Global Policy Forum

By David Cronin

African governments are worried that funds from the European Union (EU) to help them increase their countries' share of world trade could be at the expense of other forms of development aid. The EU's executive arm, the European Commission (EC), has been promising that substantial "aid for trade" will be available to African, Caribbean and Pacific (ACP) nations, who are set to sign Economic Partnership Agreements with Brussels by the end of this year.

The aid is intended to address the ACP's limited trade capacity, a key factor behind why the world's poorest countries account for less than one percent of global exports. The funds would also help ACP producers meet the EU's often exacting veterinary and food safety standards. In May, the EU's governments and the Commission committed themselves to granting 2 billion euros (2.75 billion dollars) in annual aid for trade by 2010.

Although EU officials say that ACP countries will receive the bulk of that money, some African diplomats are unimpressed. They allege that the most powerful EU institutions have not yet explained precisely where the money will come from, or allayed concerns that it may not be additional to aid that could be used to finance sorely needed investments in health and education.

"The problem with aid for trade is that it is substantially undefined," an African diplomat, speaking on condition of anonymity, told IPS. "We don't know what money they are talking about. Could it essentially be a regurgitation of existing funds from the EDF (European Development Fund)?" The diplomat said the EC is using promises of aid for trade to entice ACP countries into signing the EPAs, despite their concerns that the level of market opening required as part of those agreements would leave indigenous enterprises at risk from outside competition. "One has to assume that the Commission has the notion of aid for trade as some kind of calming medicine," the diplomat added.

Katrin Jansen, a programme assistant with the Brussels-based organisation Women in Development Europe, said EU officials have admitted that they plan to increase aid for trade without increasing the overall amount of development assistance provided by the Union. "That means aid for trade will definitely be at the expense of other forms development assistance," she told IPS. "We are very concerned about this and demand that aid for trade should not be shifted from sectors such as education and health because these sectors remain of primary importance for poor women's empowerment, as well as for livelihoods in developing countries."

Moreover, there is a concern that the sums on offer may prove insufficient once distributed among the 79 ACP states. In a 2006 report, the Commonwealth Secretariat estimated that southern Africa alone will need over 1 billion euros to help it adjust to an EPA. A new study by ICCO, a Dutch Christian organisation, concludes that the costs of adjusting to EPAs cannot be met unless money is diverted from programmes that have already been agreed between the EU and Africa. It also argues that the EC has been unwilling to make more generous offers on aid for trade. Doing so would involve acknowledging that the challenges inherent in the EPAs are bigger for poor countries than it has been prepared to admit until now, thereby reducing the likelihood that these agreements will be concluded before the Commission's stipulated deadline of Dec. 31.

Anti-poverty campaigners have protested at how a proposal on aid for trade published by the Commission in April does not contain any measures designed to ensure that small producers are paid fair prices for their goods. This is despite how the 2000 Cotonou agreement, which underpins the EU's relations with ACP countries, committed the Union to improving the often paltry prices paid to producers. Hilary Jeune, a policy officer with the Fair Trade Advocacy Office in Brussels, described as "worrying" a clause in the proposal which may require poor countries to devise national strategies aimed at integrating them into the international trading system.

"It has been proven that to overcome poverty, you have to start at the local level and develop strategies for local needs," Jeune told IPS. "It doesn't make sense that the Commission is talking about developing strategies to put these countries into an international trade system dominated by developed countries." The Egyptian government has recently prepared a paper on aid for trade, which is currently being discussed at the World Trade Organisation (WTO) in Geneva. It recommends that one of the key objectives for an effective international strategy on aid for trade should be to develop a monitoring and evaluation mechanism to ensure that the spending has the intended results.

An Egyptian diplomat said that the idea that aid for trade is additional to other forms of development assistance is "an important and fundamental issue." An EU official handling development issues denied that the Commission is seeking to "recycle" previously committed money. The official explained that the latest version of the European Development Fund is only due to become operational in January 2008, while aid for trade funds could come into circulation before then. "By definition, this cannot be recycled money," the official said, adding that plans for how it will be used are under discussion between the Commission and recipients. "The programming process is not something where someone from Brussels gets off an aeroplane with a preconceived idea and tells a particular country it must do 'X'. Instead, it involves dialogues between partners."