report RL32427, Millennium Challenge
Account, by Curt Tarnoff.
Table 3. MCC Compacts and Elements of TCB
CountryDate ofCompactTotalCompactmillionsTCB Elements
2006 million (FY2006) infrastructure
BeninFebruary$307$188.6financial sector, infrastructure,
2006million(FY2006)legal reform, port operations
Cape VerdeJuly 2005$110.1$87.3agribusiness, financial sector,
El SalvadorNovember$460.9$381.5business services, agribusiness,
2006million(FY2007)investment support, financial
2005million(FY2006)infrastructure, SME, transport
GhanaAugust$547$239.9agribusiness, financial sector,
HondurasJune 2005$215$193.1agribusiness, financial sector,
million(FY2005)infrastructure, legal reform
MadagascarApril 2005$109.8$52.5agribusiness, financial sector,
million(FY2005)small and medium enterprises
NicaraguaJuly 2005$175$123.4agribusiness, legal reform, rural
U.S. Department of Labor
The Bureau of International Labor Affairs (ILAB) of the U.S. Department of
Labor (DOL) funds and implements programs to help developing countries adhere
to international labor standards, especially with regard to child labor. ILAB partners
with the International Labor Organization’s International Program on the Elimination
of Child Labor (ILO/IPEC) to implement these programs in Africa, Asia, Europe,
Latin America and the Caribbean. In FY2007, ILAB funded about $51 million in
projects worldwide. In addition to ILAB-funded projects, in FY2007 ILAB
implemented $12 million in projects funded by USAID and the State Department,
providing labor technical assistance for the Dominican Republic-Central American
Free Trade Agreement (DR-CAFTA).
Meeting international labor standards is an important aspect of eligibility for
trade preferences and FTAs with the United States and other developed countries.
However, some observers argue that it does not directly help countries benefit from
increased trade, and therefore they question the inclusion of labor activities in TCB.
Figure 7. U.S. Department of Labor: TCB Project
Implementation by Year, FY1999-2007 (in millions of U.S.
1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: CRS based on data from USAID TCB Database [http://qesdb.cdie.org/tcb/index.html].
The U.S. Department of State
The State Department has funded and implemented programs in a variety of
TCB areas. In FY2007, the State Department funded $101 million and implemented
$72 million in TCB projects globally. More than half ($47 million) of the funding
for State Department-implemented projects went to two educational exchange
programs, comprised of the $31 million Academic Exchange Program, and the $16
million International Visitors Leadership Program. Both of these exchange programs
focused on trade-related topics such as international economics, trade law, financial
markets, intellectual property rights, business development, and other trade topics.
Another $19 million consisted of contributions to multilateral TCB programs, such
as the WTO Global Trust Fund ($1 million); the United Nations Conference on Trade
and Development (UNCTAD; $13 million); and the International Trade Center ($5
million). The remaining $6 million was distributed among global, regional, and
bilateral TCB programs, of which about $4 million was committed to programs on
customs operation and administration. The State Department funded about $29
million in TCB assistance implemented by other U.S. agencies.
Figure 8. Distribution of U.S. Department
of State TCB Funding, FY2007
Implemented by other agencies
pr ogr ams6%
Mu lt ila t e r a ls19%
Source: CRS based on data from USAID TCB Database [http://qesdb.cdie.org/tcb/index.html].
The Export-Import Bank
The mission of the Export-Import Bank (Ex-Im Bank) is to assist in financing
the export of U.S. goods and services to international markets. The Ex-Im Bank aims
to accomplish its mission through providing pre-export financing, export credit
insurance, loan guarantees, and direct loans. In 2007, the Ex-Im Bank reported
providing about $4 million in funding for TCB programs, mainly in infrastructure
and tourism development. In FY2005 the Ex-Im Bank committed nearly $50 million
to TCB, of which $42 million went toward physical infrastructure development,
primarily in the form of loans and other types of financing arrangements to help
developing countries purchase infrastructure equipment from the United States. For
example, the Ex-Im Bank provided about $15 million in financing to help Ethiopian
Airlines purchase aircraft equipment from the United States.
