Order Code RL33628
Trade Capacity Building:
Foreign Assistance for Trade and Development
Updated January 23, 2007
Danielle Langton
Analyst in International Trade and Finance
Foreign Affairs, Defense, and Trade Division

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Trade Capacity Building:
Foreign Assistance for Trade and Development
Summary
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 FY2006, 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 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.
TCB was part of the discussions within Congress in considering implementing
legislation for the free trade agreement with Central America and the Dominican
Republic (DR-CAFTA). It 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.

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Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . . . . 20
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
TCB Appropriations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Legislative Limitations on TCB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Policy Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Motivations for Trade Capacity Building . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Challenges for Trade Capacity Building . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
List of Figures
Figure 1. U.S. Trade Capacity Building Assistance . . . . . . . . . . . . . . . . . . . . . . . 9
Figure 2. U.S. Trade Capacity Building Assistance by Region
. . . . . . . . . . . . . 10
Figure 3. U.S. Trade Capacity Building Assistance by Category . . . . . . . . . . . . 12
Figure 4. Share of TCB Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Figure 5. Share of TCB Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Figure 6. USAID TCB Funding by Category, FY2002-2006 . . . . . . . . . . . . . . . 15

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Figure 7. U.S. Department of Labor: Value of TCB Project Implementation
by Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Figure 8. Distribution of U.S. Department of State TCB Funding,
FY2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
List of Tables
Table 1. Largest Recipients of U.S. TCB Assistance in FY2005 and FY2006 . . 11
Table 2. Selected U.S. Agencies with TCB Programs, FY2005 and FY2006 . . . 14
Table 3. MCC Compacts and Elements of TCB . . . . . . . . . . . . . . . . . . . . . . . . . 17
Table 4. 2004 Commitments of TRTA/TCB by Donor . . . . . . . . . . . . . . . . . . . 24

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Trade Capacity Building: Foreign
Assistance for Trade and Development
Introduction
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 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. The House passed an initiative to create a Trade Capacity Enhancement
Fund in the 2007 Foreign Operations Appropriations Bill (H.R. 5522), which would
change this situation somewhat. In FY2006, U.S. government agencies reported
obligating nearly $1.4 billion to TCB (compared to $20.7 billion in total FY2006

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CRS-2
foreign operations appropriations), of which over $1 billion was obligated by the
MCC and USAID.1
There is currently momentum for increased focus on and funding for TCB in the
donor community, both in the United States and abroad. As developing countries
become more involved in trade discussions, 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
several potential free trade agreements (FTAs). The United States is currently in
FTA negotiations with several 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. In H.R. 5522, the
FY2007 Foreign Operations Bill, Congress is currently considering the possible
creation of a discrete TCB Fund. Congress may play a role in oversight of TCB
programs, to ensure effectiveness and adherence to U.S. interests. 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.2 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
agreements; offsetting preference erosion from multilateral liberalization; offsetting
lost tariff revenue; improving negotiating capacity; and addressing supply-side
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.cdie.org/tcb/overview.html].
2 For more information on the Doha round negotiations, see CRS Report RL32060, World
Trade Organization Negotiations: The Doha Development Agenda, by Ian Fergusson.

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constraints that make it difficult for developing countries to compete in world
markets.3
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.
3 International Lawyers and Economists Against Poverty (ILEAP), “Aid for Trade — Why
and How?”

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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.

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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. Another premise of TCB is 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)4
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),5 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.6 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.7
Also, the temporary nature of preference programs may add greater uncertainty to an
already risky business environment, discouraging both foreign and domestic
4 See CRS Report 97-389, Generalized System of Preferences, by William H. Cooper.
5 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.
6 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.
7 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.

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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.8 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.”9
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.10 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.
Adjustment Costs
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
8 International Lawyers and Economists Against Poverty (ILEAP), “Operational Modalities
for the Aid for Trade Initiative,” Background Brief No. 11, April 2006.
9 Congressional Budget Office, Assisting the Developing Countries: Foreign Aid and Trade
Policies of the United States, September 1980.
10 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.

