This article is part of a Synergies series on reviving multilateralism curated by TESS titled From Vision to Action on Trade and Sustainability at the WTO. Any views and opinions expressed are those of the author(s) and do not necessarily reflect those of TESS or any of its partner organizations or funders.

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Extreme weather events and changing climate conditions are causing hundreds of millions in economic damage and severe suffering across developing countries. Among least developed countries (LDCs), Eritrea, Madagascar, Mauritania, Chad, the Democratic Republic of Congo, Sudan, Mali, Ethiopia, and Congo face climate adaptation costs higher than their national spending on healthcare, with these costs ranging from around 5–22% of gross domestic product. In the Caribbean, the devastating experience of recent hurricanes has shown that the GDP of one country can be set back by a quarter during a five-hour climatic activity.

The ocean states of Kiribati, the Solomon Islands, and Tuvalu and countries from Bangladesh and Senegal to Tanzania and Uganda are flooded with plastic pollution with tremendous economic and health costs. From Laos to Madagascar and Guinea, rural populations, which account for two thirds of people living in LDCs, are experiencing the loss of biodiversity and ecosystems on which they directly depend for their subsistence.

Faced with the huge social and economic toll of these planetary environmental crises, despite bearing the least historical responsibility for them, developing countries have repeatedly highlighted the need for international support measures, including through aid for trade and wider finance and investment, to address their economic and trade-related impacts.

For example, in their Ministerial Declaration at the World Trade Organization’s (WTO) Thirteenth Ministerial Conference (MC13), the LDC Group calls for reinforced support, including aid for trade, dedicated to LDCs, while emphasizing the increasing economic and environmental vulnerability of all LDCs. The Organization of the African, Caribbean and Pacific States, in their MC13 Ministerial Declaration, “emphasize the need to assist developing countries and LDCs meet the trade-related environmental challenges they face and which have an impact on their development.” And an MC13 Ministerial Declaration on the Contribution of the Multilateral Trading System to Tackle Environmental Challenges, co-sponsored by almost 70 developing countries, stresses that “capacity building, climate finance and technology transfer [ … ] to address climate change are central for the adaptation and mitigation strategies of developing countries and a key element to facilitate growth and sustainable development.”

As governments and stakeholders work to promote the economic transformations vital to achieving resilient, decarbonized sustainable development, aid for trade is an important component of the financing, investment, and partnerships required to support a just transition for developing countries; one that enables new economic and social opportunities and decent work.

To better mobilize and channel the resources they need to tackle challenges and seize opportunities at the intersection of trade, environment, and sustainable development, a top priority is to ensure recipient countries are in the driver’s seat with regard to prioritization and coordination of aid for trade.

The 9th Global Review of Aid for Trade, which took place in Geneva in June 2024, offered opportunities to explore how aid for trade and financing can support trade-related contributions and responses to the sustainable development priorities of developing countries, including in relation to environmental challenges. Among other notable events, the WTO Secretariat launched a report identifying trade opportunities available to developing economies and LDCs as the world transitions to cleaner energy sources while emphasizing the crucial role of development finance in helping achieve these opportunities.

There is broad consensus that the economic burden of the global response to environmental challenges should not fall on the world’s poorest and most vulnerable economies and that developed countries have a responsibility to provide financial resources, capacity building, and technical assistance to bolster capacities in developing countries. In the face of climate change, the importance of collective action and bolstered partnerships to address such crises of the global commons is clear.

However, while commitments to provide capacity building and technical assistance to developing and least developed countries are included in the Sustainable Development Goals and a range of environmental and trade agreements, there are well-recognized shortfalls in the scale of financial and technical support relative to the challenges facing a broad diversity of developing countries, and especially LDCs, small island developing states (SIDS), and small, vulnerable economies (SVEs), at the interface of trade, environment, and sustainable development.

Discussions at recent global reviews have highlighted a number of ways that aid for trade, as part of a wider financing and investment landscape for sustainability in developing economies and LDCs, could be harnessed for a just transition to sustainable trade, including through support to: economic diversification so as to participate competitively in green markets and supply chains; boosting resilience, climate readiness, and adaptation in key export sectors; and building climate-smart and resilient trade-related infrastructure.

To effectively support recipient countries, it is also clear that efforts to “green” aid for trade need to take into account wider national goals like employment creation and poverty reduction.

