Aid for Trade

Written by Sofia Kalogeraki on 1 September 2017 in EU Monitoring
EU Monitoring

On August 31, the EP DEVE and INTA Committees organised jointly a hearing on the revision of the EU Strategy on Aid for Trade.

The aim of the meeting was to see how the revision of the Strategy could help to improve synergies and develop further links between the EU's trade and development policies, and to explore how to contribute to greater Policy Coherence for Development in the trade area. Please find more details below.

Panel I: Lessons learned from the Sixth Global Review of Aid for Trade

Paul Rübig (EPP, AT) updated the participants on the joint INTA-DEVE mission to the Sixth Aid for Trade Global Review Conference. He said that consumer rights lie at the heart of the European Parliament activity, and therefore trade should be supported, as the benefits of trade concern the EU citizens more than EU companies. He then added that the WTO has shown progress in trade facilitation and promoting aid for trade for the developing and least developed countries. Around 146 countries have received aid for trade, with special focus on the African region. Regional and global programmes attracted almost 50% of the aid for trade, mostly for transport, storage, energy generation and supply, water treatment and agriculture. A small part of the aid was allocated to banking and financial activities. The EU has invested 12.7 billion euro since 2014, he added. The report presented at the review conference outlined the success stories and serves as an instrument of discussion on where to put new focus and how the focus could be improved. The focus is now on SDGs, connectivity, women empowerment and trade facilitation, as well as to improve the LDCs’ situation. A key concern is how to bridge digital divide and empower women, especially in the LDCs.

Michael Roberts, Head of the Aid for Trade Unit, WTO, stressed that digital connectivity, financing, trade facilitation and empowerment are the four key themes of aid for trade. In terms of digital connectivity, he said that the ITU suggested that there are still around 3 billion people offline. Those that are not online do not have access to the list of products and services, which is a major impediment for trade growth in developing countries. In order to overcome this market access divide, accessible and affordable connections are needed. In terms of financing, he stressed that the WSIS has elaborated national plans for ICT connectivity, but the financing is crucial for them to materialise. The question is how the aid for trade euro/dollar will be a catalyser for the investment. Within the WTO, there is a reflection on investment facilitation and e-commerce, he added. In terms of trade facilitation, he said that the Review examined how trade facilitation interrelates with e-commerce. Some of the discussions related to how the trade facilitation improvements can also help with situations relating to disaster relief. Finally, as regards empowerment, he stressed that there are positive signs that donors and governments are integrating the gender dimension to aid for trade programme. How the EU decides to update the aid for trade strategy will have an impact on how the global aid for trade debate will continue, he concluded.  

Frans Lammersen, Principal Administrator, Development Co-operation Directorate, OECD, stressed that the challenge is to create Chinese growth rate without the Chinese carbon footprint. The big benefit of the aid for trade initiative is its inclusiveness and the dialogue it promotes to help countries benefit from market access opportunities. It is also a very flexible agenda, in a sense that in 2009 the focus was to maintain momentum, but in 2013 it was about linking developing countries to global value chains. Then it was realised that it is important to reduce trade costs for SMEs in the developing countries. Finally, there has been a focus on promoting connectivity. Trade is now more prioritised in the developing strategies and the donors respond to this trend well. The flow of aid for trade to developing countries has been doubled, which was one of the objectives of the initiative. At macro and micro levels, the expected results have been obtained as confirmed by the evaluations by the EU. How to achieve better aid for trade is the question; interoperability, regional cooperation and infrastructure improvement are all necessary. It takes a lot of time, but it is possible, looking at the Vietnam case. Regional priorities must also be integrated. Most of the aid was given in grants, but this has changed now, most of it is in loans. There is a need to focus on different constraints and look at the link between trade and investment. One needs to communicate much better the substantive achievement achieved. The SDGs set out a very comprehensive agenda, focusing on economic, social and environmental objectives. The EU has a big role to play as it is the largest aid donor for trade.

