[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 20.9.2007

SEC(2007) 1202

COMMISSION STAFF WORKING PAPER Accompanying the

COMMISSION WORKING PAPER EU Report on Policy Coherence for Development {COM(2007)545 final}

TABLE OF CONTENTS

1. INTRODUCTION 3

2. ORGANISATIONAL MECHANISMS 5

3. POLICY AREAS 23

3.1. TRADE 23

3.2. ENVIRONMENT 38

3.3. CLIMATE CHANGE 49

3.4. SECURITY 58

3.5. AGRICULTURE 76

3.6. FISHERIES 85

3.7. SOCIAL DIMENSION OF GLOBALISATION, EMPLOYMENT AND DECENT WORK 97

3.8. MIGRATION 106

3.9. RESEARCH 115

3.10. INFORMATION SOCIETY 128

3.11. TRANSPORT 135

3.12. ENERGY 144

INTRODUCTION

Policies other than development cooperation have a strong impact on developing countries. The European Union (EU) concept of Policy Coherence for Development (PCD) aims to build synergies between those policies and development objectives. This in turn will increase the effectiveness of development aid. Against the backcloth of the EU commitment to substantially increase official development assistance, the importance of ensuring that these resources are not rendered inefficient or wasted by policy incoherence is even greater.

As a global actor, the EU influences the context in which development takes place through a great variety of policies. Its importance as a trading partner, at multilateral and regional levels, its policies on migration, its role in setting standards in areas such as information and communication technologies, transport or sanitary and phyto-sanitary measures, its voluntary policy towards mitigating climate change and addressing climate adaptation needs, are only a few examples of the many areas where EU actions can support or undermine developing countries' efforts towards poverty reduction. Increased globalisation further strengthens those interdependencies.

In some areas, the impact of EU initiatives is sometimes even greater than EU action through development assistance programmes. Yet measures taken in those areas reflect primarily other concerns and serve other purposes than development ones. The concept of PCD is therefore useful firstly to raise awareness about the effects of EU policies on development, and secondly to identify and increase complementarities between those policies and development cooperation.

The effects of EU policies on developing countries are sometimes difficult to assess since they result from complex processes. Furthermore, they very much depend on each partner country's specific situation and constraints. The aim of this report therefore is to shed some light on progress made by the EU in promoting a higher degree of coherence between the main policies that affect developing countries as well as to identify the main outstanding issues to be considered for further action.

The policy framework that serves as a reference for this report was set in 2005, as part ofthe package of measures adopted by the Council on the basis of Commission proposals to accelerate progress towards the Millennium Development Goals[1]. The ambitious commitments taken on the EU for more and better aid were indeed complemented with specific commitments on improving PCD in twelve policy areas. These commitments were confirmed at the highest political level in the European Consensus on Development[2], signed in December 2005 by the Presidents of the European Council, the Parliament and the Commission.

While commitments on financing for development are regularly monitored by the Commission, the most recent report having been issued in April 2007[3], this report is the first to be issued on PCD. It therefore constitutes an innovative tool opening up promising new avenues for accelerating progress in development and poverty reduction across the world.

Since 2005, in addition to the twelve policy areas mentioned above, the EU has also paid attention to the organisational mechanisms deemed necessary to facilitate progress on PCD. The adoption of a Rolling Work Programme on PCD to be updated every six months by each EU Presidency as well as a review of the decision-making process within the Council, are examples of such organisational measures[4].

As underlined in the recent OECD DAC Report on EC Development Policy "The Community has actively contributed to the growing international consensus on policy coherence. Along with most major international donors it agrees on the need for government policy coherence among policies which affect poor and vulnerable nations. The international community is still learning how best to approach this politically sensitive topic (OECD, 2005) and the Community is clear about its desire to help shape a broader international approach."

The EU has undertaken substantial efforts to enhance the complementary interaction of various policy actions and to reconcile different objectives (for example in trade, agriculture, development, environment or migration). Good progress has been made in this direction and measures with regard to improved strategic planning, increased effectiveness and impact , as proposed in the new 'Europe in the World' approach[5], are expected to further enhance the coherence and efficiency of EU policies and instruments. In this context, this report provides a basis for assessing the application of PCD, and may serve as a public information tool to trigger further debate and feedback from developing countries, civil society and the European Parliament. This report concerns Member States as much as the EU[6]. Therefore, it is expected to also feed the debate internally in each Member State.

ORGANISATIONAL MECHANISMS

1. General Commitment to Policy Coherence for Development

There is a strong general commitment to PCD within the EU, as indicated by the adoption of the Communication on Policy Coherence for Development (PCD)[7] in April 2005, the ensuing Council Conclusions in May 2005 and the European Consensus on Development in December 2005.

The Commission has fulfilled its role by initiating the setting-up of an EU policy framework for PCD. At service level, most Commission Directorates-General concerned participate actively in meetings of the Inter-Service Group on PCD set up in 2006 as well as in other PCD-related meetings, organised by or with civil society, or think-tanks and research centres. In some areas, especially where policy frameworks for ensuring coherence with development objectives exist, such as in fisheries, trade and migration, the awareness of and the commitment to the PCD agenda is good. The concept of PCD is however also sometimes seen as development cooperation contributing to the objectives of other EU policies. In general, a two-way approach is progressively being developed, leading to increased synergies and eventually to higher effectiveness of policies.