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CRS-7
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. 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 increased
growth and poverty reduction.11 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.12 TCB grew from these ideas about trade and
development.
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,
prevailing theories of development, and domestic administrative realities.13
11 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.
12 Jan Ubels, Thomas Theisohn, Volker Hauck, Tony Land, From local empowerment to
aid harmonization. Published by ECDPM, SNV, UNDP, 2005.
13 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.

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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).14
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, have a greater influence on development policy than they did previously.
Overview of U.S. Bilateral Trade Capacity Building
According to the USAID Trade Capacity Building Database,15 U.S. government
agencies obligated $1.4 billion in TCB assistance worldwide in FY2006. 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 has
climbed steadily every year since, from $370 million in 1999 to $1.4 billion in 2006.
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
2005, it funded 52% of total U.S. government TCB assistance, about 66% in 2004,
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). The MCC first obligated funds for TCB
in 2005.
14 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.
15 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
at [http://qesdb.cdie.org/tcb/index.html].

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Figure 1. U.S. Trade Capacity Building Assistance
(in millions of U.S. dollars)
Source: 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. Other TCB working groups exist for
the FTA negotiations with Panama, the Andean countries, and Thailand.

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Figure 2. U.S. Trade Capacity Building Assistance by Region
(in millions of U.S. dollars)
600.00
500.00
400.00
FY03
FY04
300.00
FY05
200.00
FY06
100.00
0.00
Middle East
Asia
Sub-
Former
Central &
Latin
Non-
& North
Saharan
Soviet
Eastern
America &
targeted
Africa
Africa
Republics
Europe
Caribbean
Global
Funding
Source: U.S. trade capacity building database. All figures in this report are based on data from this
source.
As shown in Figure 2, most regions have seen increased U.S. TCB assistance
levels since 2003. The Middle East and North Africa region received much less TCB
assistance in 2006 than in previous years because of a decline in TCB assistance in
2006 to Iraq (from $101 million in 2005 to $9 million in 2006), Egypt (from $69
million in 2005 to $30 million in 2006), and the West Bank/Gaza (from $35 million
in 2005 to $0 in 2006). 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. The Latin America
and Caribbean region had a similarly high level of TCB assistance in 2005, 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 but they focus
on individual countries in different regions.

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CRS-11
Table 1. Largest Recipients of U.S. TCB Assistance
in FY2005 and FY2006
(in millions of U.S. dollars)
Country
FY2006
FY2005
Georgia
199.42
5.0
Benin
188.6
0
Armenia
99.09
5.06
Cape Verde
87.3
0
Central America ns
60.32
34.35
Afghanistan
59.34
50.43
Colombia
58.11
50.60
Vanuatu
54.0
0
Peru
32.43
10.87
Egypt
29.68
68.79
Ukraine
13.39
27.68
Western Africa ns
12.35
23.40
Ethiopia
11.92
21.75
Nicaragua
10.87
132.67
Iraq
9.48
101.3
Honduras
7.06
202.12
Romania
3.9
27.86
Madagascar
0.9
58.31
West Bank/Gaza
0
35.43

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CRS-12
Figure 3. U.S. Trade Capacity Building Assistance by Category
(in millions of U.S. dollars)
600
500
400
FY03
FY04
300
FY05
FY06
200
100
0
e
B
ion
IT
ion
ng
TA)
tion
ent
ards
nce
tur
rds
ent
ent
ent
ation
C
ss
ot
ni
(R
m
st
r T
lopm
erce &
rom
Trai
ent
erna
acilita
and
ordin
the
m
Standa
r St
ov
rastruc
eve
evelopm evelopm
O
nd Acce
e F
om
d G
Inf
e &
l D
a
C
port P
greem
ad
al
or D
ncy Co
ss
E-
Ex
ervices &
Tr
d Labo
rad
Goo
tura
ect
S
T
&
hysic
Foreign Inve
ul
S
ervices D
rene
ade A
P
ent
ric
erage
es an
ent
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S
wa
ness
Tr
rc
lic
Ag
her
usi
pm
d Int
Ot
ts, A
B
gional
vironm
Tourism
esou
elo
n Po
an
en
elated
Re
ev
En
R
nce
an R
e-
or D
petitio
rna
greem
um
ct
ad
om
A
H
Tr
ove
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C
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TO
W
cial
an
Fin
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.

