EU Aid for Trade

EU Aid for Trade

Increased participation in world trade has the potential to be an engine for growth and poverty reduction in Least Developed Countries and developing countries by generating revenues and employment, lowering prices on essential goods, and promoting technology transfer and increased productivity. Market opening and strengthened international trade rules provide new opportunities, but are not on their own sufficient to generate trade, especially in the poorest countries. Many countries face domestic constraints such as a lack of productive capacity, excessive red tape and inability to meet standards in high value export markets - all of which impact negatively on the competitiveness of developing country exports and undermine the potential benefits of increased imports.

Trade-related development assistance - known as Aid for Trade (AfT) - targets these “supply-side” constraints. It can include help in building new infrastructure, improving ports or customs facilities and assistance in helping factories meet European health and safety standards for imports. It also strengthens countries’ capacity to negotiate and implement trade agreements to reap the most benefit from increasing trading opportunities, such as the WTO Trade Facilitation Agreement concluded in December 2013 for which the EU committed to cover a significant share of developing countries' needs for implementation.

A strong EU commitment to Aid for Trade

The EU is the leading global advocate and the world's biggest source of aid for trade. The EU and EU Member States adopted a joint Aid for Trade Strategy on 15 October 2007 that aims at supporting all developing countries, particularly the Least Developed Countries, to better integrate into the world trading system and to use trade more effectively in promoting the overarching objective of eradicating poverty in the context of sustainable development. The strategy embraces the full AfT agenda, as identified by the 2006 WTO AfT Taskforce (Box 1).

In 2011, the EU and Member States confirmed their position as the largest provider of Aid for

Trade (AfT) in the world, accounting collectively for 32% of total AfT, despite the global economic downturn. The combined annual Aid for Trade from the EU budget and those of the EU Member States reached €9.5 billion in 2011 (of which €2.7 billion from the EU budget). For the subset of EU Trade Related Assistance, the collective amount was nearly €3 billion, well above the target the EU had set for itself at the Hong Kong WTO Ministerial to spend (as from 2010) €2 billion per year on Trade Related Assistance. The European Commission has put together a collection of case stories to illustrate the kind of activities supported by the EU budget. With almost 36%, Africa is the biggest recipient of collective EU AfT.

As part of the EU joint Aid for Trade Strategy, the European Commission produces an annual monitoring report on EU Aid for Trade, in order to assess progress in implementing the commitments taken on by the EU and its Member States as regards sustaining high volume and increasing results and effectiveness. The monitoring report on AfT 2013 demonstrates that both the EU and the Member States are substantially advancing in implementing the EU AfT Strategy. The results point to a strong EU engagement in AfT, both in terms of volume commitments as well as on enhancing the impact of AfT delivery on the ground.

The Enhanced Integrated Framework for the LDCs

The EU is a strong supporter and active participant to the Enhanced Integrated Framework (EIF), a multi-donor programme housed in the WTO Secretariat supporting LDCs to be more active players in the global trading system. The programme helps them mainstream trade into their development strategies and tackle supply-side constraints to trade. The programme is currently helping 49 LDCs worldwide, supported by a multi-donor trust fund, the EIF Trust Fund, with contributions from 23 donors including the EU and several EU Member States. The European Commission has pledged €10million to EIF Trust Fund and provides support on the ground by taking the role of a 'donor facilitator' in several LDCs (read more about the EIF).

EU Aid for Trade in practice

Aid for Trade is a part of overall EU Official Development Assistance and financed via the EU development instruments under the regular EU budget, as well as via the European Development Fund (EDF). The Africa, Caribbean and Pacific (ACP) region is among the main beneficiaries of EU Aid for Trade (see more information about Aid for Trade programme for the benefit of the ACP). Of particular relevance in the context of the WTO negotiations, the ACP benefit from a specific EU-financed programme to enhance their capacity to participate in the multilateral trading system.

While EU development assistance is funded from different instruments and budget chapters (see box 2), broadly similar principles and procedures apply to turn a financial allocation into a development programme on the ground. Notably, EU assistance including Aid for Trade is distributed through multi-annual country and regional strategies and programmes jointly prepared by the European External Action Service, EuropeAid and partner countries or regions. This results in agreed country and regional strategy papers, which includesmulti-annual national/regional indicative programmes highlighting a limited number of focal areas for funding, of which Aid for Trade could be one. The EU is currently in the final stages of programming its ODA for the period 2014-2020.

These response strategies are defined in line with EU development policy priorities – as outlined in the Agenda for Change and other documents – such as alleviating poverty, promoting sustainable development, increasing aid effectiveness and achieving the UN’s Millennium Development Goals. Every effort is also made to ensure that the strategies are coherent with other relevant EU policy areas, including in the area of trade. The EU also supports our partner countries in achieving better coherence between their trade and development policies. In that regard we wish to see, more as a rule, trade policy becoming an integral part of partner countries' development strategies.

The EU is also committed to the principle of ‘ownership’, i.e. that partner countries are in the lead in the process of developing the cooperation strategies and programmes which benefit them. In that respect, the EU acknowledges not only the responsibility of the government but also the essential oversight role of democratically elected representatives, as well as the active participation of civil society representatives in the policy dialogue phase on programming.

 

The WTO Aid for Trade Initiative and its AfT categories

Trade-Related Assistance (TRA)
Category 1 — Trade policy and regulations: e.g. training, explaining rules and regulations.
Category 2 — Trade development: e.g. investment promotion, analysis/institutional support for trade, market
analysis and development. This Category is the trade-related subset of Category 4 (see below).
Category 6 — Other trade-related needs: e.g. other trade related support identified as such by beneficiaries and not
captured under the other categories, such as vocational training or public sector policy programmes. Is also used to report
on larger cross-sectoral programmes with important subcomponents in the other AfT categories.

Wider Aid for Trade agenda: TRA plus further categories:
Category 3 — Trade-related infrastructure: e.g. physical infrastructure including transport and storage,
communications, and energy generation and supply.
Category 4 — Building productive capacity: Includes business development and activities aimed at improving
the business climate, privatisation, assistance to banking and financial services, agriculture, forestry, fishing,
industry, mineral resources and mining, tourism. Includes trade- and non-trade-related capacity building.
Category 5 — Trade-related adjustment: - e.g. contributions to government budget for implementation of
recipients own trade reforms and adjustments to trade policy measures by other countries.

 

EU Official Development Aid instruments and allocations (including to Aid for Trade) over the current programming period (2007/08-2013)

  • European Development Fund (African, Caribbean and Pacific countries): 2008 – 2013. €22 682 million for 6 years
  • Development Cooperation Instrument (Latin America and Asia including Central Asia): 2007 – 2013: €16.897 billion for 7 years.
  • European Neighbourhood Policy Instrument (Neighbourhood countries and Russia): 2007 – 2013: €11.181 billion for 7 years
  • Pre-accession instrument (the Balkans and Turkey). 2007 – 2013: €11.468 billion for 7 years
  • The European Commission also manages a special budget line for multilateral initiatives in the area of Aid for Trade: €4,5 million a year  (most of the projects financed under this line relate to WTO or WTO-related initiatives, mostly implemented via a contribution to multilateral Trust Funds)