The Department of Transportation
In FY2007, the Department of Transportation (DOT) did not fund or implement
any TCB activities. In FY2006 it implemented about $26 million in TCB assistance,
which was almost entirely in the form of assistance to Afghanistan funded by
USAID. This assistance included a $25 million project to improve the Kabul
International Airport, and a $1 million project to rebuild the Afghanistan Civil
Aviation System. In previous years (FY2003 to FY2005), the DOT implemented
projects totaling between $1 million and $14 million per year in different regions of
the world, funded by itself and other agencies including USAID, State, and USTDA.
The U.S. Trade and Development Agency
The mission of the U.S. Trade and Development Agency (USTDA) is to
advance economic development and U.S. commercial interests in developing and
middle income countries. In pursuit of this mission, USTDA funds technical
assistance, feasibility studies, orientation visits, and business workshops that support
the development of a modern infrastructure and a fair and open trading environment.
In 2007, USTDA reported funding and implementing about $23 million in TCB.
About half of this TCB was in support of physical infrastructure development in the
form of feasibility studies, training workshops, and technical assistance. The largest
individual country recipients of TCB assistance from USTDA in 2007 were Burkina
Faso ($1 million), Uganda ($1 million), and Vietnam ($1.1 million).
The U.S. Department of Agriculture
The U.S. Department of Agriculture (USDA) provides most of its TCB through
the Foreign Agriculture Service (FAS). In 2007, the USDA funded around $5.1
million and implemented around $15.8 million in TCB assistance. USAID funded
about $11 million in projects that were implemented by USDA, and the Department
of State funded another $6 million. About $8 million of the USDA-implemented
activities were in the area of “trade-related agriculture,” which includes activities
such as strengthening agricultural markets, support for agriculture technology
development, improving environmental standards, biotechnology risk assessment,
and technical assistance directly to producers. The next highest level of USDA-
implemented activities was in technical assistance for developing countries to comply
with WTO Sanitary and Phytosanitary (SPS) agreement, at nearly $3 million.
Other U.S. Agencies Providing TCB Assistance
Other U.S. government agencies provided smaller amounts of TCB Assistance,
but were active in the TCB process. In FY2007, the U.S. Treasury Department
provided advisors to various developing country governments in the areas of
financial markets, budget management, debt management, tax administration, and
financial law enforcement, implementing $18 million in TCB assistance. The
Overseas Private Investment Corporation (OPIC) helps U.S. businesses invest in
developing countries through financial instruments such as loans and political risk
insurance. OPIC programs support profitable investments with development aims.
In FY2007 OPIC implemented $27 million in TCB programs, mainly in the areas of
physical infrastructure development and financial sector development. The
Department of Commerce implemented about $17 million in TCB programs,
including many by its Commercial Law Development Program (CLDP) in various
areas of commercial legal development, as well as other programs by the Patent and
Trademark Office and the National Institute of Standards and Technology. Most of
Commerce’s TCB programs are funded by other agencies. The Department of
Homeland Security implemented $3 million in TCB, mainly in the area of border
security training for customs officials, funded by the State Department. The Peace
Corps funded and implemented about $2 million in TCB assistance in 2006, mainly
in e-commerce, business development, and tourism development. The Department
of Energy implemented about $2 million in TCB assistance in the former Soviet
Union republics, which was funded by the State Department. Other agencies have
implemented programs totaling $4.7 million, including the Environmental
Protection Agency ($2.1 million), the Federal Trade Commission ($0.6 million),
Health and Human Services ($0.1 million), the Department of the Interior ($0.1
million), and the Department of Justice ($1.8 million).
Trade Capacity Building by Non-U.S. Donors
Multilateral Trade Capacity Building
TCB is provided by multilateral development banks such as the World Bank and
the Inter-American Development Bank (IDB), and through multilateral funds
managed by the WTO. TCB is also discussed in WTO negotiations. The WTO and
the Organization for Economic Cooperation and Development (OECD) maintain a
database of worldwide TCB activities, including multilateral and bilateral efforts.
