Timor Leste signed up to the Cotonou Agreement in 2005. The Partnership Agreement comprises members of the African, Caribbean and Pacific (ACP) Group of States - of which Timor-Leste is now part - and the EU and its Member States.

It focuses on three main areas:

• Political cooperation
• Development cooperation
• Economic and trade cooperation 

Its ultimate goal is to reduce and eventually eradicate poverty and integrate the ACP countries into the world economy.

There is also a special emphasis on conflict resolution and peace building.

Several joint institutions were set up to ensure the agreement is run properly:

• The ACP-EU Council of Ministers
• The ACP-EU Committee of Ambassadors
• The joint Parliamentary Assembly

The agreement started in 2000 and lasts until 2020.

A Political Dialogue, as foreseen in article 8 of the Cotonou Agreement, is held regularly.

The Cotonou Partnership Agreement provides the legal framework for EU and Timor-Leste trade relations. It aims to liberalise trade between both sides, while enhancing development and development-finance.

The EU has improved Timor Leste's access to its market through its Everything but Arms initiative. This gives the country full duty free and quota-free access to the EU for all its exports except for arms and armaments.

The EU has also developed a comprehensive training programme for the Ministry of Tourism, Commerce and Industry, helping staff there deal effectively with trade-related issues.

As Timor Leste is located so far from the EU, there is not a significant amount of trade between both sides. In fact, Portugal is the only EU country that has some kind of trade with Timor Leste.

The technical and financial cooperation constitutes the main component of the Cotonou Agreement. The latter, valid for 20 years (from 2000 to 2020) is broken down to implementation periods of 5-6 years. Each period is covered by a global financial envelope called the European Development Fund (EDF). The current one, covering the period 2014 – 2020 is called the 11th EDF. Under this fund, a National Indicative Programme (NIP), is negotiated, agreed and signed between the EU and each one of the ACP countries. A total amount is included therein. The NIP specifies the priority areas to be supported by the EC during the 11th EDF period.

For Timor-Leste, the amount of the 11th EDF is €95 million (equivalent to around US$110 million). The EDF interventions will focus on the following areas, which are considered vital for the Country's continued sustainable and inclusive development:

1. Good Governance – through reforms of the public finance management system, as well as check and balance institutions to ensure an effective and transparent implementation and monitoring of development policies. An amount of EUR 30 million, or some 32% of the total NIP, is foreseen for initiatives in this area;
2. Rural Development – with specific emphasis on rural access, skill development in rural areas in productive sectors (agricultural production and processing, road construction and maintenance), and on nutrition (with the aim reducing food insecurity and malnutrition), to improve economic opportunities and the delivery of Government services. An amount of EUR 57 million, or 60 % of the total NIP, is foreseen for this;
3. Support Measures – for which an amount of EUR 8 million, or some 8% of the total NIP, is earmarked. This includes activities aimed at supporting the programming, preparation, implementation, monitoring and evaluation, and visibility of EU-TL cooperation, support to the NAO to ensure effective management of the NIP, and may also cover limited support to assist the Country's accession to ASEAN and to strengthen the Government's capacity to meet its ASEAN commitments.

Out of these €95 million, one project for a total of €5 million, the EU-TL Cooperation Support Facility (CSF), has already been signed with the Government. Two other projects, for a total of €57 million have been submitted to the European Commission for decision during 2016.