At national level, a political basis for PCD exists in many Member States. In Germany, for instance, PCD is explicitly mentioned in the programme of the ruling coalition’s government. The German coalition agreement states that "by closely dovetailing our policies on Foreign Affairs, Security, Development, Human Rights, Foreign Trade and Foreign Cultural and Educational Affairs, we intend to arrive at a coherent policy towards developing countries." In the Netherlands, foreign policy includes the promotion of policy coherence for development as one of its aims, and a progress report on PCD was sent to Parliament in 2006. Two different policy memoranda provide a solid basis for Dutch policy on coherence in a number of priority areas. However, the degree of commitment of ministries other than the one specifically dealing with development, varies from one EU country to another.

Various factors affecting the general commitment to PCD have been identified by Member States:

- Political commitment by the relevant Minister, ministries, Members of Parliament, Parliamentary committees, etc.

- Capacity/knowledge of PCD and development issues among officials.

- Degree of (early) involvement of development cooperation staff in PCD policy processes.

- The belief that achieving coherence in some areas is simply too difficult.

- The belief that there is always an 'either/or' choice that must be made between a development approach and a non-development-policy approach.

- Political expediency, which may lead to a less coherent approach in practice even where a PCD approach is possible.

2. PCD Promotion in EU Member States

Overview

There are some 91 different PCD-promoting mechanisms in the 27 Member States: 33 explicit policy statements or laws, 48 administrative or institutional mechanisms (e.g. inter-ministerial committees, PCD Units) and 10 knowledge-input and -assessment tools. A general feature of these mechanisms, highlighted in the evaluation and confirmed by our survey, is that the vast majority are not PCD-specific but used for various policy purposes, including the promotion of PCD.

Legal Basis for PCD in EU Member States

- Austria : paragraph on PCD in the Development Cooperation Act (2003)

- Finland : PCD Objective stated in Annual State Budget Act

- France : 'Loi de Finances' (LOLF) and 'document de politique transversale (DPT)' « Politique française en faveur du développement » attached to the LOLF.

- Luxembourg : 'Loi sur la coopération au développement de 1996', Règlement grand-ducal fixant la composition et le fonctionnement du Comité interministériel pour la coopération au développement

- Romania : Government Decree on the National Strategy on International Development Cooperation

- Spain : International Development Cooperation Act (Article 4)

- United Kingdom : International Development Act (2002) and International Development Reporting and Transparency Act (2006)

The Member States' view is that the commitment to PCD of ministries other than the one specifically in charge of development is moderate, and varies according to policy areas and the level of understanding of PCD issues. PCD commitment is stronger in policy areas traditionally close to development cooperation (e.g., trade, security, migration, environment, agriculture) and weaker elsewhere. Commitment levels among Member States also vary depending on their experience in development cooperation and their institutional set-up:

- Countries new to development cooperation without a PCD coordination mechanism across government (i.e. Bulgaria, Estonia, Slovak Republic, Slovenia and Romania) have made efforts in disseminating information on PCD but still face a widespread lack of understanding of development cooperation and a generally inward-looking policy making.

- Countries with a PCD coordination mechanism across government (i.e. Austria, Belgium, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Poland, Portugal, Spain and the United Kingdom) have all underlined the important role played, or that could be played, by such mechanisms in strengthening commitment outside the development ministry.

- Countries that have adopted a 'whole of government' approach to policy coherence for development (i.e. the Netherlands and Sweden) have an easier task on PCD, as the entire government rather than a single ministry or agency is responsible for development cooperation.

Member States with a PCD-coordination mechanism have a wide variety of tools.

Inter-Ministerial Committees

Some 14 Member States (i.e. Belgium, Cyprus, Czech Republic, France, Greece, Hungary, Ireland, Italy, Lithuania, Luxembourg, Malta, Poland, Portugal and Spain) have one or more inter-ministerial committees.

Ireland has set up an Inter-Departmental Committee on Development (IDCD) which held its inaugural meeting in April 2007. The IDCD is chaired by the Minister of State for Irish Aid and is responsible for strengthening coherence in the Government's approach to development. In Italy, although not focused specifically on it, PCD issues can be raised at the Inter-Ministerial Committee for Development Cooperation (CICS). In Greece, the Inter-Ministerial Committee for the Coordination of International Economic Relations (EOSDOS), established in 1999 and chaired by the Minister of Foreign Affairs, discusses and endorses the Greek five-year strategic framework for development cooperation which includes PCD commitments. In Poland, although not yet formalised in an inter-ministerial working group, PCD contact points in the various ministries have been identified and inter-ministerial PCD meetings have already taken place.

Inter-ministerial committees are normally focused on development cooperation in general rather than on PCD alone and are chaired by the Minister of Foreign Affairs or Development. A notable exception is France, where the Inter-Ministerial Committee for International and Development Cooperation (CICID), comprising 12 different ministries, is under the authority of the Prime Minister. In 2006, the CICID has defined specific policy guidelines for PCD on international migration and development, integration of global public goods in the French development strategy (e.g. communicable diseases, climate change), research and development, as well as good governance. The Secretariat General of European Affairs (SGAE), which is under the Prime Minister's direct authority, is mandated to strengthen the overall coherence of the French policy and also contributes to reinforcing inter-governmental coherence on development issues.

Coordination can be both horizontal (across government departments) and vertical (across different levels of government: central, regional and local). An example of a vertical mechanism is the Belgium 'COORMULTI' framework within the Ministry of Foreign Affairs, which organises coordination meetings with other federal departments and regional community authorities in order to define a coherent Belgian policy in the international institutions. A similar coordination system exists for European Affairs. In Spain, the Inter-Territorial Development Cooperation Commission is responsible for coordination between central and regional authorities involved in development cooperation.

