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Background note - EU Aid for Trade

European Commission - MEMO/05/238   06/07/2005

Other available languages: none

MEMO/05/238

Brussels, 6 July 2005

Background note - EU Aid for Trade

What is Aid for Trade?

Multilateral trade liberalization has the potential to generate significant economic opportunities that could lift many people out of poverty. But developing countries need to build their institutional capacity so they can translate market access into an ability to seize new trade opportunities.

In general terms, trade related assistance can cover: infrastructure improvements for roads and waterways; schemes to enable traders to meet international trading standards, like sanitary and health standards; assistance with WTO negotiations, (from funding think tanks to providing IT training for trade analysis); projects to modernise customs and border procedures, like outdated port handling facilities which can waste large amounts of time and money in transition economies hampering business and holding back economic development; support for fair trade projects, including support for developing micro businesses with business planning, market analysis and marketing , projects to fight fraud and corruption, providing technical and practical assistance to customs and tax authorities .; There are many more examples, but all the projects have one thing in common, they aim at helping developing countries to benefit from trade.

The Current Situation

The EU is already the largest donor of trade related assistance. The actual average EU commitment for trade related assistance in the strict sense since 2001 (trade policy and trade development, not infrastructure) has been above €700 million per year. This fluctuates, as the priorities for the type of aid provided each year are set in agreement with development partners, countries, regions, institutions.

The proposals

Today’s pledge refocuses more EU development funds to significantly increase the funding for aid for trade to €1 billion per year. This is another significant step in the drive to increase overall EU development aid and make it more coherent and effective.

With the commitments on development spending agreed at the European Council last month, today’s announcement should guarantee the increased the €1 billion figure for aid for trade spending for 2007-2013. This is in addition to EU Member States who have committed on average around €250 mlllion per year of trade assistance.

At the European summit last month, European leaders reached a groundbreaking agreement which will put the European Union on track to double its aid by 2015. The European Union’s Overseas Development Aid for 2005 will be €46 billion - making the European Union the biggest donor of overseas aid in the world. The summit agreement sets a new intermediate target for development aid of 0.56 per cent of gross national income by 2010 - which would put Europe on course to reach, by 2015, the UN’s 0.7 per cent target. In practical terms the new proposals would increase EU development aid to €66 billion in 2010, rising to more than 90 billion Europe in 2015. The plans will also improve the coherence and quality of EU development policies, and make Africa a priority for all EU aid actions. The EU agreement on aid is the single biggest commitment in the run up to the G8 summit.

How significant is the announcement today?

Many of the smaller vulnerable least developed African countries, like Mozambique, Ghana, Uganda have access to markets but are still effectively bi-passed by globalisation, because they cannot compete. For those countries, aid for trade is indispensable and it must be provided in a coordinated and sustainable manner. For those least developed African countries, today’s decision to boost aid for trade is very significant. It will make them stronger, more able to seize the opportunities of the global market, it is critical in terms of unlocking their trade potential.

Key facts on EU trade

Since 1980 trade between the EU and developing countries has more than tripled and one fifth of all developing country exports now go to the EU.

The EU absorbed 63% of Least Developed Countries (LDC) exports to the “Quad” of Japan, the US Canada and the EU in 2003 and nearly 70% of their agricultural exports.

79% of all developing country exports to the EU enter either duty free or at reduced rates of duty – an increase of 8 % since 1999.

97% of Africa, Caribbean and Pacific countries exports to the EU enter duty free and tariff escalation is virtually non existent.

All goods imported from the world’s poorest economies (Least Developed Countries, LDCs) can enter the European Union completely free from tariffs and quotas.

For more information on Aid for Trade see:

http://ec.europa.eu/trade/icentre/publica_en.htm


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