The World Trade Organization. Trade Capacity Building is commonly
referred to as ‘Aid for Trade’ and ‘Trade-Related Technical Assistance’ (TRTA)
within the WTO. Technical assistance is an important aspect of the WTO, because
many developing country members need assistance in understanding, negotiating, and
implementing WTO agreements. Developed countries have an incentive to provide
such assistance, because it helps ensure that developing country members understand
the negotiated agreements, and that they are able and willing to implement them. It
may also encourage developing countries to reach agreement in multilateral trade
negotiations such as the Doha round.
The WTO provides TCB funded through its member-supported Doha
Development Agenda (DDA) Global Trust Fund and through the separate Integrated
Framework (IF), which the WTO participates in along with five other multilateral
institutions. From January 2005 to September 2007, total contributions to the trust
fund were about $47 million. Since the launch of the Doha round, the United States
has contributed nearly $6 million to this fund; its most recent contribution was $1
million in April 2006.
The WTO also serves as a forum for donors to hold each other accountable on
TCB, and for developing countries to participate in the discussions. At the Hong
Kong ministerial in December 2005, the United States pledged to double its spending
on TCB to $2.7 billion by 2010, and other donors made similar pledges. The WTO
is working with the OECD to monitor TCB globally, in order to provide an incentive
for donors and developing countries to improve its effectiveness. As part of this
effort, the United States and other member donor countries submit reports of bilateral
TCB assistance to the WTO, which are then compiled and presented in a joint
WTO/OECD Doha Development Agenda Trade Capacity Building Database.18
Technical assistance is also discussed as part of the WTO negotiations.
Technical assistance that is specifically related to the various negotiating areas, such
as trade facilitation, is discussed in the individual negotiating groups. In some
negotiating areas, developing countries are explicitly not held responsible for
upholding agreements that they do not have the capacity to implement, unless they
are provided with adequate technical assistance. Discussions of cross-cutting issues
related to technical assistance (such as whether to create a new fund for TRTA) take
18 Available at [http://tcbdb.wto.org/index.asp?lang=ENG].
place in the Committee on Trade and Development, and within the newly formed Aid
for Trade Task Force.
The key objectives of the WTO’s Technical Cooperation and Training include
enhancing beneficiary countries’ capacity to (1) address trade policy issues; (2)
incorporate trade into national development and poverty reduction plans; (3)
participate more fully in the multilateral trade system; (4) adjust to WTO rules and
disciplines and implement obligations; and (5) exercise the rights of WTO
membership.19 The WTO delivers TRTA in the form of courses, seminars,
workshops, and conferences. In the past, critics have contended that the WTO
provides too much superficial training to too many individuals. Perhaps in response
to this criticism, the WTO drastically reduced the number of its TRTA activities:
from 462 for 12,000 participants in 2005, to 206 activities for 7,400 participants in
The WTO provided $15.9 million in TRTA/TCB assistance in 2005.21
Aid for Trade Initiative. The WTO Aid for Trade Task Force was
established at the December 2005 Hong Kong ministerial conference. It was tasked
with making recommendations to the WTO General Council on how to
“operationalize” aid for trade, and how it might contribute most effectively to the
DDA. The Task Force released its recommendations at a meeting of the WTO
General Council on July 27, 2006, the same meeting where the General Council
agreed to suspend the Doha round of negotiations. Despite the suspension of WTO
negotiations, the Task Force recommended that countries continue to provide aid for
trade, and that its recommendations still be implemented. They made this
recommendation with the caveat that aid for trade “cannot be a substitute for the
development benefits that will result from a successful conclusion to the DDA,
particularly on market access.”22 At the October 2006 General Council meeting,
WTO members reportedly agreed to endorse the recommendations of the Task
The recommendations of the Task Force include guidance on financing,
defining, and overcoming some of the challenges associated with aid for trade. The
Task Force recommends that aid for trade should be guided by the Paris Declaration
on Aid Effectiveness, which focuses on key principles of country ownership, donor
coordination, aligning aid to national development strategies, and monitoring and
evaluation. The Task Force also recommends improving on the Integrated
19 2005 Joint WTO/OECD Report on Trade-Related Technical Assistance and Capacity
Building, December 2005.
