Overview of Australia’s aid for trade

How we are helping

2016-17 Budget Estimate:
$748.0 million

The Australian Government has set an aid for trade target that represents 20 per cent of the total aid budget by 2020, which is consistent with the level of investment by other key donors and the increasing demand from developing countries, especially in the Pacific. No country has achieved high and lasting growth without participating in international trade. Aid for trade supports the aid program’s key objectives of reducing poverty and lifting living standards through sustainable economic growth.

Aid for trade is about helping developing countries address their internal constraints to trade such as cumbersome regulations, poor infrastructure and lack of workforce skills. This might include training of customs officials to facilitate trade, investing in ports and storage facilities, connecting farmers to overseas buyers, and helping women entrepreneurs to export. Aid for trade supports developing countries’ efforts to better integrate into and benefit from the global rules-based trading system, implement domestic reform, and make a real economic impact on the lives of their citizens.

The Strategy for Australia’s Aid for Trade Investments, launched by the Minister for Foreign Affairs and Minister for Trade and Investment on 1 July 2015, establishes a framework for future Australian aid for trade investments to ensure they are well-planned and effective, meet the needs of our developing country partners, and aligned with Australian interests.

Australia’s priority areas for aid for trade investments include:

  • trade and investment policy and trade facilitation
  • global value chains
  • infrastructure
  • private sector development
  • economic empowerment of women
  • knowledge and skills development
  • agriculture; and
  • services.

Strategy for Australia’s Aid for Trade Investments
Media release: Aid for Trade - Creating jobs and building livelihoods

Why we give aid for trade

No country has achieved high and lasting growth without participating in international trade1 .  There is evidence also that trade has an impact on incomes – an increase in the volume of trade of 10 per cent can raise per capita income by over 5 per cent.2  

Trade can boost employment, incomes and government revenue, because (among other things) trade translates to:

  • access to larger markets;
  • higher returns on unskilled labour;
  • greater competition, innovation and entrepreneurship;
  • improved savings and capital flows;
  • more discipline on and transparency from governments; and
  • reductions in rent-seeking activities.

Trade alone, however, is not sufficient to achieve sustainable economic growth. Trade will need to be complemented by other factors, such as macro-economic stability, rule of law and developed financial systems.

There is also the additional challenge of ensuring that the benefits from trade are distributed equitably. Developing country governments will need to address inequality directly, including through tax reform and appropriate social policy initiatives.

Australia’s development policy places greater emphasis on aid as a catalyst for sustainable economic growth and poverty reduction in developing countries in the Indo-Pacific region. Aid for trade and a new target for aid for trade investments — 20 per cent of the aid budget by 2020 — are key elements to give effect to this policy focus.

Australia has been a strong supporter of the global Aid for Trade Initiative since it was launched at the 2005 Hong Kong World Trade Organization (WTO) Ministerial Conference. This recognises the importance of trade in driving economic growth, and the need to assist developing countries to improve their capacity to trade. This set in motion a two track process:

  1. donors committed to scale up their aid for trade, but without setting a target, and
  2. the Organisation for Economic Co-operation and Development (OECD) established the Global Aid for Trade Review — a global monitoring exercise conducted every two years.

How we give aid for trade

Australia’s aid for trade investments are made through multilateral, regional and bilateral channels. The bulk of aid for trade funding is provided through bilateral country and regional program areas.

Australia has a strong record of effective aid for trade investments. Aid for trade investments can help achieve other development objectives, including the economic empowerment of women, financial inclusion, health and disability.

Also, aid for trade can drive innovative approaches, especially when new technologies are utilised, private sector resources and expertise are leveraged, and market-oriented solutions are applied.

Examples of Australia’s innovative aid for trade investments

  • 1 World Bank.  2001.  World Development Report 2000/2001: Attacking Poverty.  Commission on Growth and Development.  2008.  The Growth Report : Strategies for Sustained Growth and Inclusive Development
  • 2 Feyrer, James.  2009. ‘Time and Income – Exploiting Time Series in Geography’, NBER Working Paper Series 14910. 
Last Updated: 3 May 2016