Greening aid for trade to better respond to environmental priorities in the context of the broader trade and sustainable development objectives will require simultaneous action on six complementary pathways:

• Mainstreaming environmental goals in aid for trade planning and projects.
• Ensuring aid for trade monitoring systems accurately capture and report information about the environmental purpose and impacts of aid for trade projects.
• Securing new and additional resources for environment-related aid for trade, increasing the accessibility of aid for trade and other sources of finance that can support sustainable trade, and using aid for trade to mobilize further resources.
• Fostering coherence between aid for trade and wider efforts to finance the shift to a green global economy, including climate finance, development assistance, debt relief and investment that supports the transformation and competitiveness of developing countries in a global green economy. Alongside ensuring supportive domestic policy frameworks, critical in this context will also be reform of the international financial architecture to align with and catalyse investment in sustainability and supporting developing countries and businesses to raise capital and attract investments in the green transition.
• Integrating trade considerations into existing climate and environmental funding initiatives and in development assistance for sectors with a high environmental impact and trade dimension.
• Strengthening South-South cooperation on sustainable trade, including by learning from developing country experiences and existing practices that support environmental sustainability in trade.

As noted, boosting the contribution of aid for trade to sustainability goals and the trade priorities of developing countries will require complementary efforts to ensure that trade rules and policies address recipient country priorities and constraints. It will also require a wider international policy framework that supports them to be partners in and benefit from opportunities in environmentally sustainable trade.

Critically, harnessing aid for trade for a just transition to sustainable trade must put developing countries in the lead; listening and responding to their priorities in the area of sustainable trade. Effective priority-setting can be bolstered by integrated policymaking involving a diversity of relevant government ministries and regular consultations with stakeholders, including local businesses, civil society, and researchers. Further, ensuring that aid for trade is aligned with nationally defined sustainable development and sustainable trade priorities will entail national-level leadership and coordination of donors and donor projects by recipient countries.

To scale up and speed up just transitions to sustainable trade, governments must move now to build on discussions at the 9th Global Review of Aid for Trade. They need not wait two more years or a further review. Donors and recipients can already work to pursue the development of a clear set of sustainability goals, priorities, and targets for the next aid for trade work programme, underpinned by the environmental, economic, and social urgency of responding to environmental crises and advancing sustainable development objectives. To support such work on an ongoing basis, they could agree to convene joint sessions of the WTO Committee on Trade and Development and the Committee on Trade and Environment focused on priorities at the intersection of aid for trade, environment, and sustainable development.

In addition, developing countries and LDCs could call on the OECD and WTO secretariats to lead on a number of tasks that would inform and support the contribution of aid for trade to sustainable trade. These could include an environmental review of aid for trade, country-led assessments of trade-related environmental priorities, and the development of indicators for monitoring the environmental impacts of aid for trade projects as well as best practices for designing and implementing projects that respond to the sustainability objectives of developing economies and LDCs.

Governments can also catalyse dialogue, share experiences, and bolster cooperation through member-led initiatives at the WTO, such as the Trade and Environmental Sustainability Structured Discussions (TESSD) and the Dialogue on Plastic Pollution, each of which highlight the importance of enhanced aid for trade for developing countries, and especially for LDCs.

A final recommendation is to raise the political profile and attention to aid for trade, and the critical importance of investment and finance for the green transition in developing countries, by convening of a high-level summit on Financing a Just Transition to Sustainable Trade. The summit would provide a much-needed opportunity to promote increased financing for the transition to sustainable trade. It could also encourage greater coordination among the many disconnected public and private actors engaged in development, trade, climate, and environment finance, debt relief, and investment critical to achieving a green and inclusive global economy. The summit could bring together leaders from relevant international organizations, donor and recipient countries, and, critically, private sector and civil society actors with resources and knowledge vital to action. This gathering could also benefit from engagement with other complementary efforts, such as the Bridgetown Initiative, the Baku Initiative for Climate Finance, Investment and Trade Dialogue (to be launched at the 2024 UN Climate Change Conference—COP29), and the Coalition of Trade Ministers on Climate.

As part of a wider package of financing and investment tools targeted at supporting sustainable development in developing countries, WTO members have the opportunity to move forward on an aid for trade agenda that supports developing and least developed countries to tackle pressing challenges at the intersection of trade and sustainability. Given the massive trade and environment-related challenges facing many developing countries, especially LDCs, SIDS, and SVEs, the huge gap between needs and available support for a just transition to sustainable trade, and the urgency, scale, and impact of intersecting environmental crises, mobilizing additional resources, investments, and partnerships is vital.

A just transition to sustainable trade, underpinned by strengthened partnerships and developing country leadership on priorities, would yield benefits for all and for the planet.

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Carolyn Deere Birkbeck is Founder and Executive Director, Forum on Trade, Environment, & the SDGs (TESS).

Fabrice Lehmann is Senior Editor and Publications Manager, Forum on Trade, Environment, & the SDGs (TESS).

This piece is an updated version of an article first published in Trade for Development News. It is derived from the TESS-IISD policy paper on Greening Aid for Trade: Pathways for a Just and Fair Transition to Sustainable Trade.

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Synergies by TESS is a blog dedicated to promoting inclusive policy dialogue at the intersection of trade, environment, and sustainable development, drawing on perspectives from a range of experts from around the globe. The editor is Fabrice Lehmann.

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