20 World Trade Organization Committee on Trade and Development, Technical
Cooperation Audit Report for 2006, Note by the Secretariat. WT/COMTD/W/158, May 7,
21 2006 Joint WTO/OECD Report.
22 World Trade Organization Aid for Trade Task Force, Recommendations of the Task Force
on Aid for Trade. WT/AFT/1. July 27, 2006.
23 “GC: Members Endorse Recommendations on Aid for Trade, SVEs,” Bridges Weekly
Trade News Digest. Vol. 10, No. 33. October 11, 2006.
Framework (see next sub-section) and extending its needs-assessment process to
developing countries that are not LDCs.24
The Integrated Framework. The Integrated Framework (IF) is a process
that assists Least Developed Countries (LDCs) to integrate trade issues into their
national development strategies. Two key goals of the IF are to better coordinate aid
for trade globally and within countries (donor coordination); and to integrate aid for
trade with general development assistance objectives. Six international institutions
collaborate on the IF, including the World Bank, the WTO, the International
Monetary Fund (IMF), the International Trade Center (ITC), the United Nations
Conference on Trade and Development (UNCTAD), and the United Nations
Development Program (UNDP). The IF is funded by an IF Trust Fund, composed
of voluntary contributions from multilateral and bilateral donors. Total contributions
to this trust fund equaled $49.7 million as of March 2007, of which the United States
The first stage of the IF process is the development of a Diagnostic for a Trade
Integration Study (DTIS), which is a lengthy study on an individual country
identifying constraints to trade, sectors with the greatest export potential, and an
action plan for integrating the country into the global trading system. The DTIS is
produced collaboratively by beneficiary country government officials, economists
from international institutions, and experts from bilateral donor countries including
the United States. The DTIS includes an action plan, which is supposed to be
integrated into the country’s national development strategy as part of the IF process.
The national development strategy is usually the country’s Poverty Reduction
Strategy Paper (PRSP), which is developed in partnership with the World Bank and
IMF. Bilateral donors are expected to provide TCB to implement each country’s
action plan, but small activities may be initially funded by the IF trust fund.
According to the WTO, 47% of the IF’s budget has been used toward diagnostic
activities and 53% has gone toward implementing priority assistance activities.
Critics of the IF have said that it could be more effective if it included funding
to implement more of the action plan, rather than leave the bulk of implementation
funding up to bilateral donors. The IF steering committee is reportedly in the process
of implementing the “Enhanced Integrated Framework,” which would raise extra
money for more IF-implemented activities. Other concerns raised about the IF
pertain to whether developing country officials and citizens are as involved in
preparing the studies as they could be. Also, some observers believe that the IF
should be extended to all developing country WTO members, and not just LDCs.
As of November 2007, forty-five LDCs were at different stages of the IF
process: 29 LDCs (23 from Sub-Saharan Africa) had completed their DTIS and
national workshop to implement the action plan; eleven LDCs were in the process
of developing a DTIS; and five had initial technical reviews under consideration.25
24 International Monetary Fund and the World Bank, Doha Development Agenda and Aid
for Trade, August 9, 2006.
25 For more detailed information, see [http://www.integratedframework.org].
The World Bank. The World Bank works on trade at both the global and
country level. At the global level, the Bank conducts research and is involved in
discussions on making the global trading system more supportive of development.
