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Aid for trade

Commission Européenne - MEMO/13/649   08/07/2013

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European Commission

MEMO

Brussels, 8 July 2013

Aid for trade

EU Development Commissioner, Andris Piebalgs, and EU Trade Commissioner Karel De Gucht will today represent the European Commission at the World Trade Organisation's Fourth Global Review of Aid for Trade: “Connecting to value chains” 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 so far. The EU collectively with its Member States is the world's largest provider of Aid for Trade.

This year's joint report ‘Aid for Trade at a Glance: Connecting to Value Chains’ (from the World Trade Organisation, or WTO, and the Organisation for Economic Cooperation and Development, or OECD) confirms the importance of AfT in improving trade. In fact, this report provides evidence that Aid for trade indeed increases trade performance and calculates that every dollar invested in AfT produces between 8 and 20 USD in additional exports from developing countries.

The EU is also a strong proponent of trade facilitation, within the wider AfT initiative. In 2011, the share of EU and member in the global Trade Facilitation accounted for 59%, being the biggest providers of trade facilitation since 2008. The impact of trade facilitation can be very visible and tangible; it can lower transport costs, shorter queues at the borders, simplified controls and formalities, increase trade opportunities and create new market openings.

The EU and Aid for Trade

  1. The joint EU-AfT monitoring report 2013 (based on 2011 data) shows that the EU continued a relatively strong performance in 2011, despite the global economic downturn. The EU with its Member States confirmed their position as the largest provider of AfT in the world, accounting collectively for 32% of global AfT totalling €9.5 billion committed.

  2. Trade related assistance (TRA) commitments (helping to facilitate trade, for example by improving customs or port facilities, or helping countries to meet EU safety and health standards) also increased by 7.9% in 2011, reaching a total of €2.8 billion for EU and EU Member States; far above the €2 billion target to which they committed in the 2007 joint EU Aid for Trade Strategy.

  3. The EU and its Member States also remain the major providers of TRA in the world, with 71% of total commitments in 2011 (60% in 2010).

  4. Africa remains the most important recipient of AfT, with almost 36% of all EU collective AfT allocated to the region. In 2011, the Sub-Saharan countries increased their share in the total amounts committed to Africa both for the Member States (68%) and the EU (82%).

  5. Asia received the second largest share of AfT (17% of total in 2011), followed by America (11%) Europe (11%) and Oceania (less than 1%). 24% of EU AfT went to global initiatives, covering various regions.

Aid for Trade
(EU and Member states, in EUR million)

Aid for Trade by Region
(EU and Member states, in EUR million)

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 Origin 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

On 15 October 2007, the EU adopted a joint Aid for Trade Strategy, designed to help all developing countries, particularly Least Developed Countries (LDCs), to better integrate into the rules-based world trading system and to use trade more effectively in promoting the overarching objective of eradicating poverty. It provides for a focus on more resources to AfT and better impact on development.

EU AfT is delivered as other EU aid, following agreed aid effectiveness principles: ownership, coherence, harmonisation, accountability and results. This means going through policy dialogue, needs assessments, lining up with partner country and regional development strategies, coordination with other donors, and formulation of response strategies on this basis.

Focus on results

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. 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.

In order to make sure that the results of Aid for Trade are measured as effectively and transparently as possible, the EU has funded the Organisation for Economic Cooperation and Development (OECD) study "Managing aid for trade and development results" which is expected to provide the AfT community with guidelines on good practice in developing and introducing results for aid for trade projects and indicators.

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

a) Pesticides Initiative Programme in ACP countries (PIP): Helping farmers to trade fruit and vegetables safely

The €38.5m PIP was set up to prevent any negative effects on horticultural exports from the African, Caribbean and Pacific (ACP) region (resulting from ongoing changes of the EU food safety regulations), and to ensure the long-term sustainability of the sector. Businesses were supported in adjusting their practices and in establishing food safety and traceability systems.

Main achievements:

  1. Between 2001 and 2008, ACP exports maintained their share in European Union markets.

  2. Some 100,000 small family farms have benefited from the Pesticides Initiatives Programme.

  3. 80% of fresh fruit and vegetables exports from ACP to EU countries are covered by the programme.

  4. Following an intensive training programme, 80% of expertise used by PIP is now supplied by local (ACP) service providers

b) Bangladesh Trade Support Programme: reducing barriers to trade

The €7.8m Bangladesh Trade Support Programme (BTSP) was set up to strengthen human resources and capacity of relevant Government Agencies and private sector parties in order to introduce trade reforms and remove barriers to trade.

Main achievements:

  1. Enhanced capacity of Bangladesh in trade issues (by strengthening the newly created Foreign Trade Institute, as a think-tank on trade, training and research institution).

  2. Improved ability of the Ministry of Commerce to implement World Trade Organisation (WTO) agreements and trade reforms, in particular thanks to eight large studies on trade-related issues and the training of a large number of Ministry staff.

  3. Provided guidance on anti-dumping measures and training courses to the Tariff Commission to represent and defend the interest of Bangladesh to WTO.

  4. Improved regulatory framework in the maritime transport services and its linkages to transport through technical assistance to the Ministry of Shipping.

c) Private Sector Support Programme in Benin: Supporting industry and boosting trade across Benin

The €5m Private Sector Support Programme was put into place to boost growth and sustainable development, help Benin’s integration into the regional and global economy and help to fight against poverty in the country as a result.

Main achievements:

Private-public dialogue improved:

  1. Creation of a platform for consultation

  2. In June 2009 the ‘One Stop Shop’ set up registered an increase of 150% in the number of start-ups over a year.

  3. 29 tax proposals included in the Finance Act

  4. Corporate tax rate reduced to 25% (against 35 and 38 previously.)

  5. The website provided high visibility of the private-public partnership, with 350,000 visits

  6. Support to help fisheries in meeting the EU standards once again.

To find out more:

On the EU’s work on Aid for Trade:

http://ec.europa.eu/europeaid/what/development-policies/intervention-areas/trade/aid-for-trade_en.htm

On the Fourth Global Review of Aid for Trade:

http://www.wto.org/english/tratop_e/devel_e/a4t_e/global_review13_e.htm


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