EU highlights trade-led growth as central to modern development agenda
European Commission - MEMO/12/48 27/01/2012
Other available languages: none
Brussels, 27 January 2012
EU highlights trade-led growth as central to modern development agenda
On 27 January, the European Commission will adopt a Communication that outlines how the EU's trade, investment and development policies can work hand-in-hand to support poverty reduction as well as inclusive and sustainable growth in developing countries for the next decade.
The Communication aims to reflect changes in the relative trade power of developing countries, notably with respect to the growing weight of emerging economies and the struggle that Least Developed Countries (LDCs) have in reaping the benefits of world markets. The Communication also takes stock of how the EU has delivered on its commitments and outlines the EU's trade and investment policies for development for the next decade.
The Communication is accompanied by a staff working paper which presents supplementary information and analysis on progress made since 2002, and provides detailed background on the EU's instruments and initiatives to support developing countries.
Trade, growth and development
In setting out the EU's trade and development priorities for the next decade, the Communication calls:
What has changed?
The relative weight of developing countries in the world economic landscape has grown, but is not equally spread across developing countries.
The rise of the emerging economies – such as Brazil, Russia, India, China and South Africa – as both economic and political players, is having significant and far-reaching impact on the world economy. Together, they account for over 40% of the world population and approximately 17% of the value of world GDP.
Some countries, such as China, India or Brazil, have managed to reap the benefits of increasingly integrated world markets and are now among the largest and most competitive global economies. Millions of people have also been lifted out of poverty.
At the same time, other developing countries, particularly LDCs mainly in sub-Saharan Africa, while showing positive growth and higher trade achievements, have been further marginalised in an increasingly competitive global landscape. Many continue to face difficulties in developing their productive capacity, diversifying their export base and taking advantage of regional or world markets.
However, some LDCs, such as Bangladesh and Cambodia, have recorded good progress, driven by their specialisation in low-technology manufactures, primarily textiles. Some non-oil/commodity-exporting African countries have also done well over the past decade and have even expanded their services exports.
Why do we need to differentiate among developing countries?
The rise of emerging economies sends a powerful signal that trade-driven development is possible and that open and increasingly integrated world markets can play a major role in this process (although it is not the only element in the development equation.)
Yet those trailing behind need help and that means the EU must scale up its strong commitment to trade and development, with a clear focus on countries most in need. At the same time other countries no longer need unilateral preferential access to the EU market or aid for trade to remain competitive in world markets.
The notion of "developing countries" as a single group is losing relevance and EU trade, investment and development policy needs to be better tailored to reflect this.
What does the Communication recommend?
In support of its overarching aims, the Communication calls for:
Initiatives for trade, growth and development
The Communication suggests a series of initiatives in support of its recommendations, including:
What about support for domestic reform?
The EU supports domestic reforms needed for trade to fully contribute to development.
Developing countries too have choices to make and responsibilities to take in the interests of consolidating the long-term benefits of trade and investment. Ownership and good governance are central. The EU provides support for this through development cooperation to allow our partners to take advantage of opportunities created by market openness.
Instruments such as sector-wide programmes or budget support could assist with economic reforms needed to be able to take advantage of trade and investment opportunities1. Besides geographical programmes, new thematic programmes could be used to accompany trade openings2.
Will there be new legislation?
The Communication does not put forward new legislative proposals but does not prejudge either that follow-up work may conclude that new legislation is needed. It does not commit new funds, but suggests how existing instruments can be used better and in parallel to similar efforts in the EU's development policy3 to focus on those countries most in need.
What has the EU done to date?
In its 2002 Communication on trade and development, the Commission pledged to grant developing countries greater access to the EU market. In the 2007 Aid for Trade Strategy, the EU and its Member States committed to provide developing countries with more Aid for Trade. The EU has delivered on both accounts. Today, the EU is the most open market to developing countries in the world.
