The Aid‐for‐Trade (AfT) Initiative was launched by the Members of the World Trade Organization (WTO) with a view to helping developing countries and the least‐developed countries (LDCs) expand their trade. The current paper contributes to the literature on AfT effectiveness by examining how AfT affects recipient‐countries' export product diversification. The analysis has been carried out on a sample of 104 AfT recipient‐countries over the period 2002–2015 and uses the two‐step system generalised methods of moments (GMM) approach. Results show that AfT flows are conducive to export product diversification in recipient‐countries. In addition, the analysis has shown a positive impact of the cumulative AfT flows on the export product diversification path of these countries. These results apply as well to the subsamples of LDCs and other developing countries. One policy implication of these results is that a scale‐up of AfT would help recipient‐countries to diversify their export products baskets and hence facilitate their greater integration into the global trading system.

The economic effects of information and communication technology (ICT), and particularly the access and use of the Internet (henceforth referred to as "the Internet"), has become the focus of policymakers, researchers, and scholars. Specifically, the development of the services sector due to, among other things, the rapid development of ICT and the Internet, has led economists to recognize the tradability of services, which were long considered a residual and nontradable sector of the economy. This has led to research on the impact of ICT, including the impact of the Internet on trade in services in particular, and on trade performance in general. The rapid development of the services sector is exemplified by statistics. For example, World Trade Organization (WTO) (2019a) reported that in 2018, the volume of world trade in commercial

This paper examines empirically whether Aid for Trade (AfT) programs and Foreign Direct Investment (FDI) inflows affect export upgrading and, if so, whether their effects are complementary or substitutable. The empirical analysis suggests that AfT and FDI do affect export upgrading, namely export diversification and export quality improvement. Moreover, there is a significant interplay between these two financial flows in affecting export upgrading in recipient countries. The importance of this interplay should be taken into account by policymakers of recipient countries when they are devising both export development strategies and policies/institutions that affect FDI inflows into their countries.

This article examines the effect of Aid for Trade (AfT) flows on services export diversification in recipient-countries. The empirical analysis has relied on a sample of 100 recipient-countries (of which 31 Least developed countries-LDCs) over the period 2002-2014 and used the two-step system Generalized Methods of Moments (GMM) approach. It shows that total AfT flows always exert a positive effect on services export diversification over the full sample, with the magnitude of this positive effect being higher for less advanced countries such as LDCs than for relatively advanced economies. This finding also applies to the effect of the cumulated AfT flows on services export diversification. However, we find that the components of total AfT flows-namely AfT for services sectors and AfT for non-services sectors-exert a higher positive effect on services diversification in less advanced countries, notably LDCs than in relatively advanced countries. Specifically, for countries whose real per capita income exceed a certain level, these two types of capital inflows are associated with greater services export concentration. These findings have important policy implications for developing countries and notably the poorest countries among them.

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