Regional : Subproject 2: Aid for Trade for Inclusive Growth, 2020-2022

Industry and trade / Small and medium enterprise development - Trade and services

International trade has been instrumental to rapid economic growth and poverty reduction in Asia and the Pacific and will continue to play a key role in meeting the Sustainable Development Goals. Empirical analysis further indicates that Aid for Trade has played an essential role in the region's positive trade performance in goods and services, and in generation of inclusive job opportunities. Still, many developing countries, particularly the least developed, face challenges in fully benefiting from trade liberalization because of obstacles, such as supply-side capacity and trade-related infrastructure, that constrain engagement in international trade. Moreover, the benefits of trade liberalization within countries are not always shared equitably among all segments of the economy, with micro, small, and medium-sized enterprises and women-led firms typically at a disadvantage. To fully realize potential trade outcomes for inclusive growth, developing countries should focus more on trade liberalization and policy adjustments, as well as on the investments necessary to address capacity and infrastructure constraints. These challenges are exacerbated by DMCs' lack of understanding of Aid for Trade-related issues, including how best to maximize the benefits of Aid for Trade to achieve inclusive trade-driven growth. The TA subproject 2 will address this knowledge gap on Aid for Trade's key role in helping DMCs address constraints to inclusive trade. It will also look into the impact of coronavirus disease (COVID-19) outbreak and pandemic on Aid-for-Trade efforts and trade facilitation and supply chains.

The coronavirus disease (COVID-19) outbreak and pandemic in 2020 has impacted on trade and economic growth. Asian governments responded to the pandemic with a range of containment measures, which significantly reduced people's mobility and, along with precautionary behavior, cut into domestic economic activity. Regional and global trade plunged during the second quarter of 2020, with global trade down close to 20% year-on-year in April and May. Latest forecasts show that developing Asia's GDP will contract by 0.7% in 2020. This will be the first regional contraction since the early 1960s.

The COVID-19 outbreak and pandemic call for critical assessment of its impact on trade and supply chains. ADB's 2021 Aid for Trade Report will therefore evaluate the impact of the COVID-19 pandemic on international trade and the implications for the Aid for Trade Initiative. It should be noted that the Aid-for-Trade Work Program for 2020-2021 was established before the pandemic. The focus of the work program is on the opportunities that digital connectivity and sustainability offer for economic and export diversification. Both digital connectivity and sustainability have received increased attention amid the COVID-19 pandemic. Digitalization of the economy has been accelerated and questions of how trade can contribute to sustainability are now asked from a different perspective. The pandemic has exposed some fault lines in global supply chains highlighting their vulnerability. As economies locked down, healthcare authorities and governments were left scrambling to find the products they needed. The report will assess the impact of the pandemic on international trade and what it means for the Aid for Trade agenda, in particular with regard to sustainability and digitalization. Trade has been crucial in fighting the pandemic; and looking ahead, it will be vital for economic recovery. The pandemic will have lasting impact on how economies trade and do business across borders. These elements will be considered in the research which should be evidence-based and policy-oriented.

Opportunities for further trade growth in Asia and the Pacific maximized

DMCs' integration into the global economy heightened through increased trade openness

DMCs' understanding of relevant trade opportunities, bottlenecks, and issues improved.

Aid for Trade in Asia and the Pacific 2021 report published and disseminated

Knowledge sharing events organized

Background papers published