OECD Calls for ‘Aid for Trade 2.0’ to Tackle Climate, Digital, and Inequality Gaps

The OECD Development Co-operation Directorate, together with its research partners, has released a new working paper that places aid for trade at a decisive juncture. Authored by Coralie Martin and published as Aid for Trade at a Crossroads: Building Partnerships for Trade and Sustainable Development, the document situates this long-standing initiative in today’s volatile global context. The report makes clear that what began as a largely technical exercise to strengthen trade capacity in developing countries has now become entangled in geopolitics, climate imperatives, digital disruption, and the struggle for social inclusion. The message is stark: unless donors and partner countries adapt the aid for trade agenda, the initiative risks losing its relevance in an era where global trade itself is contested.

From Past Achievements to Present Gaps

The report does not deny the successes of the past. Since its launch nearly two decades ago, aid for trade has helped finance infrastructure projects, modernise customs, and open pathways for developing countries to enter global value chains. Roads, ports, and regulatory reforms made tangible differences to export performance in many parts of the world. Yet the study warns that the landscape of 2025 is far removed from the mid-2000s. Donor commitments, while increasing in absolute terms, have failed to keep pace with competing demands such as health, security, and climate action. Aid for trade’s share of overall development assistance has stagnated, and the flow of resources remains uneven, with some countries heavily favoured and others left behind. This imbalance underscores the urgent need for rethinking priorities.

Climate, Digitalisation, and Inclusion as Game-Changers

Three transformative forces dominate the report’s analysis: climate change, digitalisation, and social inclusion. Climate considerations, once peripheral, are now unavoidable. The report stresses that partner countries must decarbonise supply chains, adapt to stricter international environmental standards, and seize opportunities in renewable industries. Yet, despite this urgency, only a small fraction of aid for trade projects currently targets environmental goals. Without climate-smart trade support, developing nations risk being shut out of the evolving global economy. Digitalisation, meanwhile, is described as both a risk and an opportunity. E-commerce and digital platforms have the power to catapult small businesses into global markets, but the digital divide remains glaring. Without investments in broadband infrastructure, cybersecurity, and digital literacy, many countries will remain excluded. The paper also makes a compelling case for social inclusion. Trade liberalisation can generate new wealth, but it often accentuates inequality unless deliberate measures are taken. Women entrepreneurs, youth, and marginalised communities must be brought into the centre of aid for trade programmes through targeted initiatives and equity-focused design.

Geopolitics and the Search for Stability

A more sobering dimension emerges in the discussion of geopolitics. Trade has become a battlefield for competing powers, and development assistance is not immune to these rivalries. Many developing countries face increasing pressure to align with one bloc or another, risking reduced autonomy and diminished policy space. The working paper argues that aid for trade could play a stabilising role, offering countries the tools to diversify their economies and resist external shocks. For this to happen, however, partnerships must expand beyond the traditional donor-recipient framework. The private sector, regional organisations, and multilateral development banks must all be drawn more deeply into collaborative arrangements. Only by broadening participation can aid for trade build the resilience that today’s global system demands.

Toward “Aid for Trade 2.0”

The paper concludes with a bold call for what it terms “Aid for Trade 2.0.” This vision involves predictable and flexible financing mechanisms that can bridge short-term crises and long-term development goals. Innovative instruments such as blended finance, guarantees, and risk-sharing facilities are recommended to supplement conventional grants. Monitoring frameworks must also evolve, measuring not just inputs and outputs but the actual impact on sustainability, resilience, and inclusiveness. The author insists that coherence is critical: aid for trade must align with the Paris Agreement, the Sustainable Development Goals, and domestic development strategies if it is to deliver real transformation. The OECD frames this as a crossroads moment. The successes of the past two decades prove the initiative’s potential, but the challenges of climate shocks, digital divides, and inequality are sharper than ever. Whether aid for trade adapts or stagnates will determine if it becomes a cornerstone of sustainable globalisation or a relic of a previous era.