Aid for Trade Flows and Accession to the World Trade Organization

ABSTRACT Existing studies on the determinants of accession to the World Trade Organization (WTO) have neglected the role that Aid for Trade (AfT) flows might have played in the accession process. The present study aims to fill this void in the literature by investigating the association between AfT flows and the probability of joining the WTO. The panel dataset includes 50 economies of which 29 economies that acceded to the WTO under the so‐called (WTO Article XII) and 21 NonWTO Members (that act as a control group), with data spanning the period from 2002 to 2021. The empirical analysis has used the random effects logit model, and established that an increase in total AfT flows is associated with a higher probability of joining the WTO. This positive association is primarily driven by AfT interventions that help reduce trade costs, especially AfT for economic infrastructure (that affect the most the probability of WTO entry), followed by AfT flows for trade policy and regulation. The positive asssociation between AfT flows for productive capacities and the WTO entry is significant only at the 10% level. Finally, the magnitude of the positive relationship between total AfT flows and the probability of acceding to the WTO is larger, the lower the real per capita income of developing economies. Relatively advanced developing economies experience no significant association between total AfT flows and the probability of WTO entry. The study, therefore, underlines the critical role that AfT flows may play in easing the WTO accession for developing economies.