At the country level, the Bank aims to build capacity in its member countries to (1)
formulate and implement sound trade policy; (2) manage the adjustment costs of
trade reform and external trade shocks; (3) participate effectively in international
trade negotiations; and (4) develop appropriate regional trade policies. In 2005, the
World Bank made global TCB commitments of about $121 million, including grants
and loans (concessional and non-concessional). This amount is in addition to about
$2.5 billion in infrastructure for transport, energy, and telecommunications. Most of
the Bank’s TCB projects address export development, trade facilitation, and
standards such as Technical Barriers to Trade (TBT) and SPS.26 The World Bank has
been criticized by members of the non-governmental agency (NGO) and academic
community for not defining clear TCB goals and policies, and not integrating TCB
throughout its operations. The Bank is one of the six international institutions
involved in the Integrated Framework.
Other Donor Bilateral Trade Capacity Building
Many individual countries provide TCB through their own foreign assistance
programs, and report such assistance to the OECD for inclusion in the joint
OECD/WTO TCB database. Table 4 provides a summary of TCB assistance
according to the OECD/WTO database. Data for the United States is included for
the sake of comparison, as compiled by the OECD/WTO and not from the USAID
database (therefore the numbers may not correspond exactly).
Table 4. 2005 Commitments of TRTA/TCB by Donor, for
(in millions of U.S. dollars)
Policy and Develop-Fund Con-Infrastruc-bTotal
Regula- ment a t r i but i o ns ture
Australia 13.4 0 0.6 14.5 28.5
Belgium 0.7 32.6 0.3 50.8 84.4
Canada 14.5 3.4 3.9 28.3 50.1
Denmark 0.5 0.1 8.8 247.9 257.3
European 509.1 710.7 2.3 1,596.5 2,817.6
Finland 3.9 16.1 1.7 59.7 79.4
France 8.8 96.7 1.1 578.8 685.4
26 2005 Joint WTO/OECD Report.
Policy and Develop-Fund Con-Infrastruc-Total
Regula- ment a t r i but i o ns tureb
Germany 22.2 90.4 4.2 676.6 793.4
J a pan 38.8 33.0 1.0 4,279.3 4,347.1
Norway 4.6 53.6 5.5 115.4 179.1
Sweden 19.8 18.7 6.3 115.7 160.5
Switzerland 4.3 86.2 4.4 22.1 117.0
Source: 2006 Joint WTO/OECD Report on Trade-Related Technical Assistance and Capacity
Bu ild in g
a. Some donors isolated the trade component of each activity, whereas others reported the whole
activity marking it trade-related. The total amounts of TRTA/TCB in this category should
therefore be treated with caution. (From the 2006 Joint WTO/OECD Report on Trade-Related
Technical Assistance and Capacity Building.)
b. Infrastructure includes all commitments to transport, energy and telecommunications, as such
investments may have the potential to facilitate international trade.
c. Does not correspond to total for 2005 from the USAID TCB database because the data was
Legislation on Trade Capacity Building
Congress has passed appropriations legislation providing funds and guidance
for trade capacity building. Other legislation passed by Congress may restrict the
provision of TCB, either by limiting which countries can receive certain types of
funding or by limiting the types of activities in which foreign assistance may be
Funds are appropriated for TCB within the State and Foreign Operations
Appropriations Act. The 110th Congress directed the administration to use at least
$550 million of foreign aid appropriations for TCB in the Consolidated
Appropriations Act of 2008 (P.L. 110-161). This amount must come from the
following foreign aid accounts: Development Assistance (DA); Economic Support
Fund (ESF); Assistance for Eastern Europe and Baltic States; Andean Counterdrug
Programs; and Assistance for the Independent States of the Former Soviet Union, but
does not include TCB from the MCC. There has been a slow and steady increase in
funds allocated by Congress to TCB this way. In 2006, Congress recommended that
at least $522 million should be made available for TCB assistance, of which $40
million ($20 million from DA and $20 million from ESF) were to be used for labor
and capacity building activities relating to DR-CAFTA.