The UK does not have a formal inter-ministerial committee, but several forms of 'joined-up' policy making through special units drawing staff from DFID and other government departments. A number of joint Public Service Agreement Targets (shared corporate goals) exist that cover the joint working of two or more departments, including DFID. These include targets on trade and security/conflict prevention. Where PCD issues are discussed at the EU level in sector groups (e.g. migration, trade), DFID regularly briefs lead departments. DFID staff may also join colleagues from other departments at sector meetings in Brussels. Where PCD issues are discussed from a development perspective at the EU, DFID will share and welcome inputs to briefing from relevant departments. Where PCD issues such as security or environment are being discussed from a development perspective in other international fora such as the UN, DFID colleagues will often work closely with colleagues from other government departments to ensure a joined-up approach (e.g. action on forest law enforcement). A number of special units exist that are intended to promote stronger coherence on particular issues and draw staff and resources from a number of government ministries. These include the Office of Climate Change, the Post Conflict Reconstruction Unit and special collaborative networks in areas such as fisheries and research and innovation.

Consultative Bodies

Some Member States (i.e. Austria, Cyprus, Hungary, Latvia and Spain) have created consultative councils comprising academia, civil society, the private sector and, in some cases, other ministries to advise decision-makers on how best to pursue development cooperation.

In Austria, the Platform for Economy and Development, an informal network of private-sector representatives, and the Advisory Board on Development Policy, an independent advisory board, are both active on development cooperation issues. Spain has also established a Development Cooperation Council, a consultative body that brings together civil society and the private sector. In Austria and Portugal there are councils comprising ministries rather than civil society: the Austrian Council for Sustainable Development which includes all ministries and the Portuguese Ministerial Council for Cooperation.

Other Member States (i.e. Austria, Denmark, Finland and Germany) use a series of special committees and consultative bodies chaired by different ministries depending on the topic. In Austria, examples of special committees are the plenary meetings of the trade and development committee and standing working group between the Ministries of Foreign affairs and of Finance. In Denmark, the Ministry of Foreign Affairs is represented in several special committees that also include interest groups, although the committees’ sessions are always chaired by a civil servant.

In Germany, there is not one committee, but several committees on specific issues. BMZ is a member of the Federal Security Council, which coordinates German security and defence policy and deliberates on the export of arms. BMZ is also part of the Inter-Departmental Committee on Export Guarantee which recently adopted guidelines on the consideration of ecological, social and development aspects in this field. A last example of formalised cooperation among various government departments is the inter-departmental working group on civil crisis prevention, which operates on the basis of a specific action plan in the area of security and development, that was in itself designed by a cooperative effort of all government departments involved and was established to assure coherence in the implementation of the plan's directives.

'Whole of Government' Approaches

Whole-of-government approaches are followed by the Netherlands and Sweden. The 'whole–of-government approach' to development cooperation is certainly conducive to policy coherence for development[8], particularly in fragile states[9]. As emphasised by DAC, "working effectively across [political, security, economic and administrative] domains requires donor countries to adopt a 'whole-of-government' approach, involving departments responsible for security, and political and economic affairs, as well as those responsible for development aid and humanitarian assistance."

The Swedish approach to PCD, for example, is that the whole government shares the ownership of the PCD. This means that the policy itself is formulated and designed at the different offices of government. The Minister for Environment is responsible for formulating an environmental policy that integrates developmental aspects, while the Minister for Trade and Industry is responsible for the way Swedish trade policy contributes to equitable and sustainable global development. If there is a risk that measures designed to fulfil the objectives of a policy area will counteract Swedish efforts to achieve equitable and sustainable global development, it is the responsibility of the policy area in question to look for alternative measures and find an acceptable solution within the framework of its regular policy preparation work.

There are disincentives to PCD-coordination mechanisms and whole-of-government approaches: they are more time-consuming, often entail compromises, offer less visibility to individual departments or ministries, and are more costly, as they require adequate staff capacity both at headquarters and in the field.

PCD Departments and Units

PCD departments or units are in place in 16 Member States (i.e. Austria, Belgium, Denmark, Estonia, Finland, France, Germany, Hungary, Ireland, Lithuania, Luxembourg, the Netherlands, Poland, Portugal, Spain and Sweden).

In Finland, the Department for Development Policy within the Ministry of Foreign Affairs is responsible for coordinating the government's development policy as a whole, including its PCD commitments. The Unit for General Development Policy and Planning within the Department for Development Policy of the Ministry of Foreign Affairs coordinates and monitors PCD. To enable PCD discussions across ministries and/or departments on specific thematic issues, thematic working groups have been set up (e.g. on trade and development, security and development, migration and development, etc.). Additionally, there exists a coordination mechanism for OECD issues. The government has appointed an external advisory body, the Development Policy Committee, to support its efforts on PCD. The Committee members consist of representatives of all relevant stakeholders in the Finnish society, e.g. parliamentary political parties, trade unions, private sector, agricultural unions, NGOs as well as academia. Since 2004 Finland has had a Ministry of Trade and Development, which simplifies the coherence between these two areas.