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CRS-13
Figure 4. Share of TCB
Figure 5. Share of TCB
Funding
Implementation
OPIC
Other
USDA
Other
USDA
1%
0%
2%
2%
3%
Labor
Labor
OPIC
State
Treasury
5%
1%
4%
7%
1%
Treasury
Transportation
1%
State
2%
USAID
12%
USAID
34%
33%
MCC
44%
USTDA
MCC
USTDA
2%
44%
2%
The fact that TCB is provided by many different U.S. government agencies has
been cited as both a benefit and a source of concern. On the benefit 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.

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CRS-14
Table 2. Selected U.S. Agencies with TCB Programs, FY2005
and FY2006
TCB
Implementation
Agency
(in millions)
Areas of TCB Assistance
2006
2005
Millennium Challenge
$610.15
$369.0
transportation infrastructure, financial
Corporation (MCC)
sector, trade facilitation, agribusiness,
private sector capacity
U.S. Agency for
$461.1
$687.7
trade negotiations, implementation of
International
trade 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
$62.4
training on trade-related topics, private
sector development, governance,
contributions to multilateral TCB
funds, trade facilitation, labor,
environment, regional trade
agreements
Department of Labor
$71.89
$79.6
reform and enforcement of labor laws
Department of
$45.1
$26.2
agriculture, private sector capacity,
Agriculture
WTO agreement on SPS
Trade and
$23.6
$29.1
infrastructure, private sector capacity,
Development Agency
trade facilitation, environment
(USTDA)
Department of the
$20.0
$7.9
financial sector, governance
Treasury
Overseas Private
$15.7
$9.7
infrastructure, private sector capacity,
Investment Corporation
financial sector
(OPIC)
Department of
$5.9
$7.4
WTO accession and agreements, trade
Commerce
facilitation, legal reform, governance,
competition policy
Peace Corps
$2.3
$3.8
private sector capacity, tourism
Export-Import Bank
$0.9
$49.6
infrastructure, financial sector
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

---

CRS-15
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, FY2002-2006
(in millions of U.S. dollars)
120,000,000
100,000,000
2002
80,000,000
2003
60,000,000
2004
40,000,000
2005
20,000,000
2006
0
O
IT
ts
s
e
B
&
ion
ng
d
ent
en
ion
re
rds
ion
C
WT
e
ot
ni
dar
tm
lture
T
rc
m
rai
es
rvices
nat
e
T
tanda
ricu
di
ther
m
acilitat
Se
t Pro
greem
S
A
Stan
overnanc
Inv
frastructu
Ag
oor
O
om
or
s &
&
C
C
xp
rade F
& G
E-
E
s Sv
rade
T
Labor
rade
olicy &
T
ctor
ical In
T
cy &
ines
e
hys
al
en
us
onal
ces &
P
B
ent
par
egi
R
petition P
esour
R
om
Financial S
C
an
nvironm
E
ov/Trans
G
um
H

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CRS-16
The Millennium Challenge Corporation (MCC)
In 2006, the MCC committed the largest amount of TCB assistance of any U.S.
government agency.16 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 of Directors.
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.
About 80% of these commitments were for physical infrastructure development.
Future MCC TCB assistance levels may increase 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.
16 For more information about the MCC, see CRS Report RL32427, Millennium Challenge
Account, by Curt Tarnoff.