In previous years, Congress has designated somewhat lower amounts for TCB
assistance. TCB was first included in Foreign Operations Appropriations in the
FY2003 appropriations, with a total allocation of not less than $452 million, $159
million from DA, and $2.5 million from the U.S. Trade and Development Agency
(TDA). In FY2004, the total allocation was not less than $503 million, of which
$190 million from DA; and in FY2005 the total was $507 million, of which $194
million from DA. In FY2005 there was also an earmark of $20 million from ESF to
support TCB activities regarding labor and environment in the CAFTA-DR
In the 109th Congress, the House version of the FY2007 Foreign Operations,
Export Financing, and Related Programs Appropriations Bill (H.R. 5522) would have
included the creation of a Trade Capacity Enhancement Fund in the amount of $522
million, and an Office of the Director of Trade Capacity Enhancement within
USAID. This new office would have been responsible for USAID’s TCB programs,
as well as coordinating government-wide TCB programs of all U.S. agencies. These
changes in the funding and management of TCB would have represented an initiative
to make TCB a higher priority. They also prompted concerns about restricting the
administration’s flexibility to allocate foreign aid and draining resources from other
foreign assistance priorities. The Senate version of the bill did not include this new
fund or office, and neither did any of the 2007 Continuing Resolution bills.
Legislative Limitations on TCB
In the mid-1980s, Congress passed legislation restricting the use of foreign
development assistance programs in response to problems in the U.S. farm economy.
Some observers maintain that USAID developed policies that were more restrictive
than necessary, as a result of the agency’s sensitivity to congressional criticism.27
One widely cited legislative restriction on USAID’s trade-related activities is known
as the Bumpers Amendment, which was first introduced in the Urgent Supplemental
Appropriations Act of 1986, (Section 209 of P.L. 99-349). The Bumpers
Amendment states that no U.S. development assistance funds may be used for
agricultural development activities for a commodity that would compete with a
commodity grown or produced in the United States. There are two exceptions to the
Bumpers Amendment: (1) where the activity is designed to increase food security in
developing countries and it would not have a significant impact in the export of
agricultural commodities to the United States; and (2) in the case of a research
activity intended primarily to benefit American producers. USAID officials have
cited the Bumpers Amendment as restricting TCB assistance in agriculture, for
example in the provision of assistance to West African cotton farmers.
27 “Trade Associations and Foreign Aid: U.S. Commodity and Industry Interests and A.I.D.
Trade Development Activities,” Agricultural Policy Analysis Project, Phase II, January
In addition to restrictions on agricultural assistance, there are other restrictions
on U.S. foreign assistance that affect TCB assistance. One such restriction,
originating in the FY1993 Foreign Operations Appropriations (Section 599 of P.L.
102-391), prohibits funds to be used as a financial incentive for a U.S. firm to
relocate outside of the United States, to establish or develop an export processing
zone (EPZ) in a foreign country, or for any project that would contribute to the
violation of internationally recognized workers’ rights.28 Other restrictions affect aid
to particular countries, such as in the Nethercutt Amendment (P.L. 109-102 Section
574), which restricts ESF assistance to countries that are a party to the International
Criminal Court (ICC) and have not signed an Article 98 agreement.29 These statutory
restrictions are catalogued and summarized by USAID.30
Motivations for Trade Capacity Building
Trade capacity building is generally regarded as an activity taken on by the
United States and other donors for altruistic purposes: to help developing countries
benefit from trade and achieve poverty reduction. There are other possible
motivations for TCB that are not as altruistic. One possible motivation is to create
markets for U.S. exports. TCB might achieve this objective indirectly by increasing
developing countries’ incomes, which would in turn would allow developing
countries to import more goods from the United States. TCB can more directly
create markets for U.S. exports by influencing developing countries’ policies (such
as technical standards) to be more open to U.S. goods, and by promoting
development in sectors that would likely require imports of intermediate products
and capital goods from the United States. The U.S. Export-Import Bank facilitates
this process, by providing loans to businesses in developing countries to import
American capital goods such as factory equipment.