In Germany, the Joint Rules of Procedures of the Federal Ministries (GGO) were amended in 2000 to permit BMZ to scrutinise other Departments' draft legislation for compliance with development policy. The commitment to PCD was formalised in April 2001 as an obligation for the whole Federal Government. A unit in BMZ was created to coordinate implementation of the PA 2015. BMZ's sector policy divisions play the central role in making PCD operative. They monitor a continuous stream of information on relevant national, EU and international activities in their specific field, channelled towards them by the Federal Ministry in charge of national policies in that thematic area, and actively maintain contact with their counterparts in that Ministry. As members of inter-departmental thematic groups, they are entitled to put issues of their interest onto the agenda of regular meetings, which serve as a first-level inter-departmental clearing-house. This closely woven network of operational communication is the mainstay of the German Federal Government's PCD efforts. The exchange of personnel has proven to be helpful in promoting mutual understanding among staff rooted in the different institutional cultures of the various ministries. To date, experience with this instrument has been very positive.

Finally, in the Netherlands a PCD Unit was set up in 2002 within the Ministry of Foreign Affairs, reporting directly to the Director-General for International Cooperation and the Minister for Development Cooperation. It has a staff of six and works closely with other divisions within the Ministry of Foreign Affairs in project teams on specific coherence dossiers. The unit employs three mutually reinforcing intervention strategies with a strong EU focus: (i) across-the-board screening of EU legislative proposals for their impact on developing countries and poverty reduction and incorporation of development friendly positions into Dutch standpoints in Brussels; (ii) pro-active focus on specific PCD dossiers with the Foreign Affairs Ministry's project teams that may also involve the relevant department, and seeking alliances with like-minded Member States and other stakeholders; and (iii), promoting general awareness of PCD at national, EU and international level, independent monitoring of OECD countries' efforts and stimulating research into actual impact in developing countries.

Capacity for PCD in particular is considered by Member States to be still limited, both at the EU and national level. While 16 Member States have established a department or unit in charge of coordinating and monitoring PCD, only seven stated that their PCD unit's capacity was 'good' and none rated it as 'strong'.

3. PCD Promotion within the Commission

A series of mechanisms have been set up that promote PCD within the Commission.

- Inter-Service Consultations, to be seen as a process including informal discussions and inter-service meetings, as well as more formal steps, allow all services to express their views on policy proposals. The Commission being an institution that works on a collegial basis, all policy proposals are subject to systematic consultations at the political level.

- The Impact Assessment System allows the evaluation of consequences of major policy proposals, and the assessment of alternative options, including in the field of development (i.e. impact on third countries).

- Country and Regional Strategy Papers allow the identification of PCD issues and establish link to programming or in-country political dialogue.

- A unit is specifically in charge of PCD in the Commission's Directorate-General (DG) in charge of Development and Relations with African, Caribbean and Pacific States. It acts as a focal point for the follow-up to PCD commitments and maintains a global overview on the contribution of EU policies other than development to progress towards the MDGs.

- An Inter-Service Group on PCD was created in 2006 and comprises members of relevant Directorates-General, including the Secretariat-General and the Legal Service.

The Inter-Service Consultation (ISC) is a powerful mechanism for ensuring coherence. ISC has been set up to ensure proper coordination between the various Commission services. The aim is not specifically to promote PCD, though it is being used to this purpose. An Evaluation Study on PCD[10] carried out in the first half of 2007 confirms that the way ISC is used by the Commission has contributed to promoting the PCD agenda. It also concludes that the broad range of policy initiatives to be scrutinised for their effect on developing countries makes it necessary to set priorities. According to several Member States, however, Inter-Service Consultation could be used more actively. Ideally it should be possible to track how and at what stage the PCD viewpoint has been integrated into the Commission process.

The PCD Unit in DG Development monitors how other DG Development's comments are taken into account by other DGs regarding the major policy proposals identified as potentially important for their impact on developing countries in the Presidency's PCD Rolling Work Programme. As for the Commission's Secretariat General, it ensures that the ISC is used in an appropriate manner by all DGs and in accordance with the defined rules of procedure. It plays the role of a coordinator and ensures coherence with the political priorities set by the College.

Commission Inter-Service Consultations and Impact Assessment for the 2006 Reform of the EU Sugar Market: identifying adjustment support needs for developing countries

In February 2006, based on a Commission proposal, the EU adopted a regulation on the reorganisation of the EU sugar regime, a key feature of which was a 36% reduction in the price of sugar over four years. In parallel, the EU also adopted a regulation establishing accompanying measures aimed at mitigating the impact of the reform of the EU sugar regime for ACP countries likely to be affected. The accompanying measures were not provided for in the original Commission proposal. They are the result of a process which allowed DG Development to pinpoint the difficulties for ACP countries, share its concerns with other involved Commission services, and jointly come up with a viable solution.

The Inter-Service Consultation process and the impact assessments were absolutely crucial in securing in the discussion two main elements: (1) an improvement in the degree of PCD of the proposed reform, and (2) the adoption of accompanying measures to support the developing countries affected.

The impact assessments and complementary internal calculations produced in the period 2003-2005 allowed for a reasonable estimation of expected effects (losses, but also gains) in sugar-exporting ACP countries under various policy scenarios. 'Sugar Protocol' ACP countries were expected to lose in terms of 'guaranteed' export earnings. Therefore, the Commission proposed accompanying measures for these countries to assist them in their adjustment process. In addition, a number of Least-Developed Countries (LDCs) that were expected to gain through quota-free access to the EU sugar market agreed under EBA, would see their potential gains reduced due to the price reductions included in the reform. However, accompanying measures for these LDCs (not part of the Sugar Protocol) were seen as less justified. Indeed, the 'losses' they would incur in their sugar export earnings after a reduction of the EU price were seen as potential, rather than certain as in the case of the Sugar Protocol countries.

