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The future of Aid for Trade: a European perspective

Jean-Luc Demarty's picture
Jean-Luc Demarty
December 2013

Jean-Luc Demarty is Director-General of Directorate-General for Trade at the European Commision. In this blog, he gives a European perspective on the future of Aid for Trade, aruging that the key to success lies in supporting the efforts of developing countries themselves. This blog is part of a mini-series on how Aid for Trade contributes to progress in development.

Aid for Trade (AfT) has become a key feature of development cooperation since the Global Aid for Trade Initiative was launched at the 2005 Hong Kong WTO Ministerial Conference.  In 2011, AfT accounted for one quarter of total official development assistance (ODA), up from 19% in 2005. The European Union strongly supports the continued focus on AfT by the WTO, particularly for developing countries in the greatest need.

Our support can be seen in the position of the EU and its Member States as the world’s largest provider of AfT – confirmed in 2011, when our commitments totalled €9.5 billion, or almost one third of total global AfT. Since 2008, the EU and its Member States have met and exceeded their commitment to provide €2 billion worth of Trade-Related Assistance each year, focusing on core aspects of trade, such as trade policy and regulation, trade facilitation and other trade-related needs. In 2011, that commitment totalled €2.8 billion.

Looking to the future, the EU and its Member States will continue to lead global efforts to respond to AfT needs, so it is crucial to keep on prioritising AfT in our development cooperation. This is very important as we embark on a major programming exercise that will determine our bilateral and regional aid for the next seven years.

At the same time, prioritising AfT doesn't only depend on us. In keeping with the principle of national ownership, we depend on demands from our partner countries. This, in turn, requires them to recognise openness to trade as a prerequisite for successful development. And that means integrating trade into their own national development strategies, as well as implementing sound domestic policies that maximise the benefits of trade for inclusive growth and sustainable development.

A useful insight into the emerging priorities of partner countries comes from the report on the 2013 OECD/WTO questionnaire carried out for the 2013 Global Aid for Trade Review, with responses from 80 AfT recipient countries. Trade facilitation and access to value chains topped their list of AfT priorities. To pursue export-led growth, countries need access to imported equipment and to intermediate goods and services, and that requires access to value chains. Yet trade barriers between developing countries – even those in the same region – are usually very high, increasing the cost of imports, reducing competitiveness and making it more difficult to export.

The Trade Facilitation Agreement under negotiation in the WTO could help to resolve this situation by cutting red tape, increasing predictability and reducing costs for traders. The EU already provides over one-third of global support for trade facilitation, rising to almost two-thirds with the contributions of its Member States, and is committed to continue providing such support, including for the implementation of the Trade Facilitation Agreement.

We also need to establish a link between the Aid for Trade Initiative and the UN discussions on the post-2015 development framework. Trade for development in general, and AfT in particular – must feature in the post-MDG development framework. We also have to reflect changes in the global economy, particularly the growing role of emerging economies. The EU is actively encouraging these increasingly powerful economies to take on more responsibility in supporting Least-Developed Countries and other countries in need. In the area of trade, such responsibility includes both market access and the provision of AfT. The EU welcomes the initiatives already taken here, notably in the context of South-South cooperation. However, the transparency, visibility and impact of this cooperation would benefit from being brought progressively into the framework of the Paris Declaration on aid effectiveness.

In short, the key to the continued success of the global Aid for Trade initiative lies in the efforts of developing countries themselves, supported by traditional and emerging donors, in a spirit of openness and transparency.

Read other blogs in this series from Olivier Cattaneo, Marie-Agnès Jouanjean and Dirk Willem te Velde.