Greater access to EU markets
The EU has a flagship initiative to open its markets to developing countries, known as the Generalised System of Preferences (GSP), which offers reduced tariffs for goods from developing countries. In addition to the standard GSP regime, the GSP+ scheme grants additional preferences to developing countries that are committed to implementing core international conventions on human rights, labour rights and sustainable development.
Furthermore, Everything but Arms (EBA) provides least-developed countries with duty-free quota-free market access to the EU for all their products except arms and has proved to be an effective engine for boosting LDC exports to the EU market.
Since 2002, the EU and African, Caribbean and Pacific (ACP) countries have been negotiating Economic Partnership Agreements (EPAs). These are trade and development partnerships that go far beyond commercial relations and strive to break the vicious circle of poverty. The aim of these far-reaching agreements is to improve ACP countries' trade and investment prospects, promote regional integration, improve the business environment, as well as implement the Cotonou Agreement's trade pillar. EPAs are pro-development agreements that are WTO-compatible, thus ensuring predictability and legal certainty. ACP countries that initialled EPAs with the EU can access the EU market without duties or quotas.
In addition, a series of Free Trade Agreement (FTA) negotiations were launched with more advanced developing partners, such as India, Singapore and Malaysia. FTA negotiations were also successfully concluded with the Central American region as well as with Colombia, Peru and Ukraine. These agreements go beyond tariffs: they look at non-tariff barriers and key regulatory issues related to services, investment, intellectual property rights, competition or public procurement. These issues are also addressed bilaterally outside of FTA negotiations, notably with China.
A number of additional negotiations with developing and emerging nations in Asia, Latin America and in the EU's neighbourhood have also been launched.
Easier access to markets
The EU has made it easier to get practical access to the EU market. This notably concerns new and simpler preferential rules of origin applicable since 1 January 2011 in the GSP system, and an improved flow of information to developing countries on how to export to the EU through the Export Helpdesk.
Provided Aid for Trade
Aid for Trade in action - supporting coffee and tea production in Rwanda
An EU project, set up to help support the Rwandan tea and coffee industry, creating more jobs and increasing the livelihoods of farmers as a result, has benefitted 60,000 farmers. Some 85% of the Rwandan population works in the agricultural industry.
The programme helped to provide new facilities and equipment (for example new washing stations and new and rehabilitated storage systems, as well as pesticides, to protect the crops). To help tea production, drainage canals were built, road works carried out to improve access to tea estates, and training provided. It also helped farmers to diversify into other products: for example; soya, macadamia nuts, mushrooms and potatoes.
The project has had a significant impact and has helped to relaunch coffee production in Rwanda. It also contributed to a 38.2% share in total export value (real terms) for coffee and tea together in 2009.
The programme has also had a very big social impact - helping to improve producers' livelihoods and increase their purchase power. Women, who make up 40% of the programme, have particularly benefitted from it. The local environment has also been improved, thanks to the improved drainage system, increased use of water recycling, and better use of chemicals.
What happens next?
The Communication will now be discussed in the Council and the European Parliament. Trade Council Conclusions are expected by 16 March 2012.
For more information
The Communication, staff working paper and other background documents:
EU Trade Policy:
EU Development Policy:
Aid for Trade:
Publication on Aid for Trade: Aid for Trade
EU Accountability Report 2011 on Financing for Development (Annex on EU Aid for Trade Monitoring Report 2011)
The review of the Generalised System of Preferences (EU import scheme for developing countries)
Economic Partnership Agreements:
2002 "Trade and Development: Assisting developing countries to benefit from trade" Communication:
"The Future Approach to EU Budget Support to Third Countries", COM(2011) 638, 13.10.2011
The thematic programme for "global public goods and challenges" of the Development Cooperation Instrument proposed by the Commission in "Global Europe: A New Approach to financing EU external action " COM(2011) 865, 712.2011 foresees inter alia the support to the definition and implementation of trade policies and agreements, assistance to integrate into the multilateral trading system, promoting investment relations between the EU and partner countries and regions.
Agenda for Change Communication