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CRS-17
Table 3. MCC Compacts and Elements of TCB
TCB in
Date of
Total
Country
millions
TCB Elements
Compact
Compact
(Year)
Madagascar
April 2005
$109.8
$52.5 agribusiness, financial sector,
million
(FY2005) small and medium enterprises
(SME)
Honduras
June 2005
$215
$122.4 agribusiness, financial sector,
million
(FY2005) infrastructure, legal reform
Nicaragua
July 2005
$175
$123.4 agribusiness, legal reform, rural
million
(FY2005) development, transport
infrastructure
Cape Verde
July 2005
$110.1
$87.3 agribusiness, financial sector,
million
(FY2006) infrastructure, transport
infrastructure
Georgia
September
$295.3
$189.5 agribusiness, energy
2005
million
(FY2006) infrastructure, SME, transport
infrastructure
Benin
February
$307
$188.6 financial sector, infrastructure,
2006
million
(FY2006) legal reform, port operations
Armenia
March
$235
$90.1 agriculture, transport
2006
million
(FY2006) infrastructure
Vanatu
March
$65.7
$54.0 transport infrastructure
2006
million
(FY2006)
Ghana
August
$547
Not yet agribusiness, financial sector,
2006
million
reported. legal reform, rural development,
transport infrastructure
El Salvador
November
$460.9
Not yet business services, agribusiness,
2006
million
reported. investment support, financial
services, transportation
infrastructure
Mali
November
$460.8
Not yet transportation infrastructure,
2006
million
reported. agribusiness, business
infrastructure
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,

---

CRS-18
Latin America and the Caribbean. In FY2006, ILAB funded about $54 million in
projects worldwide. In addition to ILAB-funded projects, in FY2006 ILAB
implemented $17.1 million in projects funded by the State Department, providing
labor technical assistance for the Dominican Republic-Central American Free Trade
Agreement (DR-CAFTA). ILAB also implemented additional labor technical
assistance projects in the Middle East and North Africa region which were funded by
the State Department, with a total cost of less than $1 million.
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: Value of TCB Project
Implementation by Year
(in millions of U.S. dollars)
140
120
100
80
60
40
20
0
1999
2000
2001
2002
2003
2004
2005
2006
The U.S. Department of State
The State Department has funded and implemented programs in a variety of
TCB areas. In FY2006, the State Department funded $161 million and implemented
$92 million in TCB projects globally. More than half ($50 million) of the funding
for State Department-implemented projects went to two educational exchange
programs, comprised of the $32 million Academic Exchange Program, and the $18
million International Visitors Program. Both of these exchange programs focused

---

CRS-19
on trade-related topics such as international economics, trade law, financial markets,
intellectual property rights, business development, and other trade topics. Another
$18 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; $12 million); and the International Trade Center ($5
million). The remaining $24 million was distributed among global, regional, and
bilateral TCB programs, of which about $19 million was committed to programs on
customs operation and administration. The State Department funded $70 million in
TCB assistance implemented by other U.S. agencies.
Figure 8. Distribution of U.S. Department
of State TCB Funding, FY2006
Educational
Exchange
31%
Implemented by
other agencies
43%
Contributions to
State-
Multilateral
implemented
Institutions
programs
21%
15%
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 2006, the Ex-Im Bank reported
providing about $900 thousand 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 FY2006, the Department of Transportation (DOT) implemented about $26
million in TCB assistance, which was almost entirely in the form of assistance to
Afghanistan funded by USAID. This assistance includes 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

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CRS-20
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 2006, USTDA reported funding and implementing about $24 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
recipients of TCB assistance from USTDA in 2006 were Mexico ($2.2 million),
China ($2.1 million), Vietnam ($2 million), India ($1.3 million), Indonesia ($1.2
million), and Azerbaijan ($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 2006, the USDA funded around $25
million and implemented around $45 million in TCB assistance. USAID funded
about $11 million in projects that were implemented by USDA, and the Department
of State funded another $9 million. About $30 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 $6 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 FY2006, the U.S. Treasury Department
provided advisors to various developing country governments in the areas of budget
management, debt management, tax administration, and financial law enforcement
in 2006, implementing $20 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 FY2006
OPIC implemented $15.6 million in TCB programs, mainly in the areas of physical
infrastructure development and export promotion. The Department of Commerce
implemented about $6 million in TCB programs, including many by its Commercial
Law Development Program (CLDP) in various areas of commercial legal
development. The Department of Homeland Security implemented $5.86 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,