The accompanying measures for Sugar Protocol countries started in 2006 (with a specific budget line and regulation) and were then included in the Financial Perspectives covering the period 2007-2013 (with a specific regulation under the Development Cooperation Instrument. In total, an indicative amount of €1.284 billion was allocated for the Accompanying Measures in Sugar Protocol countries (AMSP) for the period 2006-2013. In deciding the amounts of assistance allocated to the various Sugar Protocol countries, the loss on the EU market was an important factor, just like the importance of the sugar sector in the country itself. The accompanying measures financed by the EC pay specific attention to enhancing the competitiveness of the sugar and cane sectors in countries where this is a sustainable process; to economic diversification in sugar-dependent areas; and to broader impacts generated by the adaptation process (macro-economic, environmental, social).

F or a detailed analysis see ODI, Case Study: The Reform of the EU's Sugar Regime, prepared by Alan Hudson

The PCD Unit in DG Development can convene meetings with internal and external stakeholders and involve other DGs in PCD processes. This mainly concerns the Inter-Service Group on PCD and the PCD Network, an informal forum for exchanges of information between the Commission and Member States, but it can also concern ad hoc meetings with external stakeholders such as civil society and NGOs, or international organisations such as the OECD. It is also in charge of the organisation and coordination of PCD-related work within the Commission. Last but not least, it is responsible for the preparation of the Biennial EU PCD Report.

4. PCD Promotion at EU Level

Member States see EU processes as being more conducive to PCD than national ones. Much progress seems to have been made so far due to Presidency actions, especially at European Council's level. Some 22 Member States rated the Presidency's action to reflect development concerns across the policy spectrum as 'good' or 'strong', one of the highest approval ratings.

However, Member States underlined in their replies that PCD is not institutionalised well enough in the EU decision-making process and is weak at the national level. As highlighted by the CEPS Study on PCD in the EU Council[11], PCD is "easier to ensure in the policy-making processes in the European Commission than in the EU Council. The main reason is that decisions are ultimately taken by the Commission as a whole, thereby allowing all interests to be represented and cleared at the central level, i.e. the College of Commissioners, whereas decision-making in the Council must navigate the nine sectorally divided ministerial formations and numerous subordinate bodies, where the majority of decisions are taken." Joint Council sessions, when they were organised, for example on Trade and Development have been successful in bridging these divisions. Generally speaking, though, the sectorally divided EU Council decision making and the low weight development has in the internal balance of power at both EU and national level are a major obstacle to PCD. As a consequence, most Member States showed limited satisfaction with existing Council procedures (16 out of 26 rated them as weak or average) and with their own national PCD mechanisms and institutions (rated weak or average by 14 out of 24 Member States).

According to many Member States, the main issue is the limited involvement in PCD promotion of the 250 or so Council Working Parties. Coreper is central to ensuring PCD as it discusses the work of the sectoral working parties before it is sent on to the relevant Council formation. Yet starting discussion at Coreper is too late: it is estimated that 70% of the issues are solved at Council Working Party level, 15% at Coreper level and 15% at the Ministerial level. The CEPS study found no evidence of Coreper "emphasising the need for policy coherence, let alone policy coherence for development"[12]. Relying only or principally on Coreper to drive the PCD agenda is therefore unrealistic and impractical.

The PCD approach needs to begin within capitals and the Commission and be built within the Council Working Parties so that Coreper receives submissions that are already as coherent as possible. Joint meetings of the Council Working Parties are amongst the most successful practices, but many Working Parties and Commission DGs are perceived by Member States as suspicious of the PCD agenda (e.g. particularly in the case of fisheries and migration). The separation between Coreper I (employment, internal market, industry, energy, etc.) and Coreper II (external relations, economy and finances, justice and home affairs) poses additional challenges to PCD.

The structure of the General Secretariat of the Council (GSC) helps to ensure strategic overview and permanent coordination of all aspects of external relations. In this area a single Director General is responsible for RELEX (geographical and thematic desks), trade, development, enlargement and politico-military affairs, and is functionally connected to the Policy Unit of the High Representative/Secretary General.

The Development Unit is part of the Secretariat's Directorate for International Trade and Development Cooperation whose mission statement is "To make the council's activities in international development and trade (including the EEA/EFTA) more efficient in themselves and more effective as an element of EU Foreign Policy and to foster coherence between them and with the EU's foreign policy objectives."

These existing GSC structures have been useful in ensuring coherence on several dossiers such as, for example, Economic Partnership Agreements and the preparation of the UNCTAD XII Conference. The team of officials that advises the Presidency (whether preparing Development issues, for GAERC or a 133 Committee) consists of both development and trade experts. These experts and desk officers collaborate routinely on a daily basis.

In the European Parliament, the Development Committee is increasingly engaging in PCD-related issues, which it furthers through issuing reports, defending positions in plenary parliamentary sessions, and related activities. An analysis over time of the number of reports issued by the Development Committee show that more than 40% of own initiative reports address PCD related concerns so far in the sixth term of legislation compared to 12.5% and 6% respectively in the previous two terms.[13]

As mentioned above, the Commission has in place appropriate structures and mechanisms to help promote PCD amongst its services, including Inter-Service Consultations, the Impact Assessment mechanism, Trade Sustainability Impact Assessments, the PCD Unit in DG Development and an Inter-Service Group on PCD. A series of mechanisms have also been set up to promote PCD at EU level, viz:

- The PCD Network, created on the initiative of the EU Directors-General for Development, is an informal forum for exchanges of information between Commission and Member States. It held its first meeting in November 2005, and has met again three times in 2006 (May, July, November) and so far once in 2007 (May). The attendance rate has constantly increased, starting from nine Member States in 2005 and going up to 19 in 2007.

