Aid for Trade in a World of Global Value Chains: Chain Power, the Distribution of Rents and Implications for the Form of Aid

Abstract

Abstract Aid for Trade is widely heralded as a success in promoting increased trade by developing countries. Increased trade, however, does not automatically translate into greater prosperity for workers or local communities. In a world characterized by global value chains (GVCs) in which large lead firms typically enjoy considerable power over their suppliers, workers and small producers are often in a poor position to capture the economic gains produced by these chains. Profits (economic rents) typically accrue to the powerful. The policy implication is that the benefits of Aid for Trade, unless targeted at enhancing the capacities of workers and small producers, or at increasing their bargaining power, may disproportionately flow to those with power in the chain and not to the intended beneficiary.