---

CRS-21
and tourism development. The Department of Energy funded and implemented
about $1 million in TCB assistance, as part of a nonproliferation project in the former
Soviet Union republics. Most of Commerce’s TCB programs are funded by other
agencies. Other agencies have implemented programs totaling $3.7 million,
including the Environmental Protection Agency ($1.07 million), the Federal
Trade Commission ($0.75 million), Health and Human Services ($0.76 million),
the Department of the Interior ($0.35 million), and the Department of Justice
($0.77 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. The annual budget of the DDA Global Trust Fund is about $5.63
million, and total contributions to it were around $19.3 million in 2004. 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 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.17
Technical assistance is also discussed as part of the WTO negotiations. Technical
assistance specifically related to the various negotiating areas, such as trade
facilitation, is discussed in the individual negotiating groups. In some cases,
developing countries are not held responsible for upholding agreements that they do
not have the capacity to implement, unless they are provided with adequate technical
17 Available at [http://tcbdb.wto.org/index.asp?lang=ENG].

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CRS-22
assistance. Discussions of cross-cutting issues related to technical assistance (such
as whether to create a new fund for TRTA) take 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.18 In 2005, the WTO delivered TRTA in the form of courses, seminars,
workshops, and conferences. According to the WTO’s Technical Cooperation Audit,
it carried out 462 TRTA activities in 2005, providing training to more than twelve
thousand individual participants.19 The WTO provided $18.9 million in TRTA/TCB
assistance in 2004, and the top five recipients of its aid were global programs,
Burkina Faso, Malawi, Kenya, and Mauritania.20 Some critics have commented that
the WTO provides too many short-term TRTA activities, and that much of the
training is too superficial. They assert that it would be beneficial for the WTO to
conduct longer-term training to provide more in-depth coverage of issues for fewer
individuals. The WTO counters that its technical assistance is structured as it is
because it aims to respond to as many training requests as possible, which can lead
to a great number of short-term individual training activities.
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.”21 At the October 2006 General Council meeting,
WTO members reportedly agreed to endorse the recommendations of the Task
Force.22
18 2005 Joint WTO/OECD Report on Trade-Related Technical Assistance and Capacity
Building, December 2005.
19 World Trade Organization Committee on Trade and Development, Technical
Cooperation Audit Report for 2005, Note by the Secretariat. WT/COMTD/W/148, May 1,
2006.
20 2005 Joint WTO/OECD Report.
21 World Trade Organization Aid for Trade Task Force, Recommendations of the Task Force
on Aid for Trade. WT/AFT/1. July 27, 2006.
22 “GC: Members Endorse Recommendations on Aid for Trade, SVEs,” Bridges Weekly
Trade News Digest. Vol. 10, No. 33. October 11, 2006.

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CRS-23
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
Framework (see next sub-section) and extending its needs-assessment process to
developing countries that are not LDCs.23
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. 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 $34.8
million as of March 2006, of which the United States contributed $600,000.
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 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. Critics of the IF say 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. Some
critics have also questioned whether developing country officials and citizens are as
involved in preparing the studies as they could be. Also, some observers believe that
the IF program should be extended to all developing country WTO members, and not
just LDCs.
As of early August 2006, forty-two LDCs were at different stages of the IF
process: twenty LDCs (17 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; six had initial technical reviews under consideration; and 5
had submitted a request to begin the IF process.24
23 International Monetary Fund and the World Bank, Doha Development Agenda and Aid
for Trade, August 9, 2006.
24 For more detailed information, see [http://www.integratedframework.org].

