Aid to trade: how can the EU support trade with developing countries?
November 07, 2014
“It is both hypocritical and self-defeating for the EU to give aid to developing countries while simultaneously blocking their trade."
So begins a report released last month by the Overseas Development Institute and Trade Out Of Poverty, a UK parliamentary campaign group, highlighting the need for greater coherence in UK/EU aid and trade policies.
The report sets out 10 suggested priorities for the incoming EU Trade Commissioner, Sweden’s Cecilia Malmström, who took up her post this week.
Despite the punchy political foreword, the report itself is mainly technical rather than rhetorical. Among the recommendations are a couple of notable ‘supply-side’ suggestions, such as using the EU’s ‘power to convene’ to bring private-sector buyers in the EU together with potential suppliers in developing countries, and providing technical assistance to help suppliers in developing countries meet the EU’s health, safety and sustainability standards.
Technical assistance programmes of this kind do indeed have the potential to create significant opportunities for developing countries to trade their way out of poverty. For example, the UK’s Department for International Development is funding a 5-year programme, the Business Innovation Facility, which seeks (among other aims) to identify and address the barriers that prevent businesses from accessing trade opportunities in the global North. The Facility, which is implemented by PwC, recently convened some of the UK’s leading clothing brands at an industry workshop in Hong Kong to promote and to plan an ambitious growth programme for the garments industry in Myanmar. By harnessing the UK government’s and PwC’s convening power, programmes such as these can help to create momentum for foreign direct investment, encourage North-South trade links, and establish minimum industry standards. In the case of Myanmar, this may help to ensure that the garments industry grows in a sustainable, ethical way and learns the lessons of past experiences in Bangladesh and elsewhere.
Several of the report’s other recommendations focus on changes needed within the EU. These include reducing tariffs on certain imports from developing countries which are heavily penalised under the EU’s current tariff policy, and reducing the EU’s €50 billion subsidy of agricultural production, which significantly disadvantages developing country suppliers when accessing the European market. In addition, they also suggest giving preference to agricultural goods grown under more environmentally friendly conditions in developing countries rather than under intensive farming techniques in Europe.
There is no doubt that such reforms would significantly improve trade opportunities for developing countries. Nevertheless, they would also directly impact on some important groups in the EU – such as farmers, or solar panel manufacturers – whose commercial interests could be threatened by a less defensive approach to import or subsidy arrangements.
For this reason, the report appears to acknowledge that such reforms are unlikely to take place without significant political leadership: the top two recommendations both focus on strengthening the political capital behind trade reform, such as establishing a unit within the EU’s Directorate General for Trade focused on the impact of trade policy on development, and reviving political backing for the current Doha Development Round. Developing country governments and professionals working in global development have a role to play in continuing to exert pressure on the EU’s political leadership to restore momentum to this important process.
The report is a welcome contribution to the growing consensus on left and right that the EU’s aid objectives cannot be met without considerable reform of global trade arrangements. But with the interests of millions of EU farmers and manufacturers at stake, Commissioner Malmström will need to navigate some difficult political terrain if she is to embrace the recommendations of the ODI report and bring the EU’s trade policy truly in line with its aid policy.