Trade is essential for sustained economic growth and development. However, our partner countries often face internal constraints that prevent them from accessing the economic benefits of expanded trade. With Aid for Trade, we make sure to bring them the support they need to surpass these obstacles and use trade for their own sustainable development.
Aid for Trade
The EU’s Aid for Trade (AfT) strategy was adopted in 2007, in response to the Aid for Trade initiative launched by the World Trade Organization (WTO) in 2005, encouraging developing countries to recognise the role trade can play in their sustainable development. The EU’s AfT strategy helps partner countries better integrate into the global trading system and take greater advantage of the poverty-reducing benefits of economic openness and enhanced trade efficiency.
Supporting the WTO’s AfT initiative from the outset, the EU has become over time the leading provider of AfT (31% of global AfT). The EU’s AfT strategy was revised in 2017 to follow a broader approach, in line with the UN’s 2030 Agenda, considering the interlinkages that exist between investment and trade which need to be fully exploited to achieve the Sustainable Development Goals (SDGs).
The objectives of the updated EU AfT strategy are to:
- better align EU AfT interventions with market-driven opportunities and constraints
- focus more on least developed countries (LDCs) as they need the most support
- increase the contribution of AfT to SDGs while supporting a stronger participation of women in the economy
The above objectives are to be achieved through a more coherent mobilisation of several of our policy instruments regarding aid, trade, and investment, to maximise their developmental impact.
For example, entrepreneurs in partner countries benefit from a combination of duty free, quota free market access in the EU, as well as AfT provided specifically under economic partnership agreements (EPAs), 7 of which are currently implemented with African, Caribbean and Pacific (ACP) partner countries and regions.
EU trade instruments have become major drivers of our relationship with partner countries. Out of more than 120 partner countries eligible for EU development cooperation, 59 are now covered by a free trade agreement (in force or about to be ratified), and 71 benefit from EU unilateral preferential trade schemes, under the Generalised Scheme of Preferences (GSP), which unilaterally removes or reduces import duties from products coming into the EU market from vulnerable partner countries.
EU AfT operates within our partner countries’ trade and economic policies as mainstreamed in their development strategies. AfT builds on multilateral and bilateral trade agreements to scale up the developmental impact of these various trade instruments combined.
Our AfT approaches are tailored to our partner countries’ specificities, for example geographical or regional features, level of income, degree of fragility, and nature of their relationship with the EU. Alongside these specificities, we also have different priorities for supporting our partner countries’ sustainable trade and investment capacities. This differentiation approach is essential for us to identify the best triggers and drivers for sustainable development in our partner countries and target our support in the most efficient way.
Blending and investment for trade
Combining EU grants with loans or equity from public financiers and private investors, also known as blending, has helped unlock investments in partner countries, estimated at €57.3 billion up until 2017.
Over the last decade, around €3.4 billion worth of EU grants have funded over 380 blended projects and leveraged loans worth around €26.2 billion by European financial institutions and regional development banks.
Although not formally accounted as AfT, most blended projects concern sectors relevant for the AfT initiative.
In line with blending, the EU External Investment Plan (EIP) has introduced a paradigm shift towards leverage-based development aid with our partner countries in Africa and the EU neighbourhood, and provides the framework for massive mobilisation of private investments.
EU trade facilitation assistance has been stepped up since 2013, in support of the WTO’s trade facilitation agreement (TFA), and EU assistance is increasingly targeted towards those provisions of the TFA for which partner countries require assistance.
EU AfT focuses on quality infrastructure as a crucial enabler of trade and investment. It calls for EU responses in this area to be driven by market requirements to ensure sustainable improvements over time. Quality infrastructure covers regulatory and operational aspects of standardisation, accreditation, conformity assessment, and market surveillance. In practice this means we help partner countries build their authorities’ capacities, improve their food safety system, equip their laboratories, and we provide technical assistance to producers and SMEs for them to comply with new rules and standards.
Digital technologies are also being factored into EU AfT, both as an emerging sector and an enabling tool to promote growth, entrepreneurship and job creation. Among others, e-commerce is particularly supported as it offers a solution to remoteness, which can often be an obstacle to benefitting from trade opportunities.
Advancing sustainability objectives
EU AfT also contributes to operationalising our commitment to the SDGs, notably when it comes to gender equality and women empowerment, protecting the environment, or promoting decent work, corporate social responsibility, and fair and ethical trade.
Gender equality is essential to develop sustainable trade. In fact, empowering women is recognised as one of the highest opportunities to achieve poverty reduction and inclusive and sustainable growth in the framework of the UN’s Agenda 2030.
EU AfT can play a catalytic role in supporting partner countries as they shift towards sustainable, low-carbon, resilient, and circular economic models. It can promote climate-smart infrastructure and energy, and address some of the specific challenges that all the economic sectors face in combating climate change.
EU AfT is also giving priority to the respect of core labour rights and supports partner countries’ efforts to comply with the Decent Work Agenda. Through EU AfT interventions, partner countries are enabled to enforce and defend international labour standards and sustainability requirements, and encourage their private sector to do the same to contribute to a more equitable and sustainable development, based on fair and ethical trade practices.