Sida's work with trade
International trade drives development and has improved living conditions for many people. Weak institutions, poor infrastructure such as roads and electricity networks, unfavourable trade policies and low competitiveness prevent many low-income countries from benefiting from trade. Sida supports projects that facilitate trade, develop trade policy and strengthen small businesses.
Why do Sida work with trade?
Trade is important for economic development and poverty reduction
Open international trade is essential for economic development that benefits all people, including those living in poverty. Trade can reduce poverty and contribute to a green transition and a more sustainable economy. The shocks of the pandemic, the Ukraine war and high inflation are slowing down the expected growth of the global economy.1 Trade has recovered but many low- and middle-income countries have lagged behind.
The multilateral trading system in crisis
The international multilateral trading system under the World Trade Organisation (WTO) is in crisis and negative economic developments have contributed to the disruption of global value chains. More and more countries are protecting themselves from competition by imposing various trade barriers, such as tariffs. This has resulted in a sharp increase in trade barriers and the growing use of subsidies, and confidence in the WTO has declined.
International trade affects the environment
International trade tends to increase consumption. When we produce and consume more, the environment and climate are negatively affected. Carbon dioxide emissions increase, as do waste and pressure on natural resources. At the same time, trade is important to provide countries affected by the impacts of climate change with extreme weather events such as severe droughts and floods with access to technologies that can mitigate environmental impacts, build resilience and help adaptation.
Examples of what Sida has contributed to
Trade promotes development
Enabling low and lower middle income countries to participate in the world economy has played an important role in reducing poverty. Trade can lead to the development of private companies and entrepreneurship, creating employment and better working conditions. In Tanzania, the aid strengthens agricultural cooperatives and farms in using sustainable agricultural methods.
It increase the production of vegetables, fruits and spices by 20-50%. 30,000 companies and entrepreneurs in horticulture were able to increase their income and develop their business through access to new local, regional and international markets. They received support in areas such as marketing, market information and certification standards.
Growing importance of sustainability issues in trade
The world’s consumers are increasingly demanding goods and services that are environmentally and socially sustainable. For example, Sida (through Open Trade Gate Sweden) supports projects in Bolivia that have led to small businesses reaching out with their sustainably produced products (including quinoa and nuts). Their products have been presented at trade fairs in Sweden and Europe and started to be sold in European shops.
Facilitating trade for least developed countries
Support from Sida enables the world’s least developed countries to design and implement trade reforms. An evaluation of the support shows positive effects, including more goods and products being exported.
Sida's work with trade
Exports and imports from the world’s least developed countries have stalled in recent years, accounting for about one per cent of global trade. More countries have introduced various trade barriers to protect themselves from competition from other countries. These barriers include import duties, import or export quotas and tariffs. This makes trade more expensive and complicated. It also creates uncertainty, not least for low-income countries. Many of Sida’s partner countries lack access to technology and financing and have difficulty meeting international standards.
Sida supports civil society organisations, through the UN and the World Bank, and collaborates with the business community. Sida supports projects that facilitate trade, develop trade policy and strengthen small businesses to improve the living conditions for people living in poverty. Here are some examples of programmes and projects that Sida supports:
Many of Sida’s partner countries find it difficult to pursue an active trade policy and have limited opportunities to participate in and influence negotiations and to implement international trade agreements.
Here are two examples of what Sida supports:
Countries in Africa, particularly in sub-Saharan Africa, have limited participation in regional and international trade negotiations. Sida supports the new African Continental Free Trade Area (AfCFTA), which represents African countries in global trade negotiations. The aim is to increase cross-border trade within Africa and strengthen Africa’s position in the global market. In this way, Sida contributes to economic growth and poverty reduction.
The South African organisation Trade Law Center in Africa (Tralac) contributes to the development of a favourable trade policy and increases small businesses’ knowledge of trade law issues.
Sida’s support to the World Bank’s Trade Facilitation Support Program has helped countries take important steps in the implementation of the WTO Agreement on Trade Facilitation through the digitalisation and simplification of customs procedures, reducing the cost of trade for businesses and reducing waiting times.
Trade procedures are the flows and administration required for a company to export or import goods across borders. These can include customs, taxation, transport and payments. Complicated regulations, administration and high or unclear fees make it more difficult for many low-income countries to trade with other countries. Sida makes it easier for low-income countries to trade.
Here are some examples of programmes and projects that Sida supports:
Swedish support has helped Georgian companies and products reach the EU and other international markets. Within the framework of ENPARD, which promotes quality assurance among food producers to comply with EU regulatory requirements for food safety and consumer protection. Support has helped Georgian honey become more compliant with EU requirements, leading to a dramatic increase in exports.
Sida supports the Standards and Trade Development Facility (STDF), a global partnership to facilitate safe trade and contribute to sustainable economic growth, poverty reduction and food security. The partnership increases food security, enhances animal and plant protection and facilitates trade.
International trade in plants and plant products has traditionally relied on paper certificates containing plant protection regulations. Electronic certificates have been developed but many low-income countries have found it difficult to use them for financial, technical and administrative reasons. With Sida funding, the Standard and Trade Development Facility (STDF) created access for low-income countries through the global ePhyto scheme.
The ePhyto system helped to improve trade flows, reduce costs and limit the number of fraudulent certificates. According to the OECD, the total value of exports for selected agri-food product groups can increase by between 17-32 per cent over a two-year period.
Reliable energy supply, infrastructure such as roads and electricity grids, transport and communication technologies are slowing down the development of trade. Around 37% of the world’s population has never used the internet.
To be able to benefit from trade policy reforms or free trade agreements, for example, a country must have infrastructure such as functioning roads and other transport routes, as well as access to energy and information technology that favours trade.
Sida supports organisations both in civil society and through the UN that improve infrastructure, which in turn facilitates trade. Here are some examples of programmes and projects supported by Sida:
In Zambia, rural electrification is less than five per cent, although more and more people are gaining access to photovoltaic systems, for example for lighting and mobile phone charging. The Beyond the Grid Fund was launched by Sida and the Swedish Embassy in Liberia in 2016. Since then, 870,000 people have gained access to electricity. The fund is also present in Burkina Faso, Liberia and Mozambique. Through support to the World Bank (Electricity Service Access Project), another 90,000 people have gained access to the grid with a subsidised connection fee.
Rapid digital developments are changing the global economy. The digital transformation opens great opportunities for growth, job creation and sustainable development around the world. At the same time, there are many challenges faced by low and lower middle income countries.
Through support to, for example, the International Trade Centre (ITC) and the World Bank, Sida is working to bridge the digital divide. In Africa, Sida has a programme with the World Customs Organization (WCO) on customs modernisation in sub-Saharan Africa, which aims to digitalise and modernise customs administrations in 12 African countries.
Trade is part of Sida’s support under the international Aid for Trade agenda. It partly overlaps with other thematic areas such as private sector development, employment, agriculture and migration. Most of the support goes to multilateral organisations such as the World Bank or the International Trade Centre (ITC).
Updated: December 11, 2023