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CRS-24
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 2004, the
World Bank made global TCB commitments of about $868 million, including grants
and concessional loans. This amount is in addition to about $1.7 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.25 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. 2004 Commitments of TRTA/TCB by Donor
(in millions of U.S. dollars)
Trade
Trade
Trust
Policy and
Infrastruc-
Develop-
Fund Con-
Regula-
tureb
Total
menta
tributions
tions
Australia
11.8
1.2
0.3
26.3
39.6
Austria
0.4
3
0.2
8.1
11.7
Belgium
0.5
47.5
0.3
37.6
85.9
Canada
21.4
31.1
3.2
44.8
100.5
Denmark
1
3
2.7
115.7
122.4
European
296
883
0.2
1137
2316.2
Commission
Finlandc
2
8.6
0.9
6.7
18.2
France
14.5
55.5
1.3
230.2
301.5
25 2005 Joint WTO/OECD Report.

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CRS-25
Trade
Trade
Trust
Policy and
Infrastruc-
Develop-
Fund Con-
Regula-
tureb
Total
menta
tributions
tions
Germany
16.8
66.1
3.4
379.9
466.2
Italy
0.7
7.8
0.5
163.6
172.6
Japan
8
31
0.9
3303
3342.9
Korea
1
1.3
0.2
—
2.5
The Netherlands
18.6
60.7
3.5
32
114.8
New Zealand
1.5
11.2
0.2
2.4
15.3
Norway
6.1
30.2
6.8
75.1
118.2
Portugal
0.18
1.58
0
3.5
5.26
Spaind
2.8
2.8
0.4
193.9
199.9
Sweden
4.7
6.4
2.6
133.3
147
Switzerland
11.5
82.3
6.3
42.2
142.3
Thailand
0.2
0.2
—
—
0.4
United Kingdom
19
29
3
348
399
United States
199
596
3.2
554
1352.2e
Source: 2005 Joint WTO/OECD Report on Trade-Related Technical Assistance and Capacity
Building
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 2005 Joint WTO/OECD Report on Trade-Related
Technical Assistance and Capacity Building.)
b. 2003 data. Infrastructure includes all commitments to transport, energy and telecommunications,
as such investments may have the potential to facilitate international trade.
c. 2003 data used for Finland — 2004 data is incomplete.
d. 2003 data used for Spain — 2004 data is incomplete.
e. Does not correspond to total for 2004 from the USAID TCB database because the data was
calculated differently.
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

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CRS-26
funding or by limiting the types of activities in which foreign assistance may be
provided.
TCB Appropriations
Funds are appropriated for TCB within the Foreign Operations, Export
Financing, and Related Programs Appropriations Act. In 2006, the act (P.L. 109-
102) recommended that at least $522 million should be made available for TCB
assistance from the total of the following six accounts: (1) Trade and Development
Agency; (2) Development Assistance (DA); (3) Transition Initiatives; (4) Economic
Support Fund (ESF); (5) International Affairs Technical Assistance; and, (6)
International Organizations and Programs. Congress further recommended $214
million of the DA account to be allocated for TCB assistance, which may be
considered toward the total $522 million. Of the amounts allocated to TCB,
Congress directed that $20 million of ESF and $20 million of DA be used for labor
and capacity building activities relating to DR-CAFTA.
The House Appropriations Committee Report (H.Rept. 109-152) provided some
guidance for how TCB appropriations should be used. The Committee requested that
USAID prioritize building developing country capacity to implement and benefit
from special trading arrangements with the United States, such as free trade
agreements and trade preference programs. In order to help developing countries
benefit from these trading arrangements, the Committee placed emphasis on
particular TCB activities, such as: trade facilitation through improvements in
customs, sanitary and phytosanitary (SPS) measures; improvements in governance
and transparency regarding government procurement; and related regulatory reforms.
The Report also emphasized the importance of interagency coordination,
development effectiveness, monitoring and evaluation, responding to developing
country proposals, and the flexibility of long-term assistance plans to respond to
changes in trade policy and global trade dynamics. The Committee directed USAID
to consult with the Office of Trade Capacity Building at USTR in resource allocation
and programming decisions, as well as to solicit expertise from relevant federal
agencies. The Committee also encouraged USAID to implement a budget planning
process that identifies TCB activities as a component of the President’s budget
request, which has not yet been done.
In previous years, Congress has earmarked slightly fewer funds for TCB
assistance than in FY2006. 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 countries.
In the 109th Congress, the FY2007 Foreign Operations, Export Financing, and
Related Programs Appropriations Bill (H.R. 5522) was passed in the House and
placed on the calendar in the Senate. The House version of this bill would include
the creation of a Trade Capacity Enhancement Fund in the amount of $522 million,

