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Aid for trade

European Commission - MEMO/11/519   18/07/2011

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MEMO/11/519

Brussels, 18 July 2011

Aid for trade

On 19th July, European Development Commissioner, Andris Piebalgs, will represent the European Commission at the World Trade Organisation's Third Global Review of Aid for Trade in Geneva. The meeting will be a key opportunity for donors and developing countries to come together to look at how Aid for Trade (AfT) is helping people across the world to trade and what has been achieved since the launch of the Aid-for-Trade Initiative at the Sixth WTO Ministerial Conference in Hong Kong in 2005. The focus of the Third Global Review will be on showing results, drawing lessons about the impact on the ground and considering how best to maximize the potential of AfT in the future. The EU is the world's largest provider of Aid for Trade.

Background

  • What is Aid for Trade?

One in six people in the world today live on less than a dollar a day. Poor people need decent jobs, in order to make a living and provide for their families. Governments need tax revenue to invest in social services and encourage economic growth. Increasing trade and investment is one important way of achieving this and is part of the strategy for achieving the Millennium Development Goals.

The EU already grants the poorest countries in the world complete duty and quota free access to its markets, and recently, the Rules of 0rigin that determine whether a product is eligible to that free access were also relaxed, thus ensuring that developing countries really benefit from the trade preferences on offer to them.

But market access alone is not sufficient to generate trade, especially in the poorest countries. Many countries also face internal "behind the border" constraints such as a lack of productive capacity and ability to meet standards in high value export markets, excessive red tape, or poor infrastructure; all of which make it difficult for developing countries to exports their products and undermine the potential benefits of increased imports. Targeting these constraints is what Aid for Trade (AfT) is all about, along with strengthening countries’ capacity to negotiate and implement trade agreements to their benefit.

  • How does the European Union implement Aid for Trade?

  • The joint EU AfT strategy

The EU is a longstanding provider of development assistance to support increased international and regional trade. To build further on this experience, the EU and its Member States adopted a joint AfT Strategy on 15 October 2007 to enable them to support all developing countries - particularly the Least Developed Countries (LDCs) - to better integrate into the world trading system and to use trade more effectively to help eradicate poverty and promote sustainable development.

AfT embraces "classical" trade-related assistance (trade policy and regulation, trade development), as well the other areas identified by the World Trade Organisation's (WTO) Aid for Trade Taskforce: productive capacity building, trade-related infrastructure, trade-related adjustment and "other trade-related needs".

  • Focus on volumes and quality

The EU AfT initiative could be considered as a success, with AfT numbers increasing substantially in all regions and in all sectors. In 2009, the EU and its Member States allocated more than 10.5 billion, to help countries compete better in international markets (7.1 billion came from EU Member States and 3.3 billion from the EU) - almost doubling the volumes (based on an annual average of the 2000 - 2005 period.)

Aid for Trade (EU and EU MS, in EUR million)

Source: OECD CRS Database, Doha Development Database, Monterrey Questionnaire 2011

The EU and its Member States accounted for 37% of global AfT in 2009. The EU on its own is the world’s second largest donor of AfT, representing 11.4% of the world's total.

  • Quality

AfT is delivered like all other EU aid, following agreed Aid Effectiveness principles, which means it has to go through policy dialogue, needs assessments, inclusion of priorities into national and regional development strategies (such as Poverty Reduction Strategy Papers), and formulation of response strategies on this basis. This is the only way to ensure ownership, coherent programmes and sustainability.

Aid for Trade is also subject to the same accountability measures as the rest of our aid. Rigorous systems of control are in place in each recipient country to make sure money is properly spent, and this money is carefully scrutinised by the Court of Auditors and the European Parliament.

  • Where does the EU provide Aid for Trade the most?

EU AfT covers all developing country regions, and commitments have increased for all regions.

Aid for Trade by OECD Region (bilateral & regional programmes, EU + EU Member States, in EUR billion)

Source: OECD CRS

Africa accounts for the largest share of AfT from the EU and its Member States: commitments amounted to 4.1 billion, corresponding to 41% of total AfT in 2009. There were substantial increases in Sub-Saharan Africa. This region received by far the largest amounts of EU AfT.

Asia received the second largest share of AfT (22% of total in 2009), followed by America (11%), Europe (7%) and Oceania (1%).

Stories from the field - how the EU is making a difference through its work on Aid for Trade

Helping cocoa producers in Ivory Coast

The project Market-oriented Promotion of Certified Sustainable Cocoa Production (PPDC) in Ivory Coast was designed as a public-private partnership between the German Development Cooperation, the US Agency for International Development (USAID) and private partners Kraft Foods and the cocoa trader Armajaro.

The main objective of the project was to improve the living conditions of cocoa farmers through the production of sustainable ‘Rainforest Alliance Certified’ cocoa. The public-private partnership made sure that the cocoa production followed the direction needed by the market. In addition, it allowed the producers to be assured of market access beforehand, based on the commitment made by the private partners to purchase the product, provided it was of the required quality.

This gave farmers the security to invest their time and money in improved production technology. Due to the success of the project, this model has subsequently been repeated in Ecuador (Rainforest Alliance certification) and in Ghana and Nigeria.

Supporting coffee and tea production in Rwanda

This AfT programme supports the government of Rwanda in its agricultural programme. Funding provided by the Commission helped to stimulate market-oriented agriculture and local initiatives and, through the privatization process, makes use of different kinds of assistance (including technical assistance, infrastructure and capacity building) to help farmers in Rwanda to export their tea, coffee and pyrethrum (used as a natural insecticide).

Improving Quality Standards in Bangladesh

Historically, Bangladesh has been reliant on a narrow range of goods (principally garments, textiles and foodstuffs) for most of its foreign exchange earnings. In order to try and diversify the country's export base and help to contribute to growth and alleviate poverty as a result, the European Commission supported the Bangladesh Quality Support Programme (BQSP) between 2006 and 2010.

The BQSP programme aimed at helping the private sector understand the quality and packaging requirements in export markets (especially in European markets) and to apply the value chain approach in order to enhance competitiveness.

In order to address the problem of limited facilities and infrastructure for conducting internationally-accepted safety, quality and performance tests in Bangladesh, the programme helped to set up a National Metrology Institute in 2009 which ensures the accuracy and traceability of a wide range of products; from foodstuffs to engineered goods.

The programme also initiated the setting up of the Bangladesh Accreditation Board, which works to ensure the country's certificates are internationally-recognised.

This approach has already enabled several industries to improve their exports. It has helped Bangladesh's light engineering sector to bring its quality management systems (its export packaging and supply chain operations for example) to a level acceptable to international buyers.

Similarly, the programme has helped to strengthen the competitiveness and innovation of the textile and garment industry in Bangladesh by strengthening institutions such as the National Institute of Textile Training Research and Design and the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) Institute of Fashion and Technology.

In the frozen fish industry, the new testing and control process have brought exports (particularly shrimp exports) into line with international export standards, helping the industry to develop and create new jobs as a result.

Now, thanks to follow up on the success of the programme, in 2010 the European Commission put in place Better Work and Standards Programme, which will run until 2014 and help to continue to boost economic growth and reduce poverty by increasing protection of both workers and consumers and taking advantage of global market opportunities.


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