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This paper examines how aid-for-trade programs can help to magnify the growth benefits that developing countries can reap from trade reform and global integration, with a special emphasis on the Caribbean region. The first part discusses various rationales for trade-related aid, viewed both as a compensatory scheme (aimed at cushioning the impact of revenue cuts and adjustment costs) and a promotion scheme (aimed at alleviating supply-side constraints). In the latter case, particular attention is paid to the role of infrastructure as a constraining factor on trade expansion. The second part discusses the relevance of aid-for-trade arguments for Caribbean countries and identifies a number of specific issues for the region. The third part illustrates the potential growth effects of aid-for-trade programs with simulation results for the Dominican Republic - a country where infrastructure indicators remain relatively weak. The results illustrate the potentially large growth benefits that a temporary and well-targeted aid-for-trade program can provide to countries of the region.

Balance of payments --- Capital formation --- Debt --- Debt Markets --- Distorted incentives --- Domestic products --- Economic growth --- Economic Theory & Research --- Emerging Markets --- Empirical evidence --- Environment --- Environmental Economics & Policies --- Expenditures --- Externalities --- Finance and Financial Sector Development --- Free Trade --- Intermediate goods --- International Economics and Trade --- Labor force --- Labor markets --- Macroeconomics and Economic Growth --- Private Sector Development --- Production costs --- Property rights --- Public goods --- Quotas --- Tax revenue --- Trade taxes --- Unemployment --- Welfare gains