- A first Presidency PCD Rolling Work Programme was established for 2006-2007 to identify common priorities for policy and organisational action. It is updated by each new Presidency. The Rolling Work Programme is particularly useful as a forward-planning instrument, as it identifies all relevant upcoming PCD initiatives and events and clarifies the development issues at stake. It is also used by a large majority of Member States (23) in identifying and managing their own PCD programmes (e.g. as a check list, guidance note, awareness tool or common platform for EU action useful to convince reluctant non-development ministries). Although they use it, Member States also believe that its quality should be improved to make the RWP more practical and relevant.

- The Commission is responsible for preparing a Biennial EU PCD Report to review progress towards PCD achieved by EU Member States, the Council and the Commission. This report is the first edition of the EU PCD Report.

- The EU Strategy for Africa is the first integrated regional framework to improve coordination and coherence of EC and Member-State policies and instruments and has been highlighted by several Member States as another best practice example.

- Joint meetings of Council formations are a very useful way to integrate development concerns into other policy initiatives. For example, the Joint Trade and Development Ministers' GAERC session of October 2006 is considered by many Member States to be a good experience to be repeated and possibly expanded to other PCD areas in the near future.

- Ad hoc events such as the PCD Conference organised in Helsinki in October 2006 by the Finish Presidency can also efficiently contribute to promoting PCD by bringing together stakeholders.

The process of exchanging and sharing best practices on PCD at EU level was initiated one and a half years ago. The necessary set-up has been created to ensure an optimal exchange of information, including the Council Working Parties, the Informal PCD Network and a web-based Interest Group. Progress towards intensifying of exchanges of information on PCD has so far been encouraging. For instance, a session of the Council Working Group on Development, held with the participation of NGOs, involved several Member States presenting their respective approach on PCD.

The Evaluation Study underlines that it is crucial to maintain the momentum to ensure that PCD becomes standard practice within the Commission and amongst the 27 EU Member States. In this respect, the Informal PCD Network plays a particularly important role, which could be furthered if all Member States were to participate in its meetings. As far as the Commission is concerned, it will pursue and intensify its role as a promoter of PCD towards Member States and other stakeholders, particularly the European Parliament and civil society.

One weakness at the present stage is developing countries' limited involvement in PCD. A more systematic involvement of these key stakeholders is a must in the future. It is also a specific objective of the 2007 EU PCD Report to serve as a basis for this. To a lesser extent, the same applies to the European Parliament and civil society.

Regarding the Rolling Work Programme, it certainly has the potential to function as a roadmap for a better and more systematic integration of development concerns into the EU policy-making process. Political will is necessary to avoid this turning into a bureaucratic exercise with no concrete follow-up and limited concrete impact.

5. Impact Assessments

The integrated Impact Assessment (IA) system was gradually introduced in the Commission from 2003 onwards. It replaced all sectoral assessments concerning direct and indirect impacts of a proposed measure and integrated them into one global system. The IA system is a key tool to ensure that the preparation of a policy proposal is based on sound analysis and the best data available. It analyses a proposal's impact on a wide range of different policy areas.

However, the analysis of the impact on developing countries could be further improved. The evaluation of the IA system made in 2006 (see http://ec.europa.eu/governance/better_regulation/impact_en.htm#_evaluation) concludes that the assessment of the external impact "is deemed partly proportionate given that the Impact Assessment provides some information on the likely impacts on developing countries, but falls far short of a comprehensive assessment".

The evaluation is now being carefully considered by the Commission as part of an overall review of the approach, with a possible revision of the guidelines to reflect any necessary changes to the current system.

The Commission's Impact Assessments are being used at both EU and national level.

In the areas of trade, Trade Sustainability Assessments (TSIA) are used to assess the economic, environmental and social impacts of trade agreements on both the EU and the countries with whom the agreement is being negotiated. TSIAs are launched once EU Member States have adopted negotiating directives for the Commission to conduct trade negotiations, and are carried out by independent researchers.

The TSIA process includes consultation both internally, within the Commission and externally with civil society. Trade negotiators are informed of the TSIAs findings right from the outset as they participate in both consultation processes. After the presentation of TSIA results, the Commission drafts position papers which set out its position on the main findings of these studies. These documents also identify concrete actions to be taken in order to enhance the benefits of liberalisation both inside and outside the EU or to mitigate negative effects. Such actions may be in the trade domain or outside of it, in areas such as aid, cooperation and technical assistance. Once finalised, the papers are endorsed by the Commission and discussed with civil society.

Even though Member States believe that trade is the most-covered PCD areas as regards impact assessments, they questioned the timing, quality and participatory approaches of TSIAs[14]. Member States stress that TSIAs should be finalised in time and that they should be carried out with the full engagement of potentially affected developing countries with a view of better informing the decision-making.

At the national level, only three Member States evaluate the impact on development concerns of all major policy proposals.

6. Partner Countries' Perspective

Policy coherence is referred to in the Cotonou Agreement with the ACP countries, reflecting the EU's commitment to inform its partners on measures which might affect their interests[15].

The inclusion of PCD in the new Joint EU-Africa Strategy under preparation is an important step in that direction. The outline for the Joint EU-Africa Strategy is endorsed by the Ministerial Troika Meeting of 15 May recognises that the promotion of Policy Coherence for Development in both EU and African policies has an impact on Africa's sustainable development.

