Research On The Impact Of Aid For Trade On The Export Of Recipient Countries

Since the beginning of the 21st century,the total volume of international trade has grown rapidly,the trade pattern is changing all the time.The structural unbalance of global economic development makes developing countries more tough to break through domestic trade bottlenecks on its own.How to obtain the sustainable growth of trade among developing countries has become a vital issue all around the world.At the 2005 WTO Ministerial Conference in Hong Kong,WTO and OECD jointly put forward the Aid for Trade Initiative.Aid for Trade initiative aims to help developing countries(including regions)and less developed countries(including regions)to overcome the domestic supply side trap and trade related infrastructure construction bottleneck,raising the voice in the bilateral,regional,and multilateral negotiations,establishing basic trade capacity to obtain the effective trade gains.According to the OECD’s 2019 aid for trade report,more than 17,800 aid projects have been set up since the inception of the Aid for Trade Initiative,with a total investment of US $4.1 billion.However,compared with the WTO and OECD advocating the Aid for Trade Initiative to promote the trade development of developing countries(including regions)and less developed countries(including regions)actively,the academic area has been arguing about the effectiveness of aid constantly.Moreover,in the field of international economics,the discussion on the relationship between aid for trade and the trade development of recipient countries is still relatively scarce,which is not only difficult to provide a solid theoretical basis for the effectiveness of aid for trade,but also difficult to provide strong guidance for the implementation of the specific work of aid for trade initiative.Therefore,this paper attempts to use theoretical model derivation and empirical model test to discuss the impact of aid for trade on the export of recipient countries,which is also a great significance for China to implement the high-level foreign economic cooperation in the new stage of its development.This paper mainly studies three following questions:firstly,what is the connotation of aid for trade?Why do in-depth studies specifically focus on the effectiveness of aid for trade?Secondly,what is the theoretical basis for aid for trade to have an impact on the exports of recipient countries?If so,what is the mechanism?Thirdly,does aid for trade have the effect of theoretical basis analysis in practice?If so,is there any heterogeneity in these effects?First of all,this paper explores the answer to the first question by sorting through the classic aid for trade literatures.Mobilizing aid border is based on the connotation and the WTO multilateral trade rules,to maintain the trend of global trade liberalization.At the same time,aid for trade is a series of projects which is promoting the economic sustainable development of the recipient countries a series by developed countries to developing countries(including regions)and less developed countries(including regions)with characteristics.Recent research has systematically studied aid for trade from four perspectives:motivation,mode,fund allocation and effect.The conclusions on the first three perspectives are consistent in the literature but leave a fierce debate on the effectiveness of aid.This fully illustrates the significance of this research on the effectiveness of aid for trade.Secondly,this paper extends the model of heterogeneous firms’ export,and for the first time,uses the perspective of dual margins combining with the aid for trade to explore the answer to the second question in depth and detail.Through the theoretical model derivation,it is found that aid for trade can effectively promote the export of recipient countries,alongside both the intensive margin and the extensive margin;the degree of impact of aid for trade on the dual margin is different.Consequently,the derivation of the theoretical model also confirmed that the reduction of trade costs in recipient countries is one of the effective mechanisms for promoting exports,and there is significant heterogeneity but correspondent relationship between the reduction of the different types of trade costs and the different aid contents in the recipient countries.Then,based on the framework of the extended trade gravity model,this paper empirically analyzes DAC members’ aid for trade to developing countries(including regions)and less developed countries(including regions)from the perspective of exports and dual margin,and explores the answer to the third question.Using Heckman’s two-stage model and panel estimation model found:First,receiving aid can significantly promote the export possibility of recipient countries,and there is a significant negative correlation between the amount funds of aid for trade and bilateral exports from recipients to donors.Second,by dividing exports into the intensive margin and the extensive margin,it is found that the amount funds of aid for trade is negatively correlated with the intensive margin of recipients,while positively correlated with the extensive margin of recipients.Thirdly,the categories of aid for trade contents,fund characteristics and type of donors have heterogeneity on the above conclusions obviously.The empirical results using the mediating effect model show that:first,trade cost plays a partial mediating role in the transmission channel from aid for trade to the recipient’ exports;second,fixed trade cost plays a complete mediating role in the transmission channel from policy aid for trade to the recipients’extensive margin;third,variable trade cost plays a significant role in the transmission channel from non-policy aid for trade to the recipients’ intensive margin;fourth,fixed trade cost plays a significant role in the transmission channel from non-policy aid for trade to the recipients’ extensive margin.Finally,based on the above research conclusions,this paper puts forward three policy suggestions respectively,on tracing the connotation of aid for trade and reforming the system,focusing on the transparency of aid fund allocation standards and the detailed evaluation system of effectiveness,and combining with the "The Belt and Road" initiative on how to promote the development of China’s foreign economic cooperation continuously.