Aid for Trade in Services: Definition, Magnitude and Effects

Abstract

This paper reviews findings from recent literature on the trade effects of Aidfor-Trade (AfT) which has now begun to examine the impact of this aid on services trade in a significant departure from only looking at merchandise trade and investment. The paper also discusses the major transmission channels for the trade-enhancing effects of AfT and considers both direct and spill-over effects of AfT on services trade. Recent work suggests that AfT allocated to services activities may be effective in enhancing services exports of small value exporting countries, which is a significant finding from the perspective of the objective of AfT disbursement. It also provides scope for export diversification, global value chain (GVC) integration and enhancing firm productivity in recipient countries.