EU highlights trade-led growth as central to modern development agenda
A range of proposals to make trade and development instruments work hand-in-hand to ensure real poverty reduction across the world are presented by the European Commission today. The proposals aim at reinforcing the trade capacities of developing countries by making trade part of their development strategy. And to ensure we hit our target, the EU is currently looking into better ways of differentiating between developing countries to ensure the world’s poorest countries receive our biggest help. The role of trade is underlined in the proposal as one of the key drivers to support development, stimulate growth and to lift people out of poverty. Furthermore, today the EU calls for all developed economies to match its significant levels of market access to developing countries.
While the EU already provides more trade-related development assistance than the rest of the world put together, the Communication “Trade, growth and development” assesses the main next steps. For example: the traditional group of “developing countries” is outdated amid the rise of emerging economies. More tailor-made trade and development policies are needed that go beyond reducing customs duties at borders (tariff reductions), and tackle the major problem of improving the ‘business environment’.
To achieve this goal, the proposal underlines that developing countries’ leadership must also face up to their responsibilities. Developing countries need to undertake domestic reforms to ensure that the poor do indeed benefit from trade-led growth.
European Commissioner for Trade, Karel De Gucht said “The rise of emerging economies like India, China and Brazil shows that trade-driven development is possible and that open markets can play a major role in generating growth. Yet those trailing behind need help. World tariffs have never been this low and the EU already offers very favourable market access to poor countries. What will make a difference are non-tariff issues – such as standards, services, intellectual property rights, public procurement, infrastructure and packaging facilities. None of this can work without political governance.”
European Commissioner for Development, Andris Piebalgs, said: “The integration of developing countries in global trade is a powerful lever for growth and the fight against poverty. It has helped to lift millions of people out of poverty in the last decade and will remain key to our development work.” He added: “We now need to make sure that our aid for trade focuses on those most in need even more – concentrating our support on our least developed partners, helping them to reinforce their capacities, and adapt their economies to be able to join the global and regional economy.”
The Commission proposes a number of ways to improve the effectiveness of EU trade and development policy including:
- reforming the EU’s preferential trade schemes to focus more on the poorest countries,
- stepping up negotiations on free trade agreements with our developing country partners. These must look beyond tariffs to tackle the real barriers to trade,
- increasing the use of EU instruments to promote foreign direct investment, including relevant provisions in free trade agreements to enhance legal certainty and combining EU grants with loans or risk capital to support the financial viability of strategic investments,
- facilitating developing country exporters, especially small operators, to enter the EU,
- assisting developing countries to improve their domestic business environment, meet international quality, labour and environmental standards and take better advantage of trade opportunities offered by open and integrated markets,
- using trade measures to help mitigate the effects of natural disasters and tackle conflict catalysts, including in mining activities.
It also calls on emerging economies to assume more responsibility for opening their markets to LDCs through preferential schemes but also on a non-discriminatory basis towards the rest of the WTO membership, of which four-fifths are developing countries. At the same time, the EU offers emerging economies a more mature partnership that includes regulatory cooperation and engagement on global issues which are essential for development such as food security, sustainable use of natural resources, green growth and climate change.
The EU leads the way in providing trade support to the developing countries:
- The EU imports more goods from developing countries than any other market. It is also the biggest market for developing world agricultural exports. Almost 70% of all agricultural imports to the EU comes from developing countries;
- developing countries benefit from EU preferences in the form of eliminated or significantly reduced tariffs for their goods (under the “General System of Preferences”);
- the Everything But Arms initiative offers duty free and quota free access to our markets for all Least Developed Countries (LDCs) and for all products except arms and is the most generous preferential import regime in the world;
- the EU is leading world efforts for a package for LDCs in the multilateral trade talks;
- the EU supports the domestic reforms in developing countries needed for trade to fully contribute to development;
- The EU and its Member States are the world’s largest provider of Aid for Trade, which helps partners develop trade strategies, build trade-related infrastructure and improve productive capacity. The EU combined annual Aid for Trade reached €10.5 billion in 2009, maintaining the all-time high registered the year before;
- A substantial increase was also reported for EU Trade-Related Assistance (which is a sub-category of Aid for Trade that focuses on strategic trade issues such as policy development, regulation or regional integration). This brings the collective amount to nearly €3 billion, well above the target to spend €2 billion per year on Trade Related Assistance from 2010. Sub-Saharan Africa is the main beneficiary of EU Trade Related Assistance, with its share of collective EU Trade Related Assistance increasing from 15% to 28% between 2008 and 2009.
For further information:
Memo with background and figures
Communication “Trade, Growth & Development: tailoring trade and investment policy for those countries most in need”:
Staff Working Paper:
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)