Trade is a tonic for development
The EU is committed to helping developing countries integrate into the world’s trading system and share in the benefits of the global economy. The EU is convinced that international trade is part of the path to sustained economic growth and development. However, many less well-off nations need a helping hand if they are to reap the benefits of trade liberalisation.
The European Commission believes that developing countries need to make trade a high priority in their development strategies and tackle some structural problems in their economies which can hamper business activity. For example, high transport costs, slow customs and inefficient financial systems are all barriers to trading effectively in today’s fast-paced global market.
Therefore, it is vital that developing countries improve their ability to deal with sometimes highly complex and technical trade issues. This is where donors, such as the European Commission, can make an important contribution.
Tools of the trade
Programmes and projects that help developing countries benefit from trade include in particular trade-related assistance (TRA). Poorer nations often need such assistance to make the most of trading opportunities, which are now available thanks to improved market access and liberalisation.
TRA is a key component of the Commission’s development co-operation with partner countries. The concept of TRA first emerged as part of the Doha Development Agenda in 2001. Between then and 2005, the Commission allocated about €4.3 billion to TRA, making it the world’s largest single donor of this type of finance.
Trade-related assistance covers a diverse range of subjects. For example, it can be used by developing countries to draft trade strategies and negotiate trading agreements, or to help them accede to the World Trade Organisation. It can also be used to develop modern customs systems, adopt international product standards, support the presence of private companies in export markets, and to promote fair trade.
TRA can be provided to entire regions, national governments or to specific institutions. Assistance can also take many forms, be it technical advice, training or the provision of equipment, etc.
The Commission supports TRA via projects and programmes in consultation with the relevant partner countries and/or regions. Country or Regional Strategy Papers lay down priorities for the allocation of aid resources. In many countries, trade is now seen as a priority to be tackled through development co-operation.
EuropeAid works with the countries through the Commission delegations throughout the world to turn these development strategies into practical measures. For example, in 2005, the Commission prepared more than 150 new projects in the TRA field.
This positive trend is likely to continue – at the 2005 Trade Ministerial Meeting in Hong Kong, the Commission pledged to increase support for TRA to €1 billion per year. EU Member States have promised to match this commitment by 2010. That means that the Union is committed, over the long term, to spend €2 billion a year to help developing countries trade more effectively. These commitments were taken within the context of the wider so-called "Aid for trade" package.
Aid for trade
Aid for trade (AfT) is a recently coined concept and offers a more comprehensive approach than TRA. AfT accepts that many poor countries lack the productive capacity and basic infrastructure to take advantage of more open markets. It acknowledges that the poorest developing countries may need help to adjust to trade liberalisation. This means going beyond TRA, by making a commitment to aiding developing countries to design and implement trade policies and regulations that cover broad issues, such as improving trade-related infrastructure and trade related adjustment costs (such as temporary compensation for loss of tariff revenues).
Developing countries requested more AfT at the Hong Kong Trade Ministerial Meeting. After this debate, the World Trade Organisation (WTO) established a taskforce made up of developing countries and some key donors, which has come up with recommendations to introduce and promote AfT. For more information on their work, go to the following WTO website.