Wednesday, April 29, 2009

Aid for trade, a key priority of the EU in Africa

Source: EU News, Issue 3, April 2009

At several occasions, EC high officials and Commissioner Michel have emphasised the necessity to support ‘connectivity’ at regional and pan-African level and the added value of EC cooperation in that area. Recent EU-Africa debates and agreements confirm that approach that is also well illustrated in the recently published Aid for Trade monitoring report 2009.

The report provides many data showing that the EU (EC + Member States) is the largest global provider of grants in the Aid for Trade area and that Africa is the main recipient with 43,9% of total EU aid for trade in 2005-2007.
It is important to note that the definition of Aid for Trade used in the report is quite broad and includes both Trade Related Assistance (€ 1.98 million in 2007 from EU) as well as productive capacity building, trade related infrastructures and trade related adjustment as well as ‘other trade related needs’ not classified by the OECD. General budget support and non-earmarked support to multilateral organisations are not included in the calculations. With such a definition it is not surprising that total EU commitments for Aid for Trade reached € 7.17 billion in 2007 (4.74 from Member States and 2.43 from the EC) representing 10.45% of total EU ODA.

Support to regional integration captures an increasing share of the Aid for Trade (AfT) funding and the preparation of regional aid for trade packages for the ACP countries, to be supported jointly by the EC (EDF) and the Member States, is top of the EC agenda for 2009. The signing of the 10th European Development Fund (EDF) Regional Indicative Programmes in November 2008 is seen as a milestone in that process.

The North-South Corridor pilot AfT project to improve infrastructure and remove regulatory barriers between three Regional Economic Communities of Africa (the Common Market for Eastern and Southern African (COMESA), the East African Community (EAC) and Southern African Development Community (SADC)) perfectly illustrates this approach. The goal is to improve regional trade and give countries faster access to international markets, thereby boosting growth and jobs. The €115 million contribution from the EC consists mainly of funding from the 10th EDF.

The package of measures proposed by the EC in its 8 April communication on supporting developing countries in coping with the crisis also includes the recommendation to increase by 2010 to €500 million the grant inlay in the EU-Africa Infrastructure Trust Fund. The Commission, for its part, will allocate €200 million for 2009-2010 (from 10th EDF), doubling its current inlay, and calls on Member States to join this effort in order to raise €500 million. Achieving this target would leverage €2.5 billion in soft loans to support infrastructure. In the area of agriculture, the Commission insists in particular on the necessity to invest in agricultural corridors and to align investments in support of linking markets and production areas.
Whether Member States will inject such a level of fresh money into the Trust Fund is questionable considering their low contribution so far (around 28 million from 11 Member States by October 2008).

Another example of the EC support for a trade and export oriented economy in Africa is the "Better Training for Safer Food in Africa – BTSF-Africa” initiative launched by EU Health Commissioner, Androulla Vassiliou at the African Union headquarters in Addis Ababa. This is a 10 million specific programme targeted at Africa, with the view to promoting compliance with international Sanitary and Phyto-Sanitary (SPS) measures as key to bilateral trade, both within Africa and with the rest of the world, and to increasing food safety for citizens.

Finally, it is also interesting to note a new agreement between the European Commission and the African Union Commission on the principle of a common strategic framework to develop safer and more sustainable air transport in Africa. It includes supporting the Yamoussoukro Decision aiming at creating a single airspace in Africa with one provisions being the principle of free market access of (eligible) air carriers for intra-African connections. The EC will support the development and evolution of the Executing Agency for implementing the Decision and assist in the definition of the appropriate regulatory environment and market access. In other words this agreement is the best way to open the internal African aviation market to European carriers.

Supporting trade and an export oriented economy in the ACP states with EU development policy and budget is clearly a top priority of the EU but to what extend are trade policies and agreements under negotiation actually supporting development objectives? Take the recent proposal made by the EC to reduce the current banana tariff of 176 Euros/ton to most favoured nations (of Latin America) to 136 Euros/ton by 2011. Effectively, this means favouring large plantations in Latin America with low environment standards and exploitative and dangerous labour conditions at the expenses of small banana producers in ACP countries. Such a policy is clearly at odds with the EU principle of policy coherence for development. Not surprisingly, the ACP group, in a recent press release strongly criticises the EC proposal. The substantial tariff cuts would have dire consequences for ACP export trade, for which the current preferences are of vital importance. The sharp reductions proposed between 2009 and 2011 cannot be reconciled with any of the EU commitments towards ACP Countries, specifically the recently signed Cariforum-EC Economic Partnership Agreement which provides that tariff reductions should not only be "unavoidable" but "should be phased in over as long a period as possible". … Bananas for ACP countries are not only about trade, but about development. Bananas have a direct impact on environment, migration and integration in ACP countries. Now that the world is suffering from a global financial crisis, ACP countries cannot afford to sacrifice their few sources of hard currency on the altar of free trade.
Note that this concern is also highlighted in the resolution adopted at the ACP-EU Joint Parliamentary Assembly session in Prague on Economic partnership Agreements and their impact on ACP states.

The impact of Economic Partnership Agreements on development in the ACP countries is indeed a major concern for many ACP officials and civil society actors following the unfinished EPA negotiations. This critical policy coherence issue was at the core of the workshop organised on 24 March by One World Action, APRODEV and the Commonwealth Secretariat on EPAs: Trade efficiency or development for all? Gender analysis of trade liberalisation and its impact.

The Roundtable provided a forum to appreciate the relevance of systematic gender analysis to inform negotiation positions and to provide nuanced understanding of the gender impact on distributional effect. Integrating principles of responsive governance into trade policy-making and trade negotiations is needed, as well as effective EPA monitoring to enhance positive EPA impact and minimise potential harm. Suitable indicators, including gender indicators, to chart progress on implementation and impacts of EPAs are key tools in putting into practice the development and poverty reduction ambitions of EPAs.

From that point of view, organisers particularly appreciated the fact that certain recommendations from the APRODEV background paper on EPA indicators were reflected in the resolution of the European Parliament on the Cariforum EPA, as following:

Suitable development indicators should serve three key purposes:
1. to trigger implementation of EPA commitments by Cariforum States or to qualify them for exemptions;
2. to monitor the impact of EPA implementation on sustainable development and poverty reduction;
3. to monitor the implementation of EC commitments, in particular disbursement and effective delivery of pledged financial and technical assistance

The report of the workshop will be available shortly; in the meantime, you can view the available presentations, the background paper on indicators and the concept note here.

See also Euforic's newsfeeds on Aid for Trade and ACP trade, and the Brussels Development Briefing on Aid for Trade