Aid for Trade
Aid for Trade is assistance to support developing countries' efforts to expand their trade as a tool to help growth and reduce poverty.
"The EU wants "to help developing countries trade their way out of poverty. We should not only look at tariffs because in most cases they do not even exist … but we could focus much more on the trade environment. How can we get rid of the red tape for instance? How to simplify procedures?” EU Trade Commissioner Karel De Gucht.
Aid for Trade in a nutshell
Aid for Trade is a broad concept that includes financing for various areas related to improving countries' capacity to trade.
This can include support for building new transport, energy or telecommunications infrastructure, investments in agriculture, fisheries and services, as well as assistance in managing any balance of payments shortfalls due to changes in the world trading environment.
The narrower concept of Trade-Related Assistance corresponds to core trade activities covered by Aid for Trade. For instance, it covers trade facilitation, including support for improving ports or customs facilities, strengthening partners' trade negotiation or regulatory capacity, or helping countries meet specific European health and safety standards.
Why Aid for Trade is relevant
Many developing countries face internal constraints such as a lack of productive capacity, poor infrastructure, inefficient customs management, excessive red tape and difficulties to meet technical standards in high value export markets. This has a negative impact on their ability to trade and on the competitiveness of their exports.
Aid for Trade addresses these constraints, together with strengthening countries' capacity to negotiate and implement trade agreements to their benefit.
Aid for Trade aims to help developing countries develop the means to benefit from open global markets. It is an important part of a long-term strategy for global poverty reduction, alongside debt relief and general development aid.
Aid for Trade covers trade or trade-related activities such as:
- trade policy and regulation
- trade development
- trade-related infrastructure
- building productive capacity
- trade-related adjustment, and
- other trade-related needs.
Utmost importance of inclusive and sustainable growth in long-term poverty reduction achieved, inter alia, through improved business environment, regional integration and enhanced integration into world markets is emphasised also in the EU development policy, notably Commission Communication on "Increasing the Impact of EU Development Policy: an Agenda for Change" issued in October 2011.
EU trade policy and Aid for Trade
The EU and its Member States are the largest providers of world-wide Aid for Trade. The European Commission produces an annual monitoring report on EU Aid for Trade spending.
- The collective EU performance accounted for around 32% of total aid for trade flows in 2010, reaching more than €10.7 billion.
- The EU and its Member States accounted for 60% of total global commitments of Trade Related Assistance.
Financing for Aid for Trade
Aid for Trade is part of overall EU Official Development Assistance so aid for different countries is financed through different instruments:
- the European Development Fund for African, Caribbean and Pacific countries
- the Development Cooperation Instrument or its successor, the European Neighbourhood Instrument for other developing countries
- the Instrument for Pre-Accession where it covers developing countries (e.g. Turkey which is the biggest receiver of EU Aid for Trade)
The EU and its Member States have a joint strategy on Aid for Trade which includes the pledges made at the WTO Ministerial Conference in 2005.
- The financial commitments by the EU and its Member States include allocating €2 billion annually by 2010 to Trade-Related Assistance (€1 billion from Member States and €1 billion from the EU). This was exceeded already in 2008 and 2009.
- The EU has also agreed to maintain, the wider Aid for Trade spending beyond 2011at levels that reflect at least the average of 2006-2008 and to work with development banks to ensure the availability of trade finance to low income countries.
The EU Aid for Trade Strategy is implemented in a way that increases its impact.
The EU has financed activities across the full range of trade-related activities but has also made sure the funds are distributed according to the countries' own priorities and demands.
- For instance, a substantial part of Trade Related Assistance has been allocated for technical assistance to help beneficiaries meet European technical and phytosanitary standards.
Aid for Trade and WTO
The Aid for Trade Initiative does not aim to create a new global development fund for trade, but to work with existing development strategies to ensure there are more resources devoted to trade.
The focus is on "more and better", not on designing new mechanisms for funding or delivery. Keeping Aid for Trade on the political agenda is essential to mobilise additional, predictable, sustainable and effective financing.
More on Aid for Trade
- Commission Communication on "Increasing the Impact of EU Development Policy: an Agenda for Change"
- EU and its Member States joint strategy on Aid for Trade
- 2013 Annual monitoring report on EU Aid for Trade