The analysis of the partner countries' new Country Strategy Papers (CSPs) gives some indication of their perspective on PCD. CSPs are documents that lay down the bilateral cooperation strategy between the EC and partner countries based on a political and socio-economic analysis of their specific situation[16].

The new format for CSPs adopted by the Council on 11 April 2006 provides for the inclusion of a specific section devoted to PCD and analysing the partner country's main concerns regarding non-aid policies of the EU and other donors in the 12 identified PCD areas.

In the case of ACP countries, the importance of PCD is now largely recognised, as indicated by the fact that a PCD section is now included in a large majority (four out of five) of CSPs. Regarding the mentioned policy areas, the main trends are as follows: trade is mentioned almost systematically: 54 times out of 59 CSPs with a PCD section, followed by agriculture with 28 mentions, fisheries with 24 mentions and the environment with 22 mentions, the latter being sometimes linked to climate change, which is only mentioned six times. Migration is mentioned 18 times, security only 10 times, transport 8 times, energy 4 times, research and information society 3 times and the social dimension of globalisation twice. A link with programming is established in one third of the cases in the field of trade. However, links with programming are only seldom established in other PCD areas.

Inclusion of PCD in the CSP of Rwanda

The CSP of Rwanda contains a detailed and comprehensive PCD section with systematic links with programming and other EU policies. The CSP mentions the following areas:

- Trade: The main axes of action to integrate Rwanda into the world economy are described, and so is the way in which the EU will support this process. This includes negotiations on the Economic Partnership Agreement (EPA), support to infrastructures and rural development (focal sector 'Rural Development and Support to Infrastructure for Regional Interconnectivity'), as well as support for trade and regional integration (non-focal sector 'Trade and Regional Integration').

- Agriculture: Particular interest is expressed for liberalising international agriculture markets. The EU's Common Agriculture Policy is perceived has having only a limited impact on Rwanda's exports. However, the CSP mentions EU sanitary and phyto-sanitary standards as being a significant barrier to Rwandan exports. Capacity support is envisaged in this respect in the non-focal sector 'Trade and Regional Integration'.

- Environment: This sector is mentioned as being a major concern for Rwanda. A link is mentioned with the focal sector 'Rural Development and Support to Infrastructure for Regional Interconnectivity'.

- Social Dimension of Globalisation: The country strategy will also aim at ensuring that Rwanda draws economic and social gains from globalisation. The importance of improved infrastructure and access to information and communication technologies, particularly for education, is mentioned in this respect. Links are established with the focal sectors 'Rural Development and Support to Infrastructure for Regional Interconnectivity' and 'General Budget Support'.

- Security: Security and peace-keeping are mentioned as crucial issues for Rwanda in the light of the events of the 1990s, and poverty reduction and economic growth are the key to achieving them. This is consistent with the overall country strategy and particularly the focal sector 'Rural Development and Support to Infrastructure for Regional Interconnectivity'.

- Migration: Migration between Rwanda and the EU is seen as being of no particular concern, and is therefore not addressed by the CSP. However, regional migration is mentioned as having the possible benefit of regional integration.

Amongst the CSPs of the Asian countries[17], 15 out of 19 mention PCD issues. Six of those did not single out these issues as PCD nor addressed them in a dedicated PCD section, but rather included PCD considerations in the sectoral sections. The other nine tackled PCD in the Policy Mix chapter. As far as the 12 PCD areas are concerned, trade is by far the most frequently mentioned issue with 13 mentions out of 15, followed by the environment with eight mentions. Other areas are mentioned only sporadically.

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All the 17 Latin American CSPs dedicated a special section to PCD issues, in which they address PCD issues in an extremely detailed, precise and comprehensive way. Trade, agriculture and environment are almost systematically mentioned (respectively 17, 16 and 15 times). The social dimension of globalisation, migration, and fisheries are also mentioned frequently (respectively 11, 10 and nine times), followed by the information society (seven times), and security (with emphasis placed on conflict prevention and drugs) and research (six times each). The other areas are mentioned more sporadically.

Regarding Mediterranean and Middle Eastern countries, of the eight CSPs analysed, five referred to PCD: Algeria, Egypt, Lebanon, Morocco and Syria[18]. Among those only Egypt, Lebanon and Syria dedicated a special section to the 'Coherence of the Policy Mix'. Amongst the CSPs of Eastern Europe and Central Asia, all six[19] of them mention PCD issues. This includes trade, environment and transport, while the CSP of Moldova puts particular stress on security and migration problems.

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7. Accountability, Transparency, Public Information

Member States noted a general lack of transparency and accountability regarding PCD, particularly at the national level. Member States perceive the EU Council to be more accountable than themselves.

However, according to several Member States, constraints in the EU decision-making system do not particularly promote accountability, rated only slightly above 'average'. Implementing new, cross-cutting and politically sensitive agendas pose in fact significant challenges in a framework that is subject to so much change, and Presidency discretion, where business is always conducted under significant time pressure, and where there are very mixed levels of awareness, understanding and will to raise capacity levels.

In addition, several Member States point out that the complex nature of the Council decision-making makes it difficult for the EU public to follow the discussions that take place in that institution, including on the positions taken by individual Member States. The recent decisions about transparency and accountability, such as the public sessions of GAERC or the present EU PCD Report, are important steps on the path to a more accountable EU.