Another possible motivation for providing TCB is to gain the cooperation of
developing countries in trade negotiations, both bilateral and multilateral. By helping
trade officials in developing countries understand the technical aspects of an
agreement, they are more likely to complete negotiations and implement the
agreement. Developing countries are also more likely to be agreeable in negotiations
if they expect to receive assistance in implementing the agreement. An example of
28 This legislation developed out of a controversy where USAID had allegedly funded EPZs
and other incentives for U.S. businesses to relocate overseas. See CRS Report 92-931 F,
Foreign Aid’s Role in Private Sector Promotion in Developing Countries: The Controversy
Over the U.S. Agency for International Development, by Erin Day (archived; available from
29 An Article 98 agreement prevents the ICC from proceeding against U.S. personnel present
in that country. See CRS Report RL31495, U.S. Policy Regarding the International
Criminal Court, by Jennifer K. Elsea.
30 See “FY2007 Statutory Checklists: An Additional Help for ADS Chapter 202,” USAID.
Revision Date: 4/5/2007, Responsible Office: GC, File Name: 202sac_040507_cd47.
this can be found in the trade facilitation negotiations of the WTO Doha Round. At
first, developing countries did not want trade facilitation to be part of the round at all.
However, once they started receiving technical assistance in trade facilitation and
technical assistance became part of the trade facilitation negotiations, the negotiations
moved along more easily than other negotiating areas. Also, technical assistance in
trade facilitation caused some countries to make unilateral trade facilitation reforms
without any obligation under a WTO agreement.
Critics of U.S. trade policy contend that TCB may be used to deflect attention
from a failure of the United States and other donor countries to adopt pro-poor trade
reform. They point to high U.S. tariffs on imports produced by developing countries
and trade-distorting agricultural subsidies. Other critics believe that U.S. TCB is
influenced more by political objectives than development goals. They note that Iraq
was the third-largest recipient of U.S. TCB funds in 2005, after Honduras and
Nicaragua, which both received the majority of their TCB assistance from the
Millennium Challenge Corporation. Some observers have also questioned whether
the administration uses TCB as a way to influence developing country trade policies
without going through the trade negotiations process.
Trade capacity building may conflict with some perceived U.S. interests.
Building the negotiating capacity of developing countries may make reaching
agreement easier, but it might also help them to negotiate more aggressively against
U.S. positions. Also, assisting developing countries to be more competitive in world
markets may help them to compete against U.S. businesses. However, the same
argument can be made for the benefits of increased competition through TCB as
through trade liberalization. Increased competition tends to increase firm
productivity and may benefit both consumers and workers through decreased
consumer prices and increased wages. As in trade liberalization, however, the
benefits and losses associated with increased competition can be unevenly distributed
in the economy, causing some regions and industries to suffer losses of jobs and
incomes disproportionately. Although, one major difference with general trade
liberalization is that most TCB recipients are poor countries that are not likely to
provide major competition to U.S. business. Exceptions to this difference may be
found in a few major agricultural and textile producers who receive TCB assistance.
Challenges for Trade Capacity Building
One major challenge for TCB as an area of foreign assistance is to coordinate
assistance with the trade policy agenda, and to effectively integrate TCB assistance
and trade into developing countries’ national development strategies. Changing trade
policies, such as reducing trade barriers through a free trade agreement (FTA), may
require new types of assistance to help developing countries benefit from trade. In
this way, trade is not an end in itself but a tool for development. To fully utilize trade
as a tool for development, it also needs to be considered in all aspects of development
planning. Economic and social policies that have been considered separately from
trade in the past may have an effect on a country’s competitiveness and ability to
benefit from trade, therefore policymakers should have an appreciation for possible
trade implications when they are making development plans. One possible challenge
in integrating trade with development planning is that national development
strategies are typically planned on a relatively long time-frame through processes
such as the Poverty Reduction Strategy Paper (PRSP),31 while trade needs can change
more quickly. As a result, there may be tension between responding to changing
trade needs and long term development planning.