Kati Suominen, Founder and Interim Executive Director Business for Trade Development; Founder and CEO Nextrade group, said that the theme of aid for trade was connectivity, which reflects the realisation by the international community of the opportunities offered by digitisation and e-commerce. Companies that do not sell online are three times less likely to export, she said. The offline sellers are also much undiversified, and if they export, they tend to export to one market only. On the contrary, more than 50% of online sellers that export, export to more than 2 countries. Digital trade needs many elements for it to work; ICT infrastructure, logistics and trade facilitation, interoperability of online payment solutions, access to finances for companies that have short term capital needs etc. Companies find that cross border logistics and custom procedures remain a big headache for them, but they also find it costly to respond to the emerging regulatory challenges. Unfortunately, there is a lack of data for these challenges and existing interventions are too scattered. The private sector has the best knowledge of the opportunities, challenges and solutions. To spur e-commerce, trade policy needs to refashion to be ready for the digital era.

Q&A

Heidi Hautala (Greens/EFA, FI) asked the panel about the importance of the environment to attract investment to promote jobs and growth, a predictable regulatory environment, good and transparent environment and clear taxation rules. She also asked the panel to comment on how to improve business and human rights.

Marietje Schaake (ALDE, NL) warned against the impact the aid for trade could have in creating digital backdoors and jeopardising cyber security and privacy. She also wondered how to address corruption in their relation with developing countries and asked people to comment on development aid becoming an instrument to merely stop migration flows from coming to Europe.

Inmaculada Rodríguez-Piñero Fernández (S&D, ES) wondered how to fill the gap of digital capacity when there is lack of affordability of these services and lack of access to finance. How to improve the efficiency and fairness in that public-private cooperation, she wondered.

Jude Kirton Darling (S&D, UK) wondered whether there are any best-case examples from aid for trade that resulted in the improvement of social and environmental conditions in the developing countries. “Is there any connection between the aid for trade and the plurilateral discussions on trade in services, also between rich countries and LDCs?” she asked.

Joachim Schuster (S&D, DE) wondered whether there are any particular sectors of the economy that the aid for trade should focus on.

Alessia Mosca (S&D, IT) expressed her concern about the negative attitude in WTO towards aid for trade and connectivity.

Michael Roberts responded that there are number of proposals that are being discussed within the WTO relating to investment facilitation and how to improve the transparency of the investment climate.  As regards corruption, the trade facilitation agreement gives some predictability around government processes and revenue collection. E-government can also reduce corruption and increase government revenues. As regards consumer protection, discussions are still at an early stage, whereas security has not been part of the aid for trade debate so far. Then, he said that aid for trade can prevent migration, for instance, through the improvement of customs processes to prevent humanitarian aid from piling up. He then commented that all WTO members have signed to SDGs but there are different views on how to reach them.

Frans Lammersen responded that the regulatory improvements can boost the private sector involvement in aid for trade. Increasingly the private sector is interested in corporate social responsibility for its own sake and not because governments ask for it, as seen in the case of the Bangladesh textile industry. Evaluations of this type of public private partnerships are helpful to understand what works and not in this type of cooperation. It is very important to involve the private sector, but engaging the private sector is about building the private sector in developing countries.

Kati Suominen noted that old business regulations and taxes matter for SMEs in developing countries. Developing countries are pushing their SMEs to become online sellers. This should be used as an opportunity to reform tax and regulatory burdens that bother them. She suggested that there should be special treatment for countries that export low de minimis values in customs. There is so much activity in creating the regulatory environment for the digital era, especially in Latin America, introducing consumer protection and data liability rules. These rules should reflect the needs of the private sector, therefore a dialogue between lawmakers and the private sector is necessary.  The current disconnect between the public and private sector in developing countries must be overcome. 

If you are interested in reading the full briefing, please sign up for a free trial of the Dods EU Monitoring service.  

 

About the author

Sofia is a Senior Monitoring Consultant at Dods EU Monitoring.

Interested in this content?

Sign up to our free daily email bulletins.

 

Share this page

Tags