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CRS-27
and an Office of the Director of Trade Capacity Enhancement within USAID. This
new office would be responsible for USAID’s TCB programs, as well as coordinating
government-wide TCB programs of all U.S. agencies. It would also be responsible
to ensure that country strategic plans include a TCB goal, and to monitor the
achievement of that goal. These potential changes in the funding and management
of TCB represent an initiative to make TCB a higher priority. They also prompted
concerns about restricting the administration’s flexibility and draining resources from
other foreign assistance priorities. The Senate version of the bill, which has not yet
passed, does not include this new fund or office. The Senate committee report
(S.Rept. 109-277) recommends at least $283 million for TCB and other economic
growth activities.
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 maintain that USAID developed policies that were more restrictive than
necessary, as a result of the agency’s sensitivity to congressional criticism.26 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 that would compete with a similar 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.
In addition to restrictions on agricultural assistance, there are other restrictions
on U.S. foreign assistance that affect TCB assistance generally and TCB assistance
in sectors other than agriculture. 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.27 Other restrictions affect aid to particular countries, such as in the
Nethercutt Amendment (P.L. 109-102 Section 574), which restricts ESF assistance
26 “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
1991. Abt Associates, sponsored by the U.S. Agency for International Development.
27 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
the author).

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CRS-28
to countries that are a party to the International Criminal Court (ICC) and have not
signed an Article 98 agreement.28 These statutory restrictions are catalogued and
summarized by USAID.29
Policy Issues
Motivations for Trade Capacity Building
Trade capacity building is generally regarded as an activity taken on by the
United States and others 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, although that does not mean they should be judged as
negative or positive. One possible motivation is to create markets for U.S. exports.
TCB can 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’ trade policies 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
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 being obliged to as part of 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
28 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.
29 See “FY2006 Statutory Checklists: An Additional Help for ADS Chapter 202,” USAID.
Revision Date: 3/20/2006, Responsible Office: GC, File Name: 202sac_032006_cd43.

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CRS-29
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 process of negotiating a free trade agreement.
Conflicting Interests
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 assistance to help developing countries benefit from trade. In this way,
trade is not seen as an end in itself but as 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
separate 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),30 while trade
policies can change more quickly. As a result, there may be tension between
responding to the needs of changing trade policies 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. There has
30 The PRSP is a national development strategy designed in partnership with the beneficiary
country, the World Bank, and the International Monetary Fund (IMF).

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CRS-30
been some overlap and duplication among donors. Demand-driven TCB assistance,
where donors provide assistance based on the strategies and requests of recipient
governments, may 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 actually 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.31 There is concern that
some TCB recipient countries may lack the capacity to assess and prioritize their
needs.
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.32
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.33 USTR and USAID have
responded to this recommendation, and are reportedly in the process of developing
evaluation mechanisms.
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
31 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.
32 Organization for Economic Cooperation and Development, The Development Dimension:
Aid For Trade: Making it Effective. July 2006.
33 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.

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CRS-31
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 various stakeholders such as business,
government, and civil society. The OECD finds that where this dialogue has been
most robust, TCB has been most effective.34 This finding may be key in developing
a framework for evaluating TCB.
TCB 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 does not directly involve
saving lives, but it could in the long term enable countries to prevent some types of
emergencies and respond effectively to others.
34 Organization for Economic Cooperation and Development, The Development Dimension:
Aid For Trade: Making it Effective. July 2006.

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