Another major challenge for TCB is international donor coordination. TCB
assistance is provided by a wide range of donors in a multitude of sectors, and there
has been some overlap and duplication among donors. This overlap and duplication
of efforts is not only wasteful, but it can cause confusion and make programs less
effective. Demand-driven TCB assistance, where donors provide assistance based
on the strategies and requests of recipient governments, has inherent benefits and
may help facilitate donor coordination. For TCB assistance to be demand-driven,
recipients need to be proactive in assessing and communicating their needs, and
donors need to orient their assistance around those stated needs. One example of this
has been in the TCB provided alongside the CAFTA-DR negotiations, where there
was close communication between USAID, USTR, and the recipient governments
in the context of the negotiations.32 There is concern that some TCB recipient
countries may lack the capacity to assess and prioritize their needs, which would
hinder achieving demand-driven assistance.
TCB recipients have complained that they lack the capacity to coordinate the
assistance they receive from various donors. It is especially difficult when the
assistance comes in the form of multiple short-term projects rather than a long term
strategy that is coordinated with national development plans. Some steps toward
international donor coordination have reportedly been taken, notably through the
OECD and the WTO. Donor coordination has been hampered because donor
countries and organizations generally prefer to take credit for their efforts, and they
tend to have different strategies and mechanisms for planning and implementing
foreign assistance. This leads to assistance being supply-driven, that is, driven by
what donor countries are able and willing to provide. According to experts,
assistance must be driven by the partner country’s own needs, goals and strategies to
be effective, rather than being driven by the donor country’s administrative
priorities.33 OECD members agreed to implement this principle of foreign aid in the
Paris Declaration on Aid Effectiveness.34
31 The PRSP is a national development strategy designed in partnership with the beneficiary
country, the World Bank, and the International Monetary Fund (IMF).
32 For more information about TCB in the CAFTA-DR negotiations, see Eric Miller,
Achievements and Challenges of Trade Capacity Building: A Practitioner’s Analysis of the
CAFTA Process and its Lessons for the Multilateral System, Occasional Paper 32. Inter-
American Development Bank. October 2005.
33 Organization for Economic Cooperation and Development, The Development Dimension:
Aid For Trade: Making it Effective. July 2006.
34 OECD, The Paris Declaration on Aid Effectiveness. March 2, 2005.
Evaluating the effectiveness of TCB is another challenge. The U.S.
Government Accountability Office (GAO) issued a report in February 2005 which
determined that the United States government does not effectively monitor and
evaluate the effectiveness of TCB programs. It recommended that USAID and
USTR work together to develop a strategy, in consultation with other U.S. agencies
that provide TCB, for evaluating TCB effectiveness.35 USTR and USAID have
responded to this recommendation, and are reportedly in the process of developing
Measuring the effectiveness of TCB can be difficult, because meaningful
indicators are not readily available. Changes in trade volumes and other high level
indicators are not necessarily attributable to TCB. Trade volumes respond to many
factors, of which TCB is just one and not as significant in the short term as economic
factors such as commodity price fluctuations. Lower level indicators, such as the
number of people trained in WTO negotiations, may be entirely attributable to TCB,
but they do not say much about the effects of such training. According to the OECD,
the most measurable and positive outcome of TCB has been in the awareness of
WTO issues, participation in the Doha round negotiations, and the development of
a national policy dialogue on trade among the various stakeholders in business,
government, and civil society. The OECD finds that where this dialogue has been
most robust, TCB has been most effective.36 This finding may be key in developing
a framework for evaluating TCB.
An ongoing challenge for U.S. TCB is that it is just one area in which the United
States provides development assistance, and it must compete with other priorities for
limited resources. Some of these other development priorities involve responding
to emergencies where lives are at stake, such as aid in response to natural disasters,
conflict situations, and severe health concerns. It may be difficult to argue for
funding for TCB when other areas of assistance are needed to help people survive.
TCB may not directly save lives, but it could in the long term reduce countries’
vulnerability in dire situations by helping to increase incomes and reduce poverty.
35 U.S. Government Accountability Office, Foreign Assistance: U.S. Trade Capacity
Building Extensive, but Its Effectiveness Has Yet to be Evaluated. Report to Congressional
Requesters. GAO-05-150. February 2005.
36 Organization for Economic Cooperation and Development, The Development Dimension:
Aid For Trade: Making it Effective. July 2006.