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Finally, lack of visibility of PCD efforts is seen by Member States as a major weakness, albeit to varying degrees, in the different thematic priority areas. In most cases, the issues involved do not seem suitable to draw major media attention. There are of course exceptions, such as conflict resolution and crisis management, which can make for very dramatic television footage.

At the national level, transparency and accountability are usually ensured through parliamentary control (e.g. annual reports and public hearings). The UK International Development Reporting Act, for example, formally requires the UK Government to report on the impact of PCD issues on poverty reduction and development to Parliament. The report is published within DFID's Annual Departmental Report. Both the French and Swedish Governments produce every year a Government communication to Parliament on the progress and results of development cooperation, including policy coherence issues.

The Commission's Impact Assessments and Trade Sustainability Assessments are publicly available and are systematically transmitted (together with the policy document) to relevant institutions together with the policy document.

8. Overall Assessment of Horizontal PCD Commitments

Overall progress towards PCD is considered rather satisfactory by Member States, particularly at EU level, although capacity and resources available to promote the PCD agenda are deemed as 'good' by only five Member States out of twenty-seven.

These findings confirm those of the ECDPM Study on PCD in the EU context: "The mechanisms examined were relatively effective, but constraints on effectiveness were identified in all cases. The most common obstacles included lack of adequate political support, unclear mandates and insufficient resources. On efficiency, interviewees generally felt that the PCD mechanisms they were working with were efficient; however, the evaluation found that in the absence of monitoring tools the basis for such judgements was not always very solid. Although nearly all stakeholders felt their mechanisms were having an impact they also found it hard to quantify[20]."

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Member States' assessment is that the overall progress towards PCD has been greater at EU level than at national level. The level of progress perceived by EU Member States in the 12 PCD areas, which is discussed more in greater detail in the following chapters, is modest, with most areas only slightly above 'average'.

Awareness of the external impact of EU policies beyond development has increased within EU institutions. Adequate policy frameworks, procedures and instruments to promote PCD have been set up at Commission and EU levels. While the right framework is in place, it must now be used in a more systematic way and, if necessary, improved and adapted based on experience.

Greater PCD awareness is perceived by Member States as one of the main achievements so far. There is positive momentum in terms of establishing functioning tools and institutional mechanisms for PCD work, both in the EU and in some Member States. Some results have been achieved, e.g. in terms of strong commitments (both national and EU level, which complement and reinforce each other), planning tools at EU level, active analytical and factual work in some areas (e.g. trade, migration). The EU's commitment to PCD is well communicated – via the European Consensus on Development, PCD-related communications and conclusions, messages within sector groups.

Time will play a key role in this respect, provided the political will continues to gain further momentum. The extension of the PCD process to other stakeholders, namely partner countries, and the European Parliament and civil society, also appears necessary.

At the same time, capacity constraints at all levels are an important issue, although the progress made by several Member States in the last few years has been promising. Further progress regarding the integration of PCD issues in associated Council Working Parties and Commission departments would help in this respect.

[pic]Obviously, conflicting political priorities are sometimes a more serious obstacle to PCD in drawing up policy initiatives. These can only be solved at the highest political level, i.e. the College, the European Council or the European Parliament.

Member States also perceive a lack of adequate systems for policy and decision-making. An 'institutional set-up' where PCD concerns would be taken care of more systematically and at an early stage is still lacking. Unless a PCD approach is strengthened within sector Working Parties in the Council, there is little possibility of correcting inconsistencies at higher levels.

There is a lack of ownership and/or knowledge of PCD commitments and its implications in different policy areas, since such ownership and knowledge of PCD is widely spread between different policy areas. DG Development and development ministries in Member States need to better engage colleagues from policy areas other than development.

At this stage, the analysis of the degree of PCD remains both analytical and empirical. There are some attempts to actually measure the coherence of a country's or institution's policies, but establishing such a measurement system is proving difficult[21]. None of the existing ones have achieved a degree of maturity that provides a sufficient level of reliability and credibility.

9. Outstanding Issues

- As underlined by Member States, review and improve Council procedures. Ensure that PCD is built within the Council WP's so that Coreper receives submissions that are already as coherent as possible, institutionalise the process of PCD screening of the Council Agenda by Presidency and Council Secretariat and clarify screening criteria, organise more joint GAERC sessions and ask the various Council formations to report to GAERC on how they have incorporated PCD into EU policy. The detailed practical recommendations included in the CEPS study could also be considered in the process.

- Intensify the dialogue with partner countries on the synergies between EU policies and development cooperation programmes to take better account of PCD in bilateral cooperation and promote the inclusion of PCD in their national/regional development strategies.

- Intensify exchanges with the European Parliament and a broader range of civil society organisations, not only in development but also active in the different PCD areas.

- Further improve information-sharing on PCD issues. Several actions in this regard have been put forward by Member States for consideration: publication of PCD best practice, seminars/workshops on PCD, PCD Bulletin, more frequent meetings of the Informal PCD Network, better use of CIRCA, Director-General-level meetings on PCD, less generic, information-sharing on disaggregated aspects of a PCD sector (e.g. remittances) or theme (e.g. national coordination structures), up-to-date list of PCD contacts in each Member State, focal point for PCD in Council Secretariat, annual high-level meetings on specific PCD topics, and establishment of a PCD 'corner' at the next EU Development Days.

- Better use the Impact Assessment process. Assessments should be used to take more explicit account of the impact on third countries and international relations, although both are already mentioned in the IA guidelines.

- Make the Rolling PCD Work Programme more operational. It should cover in its annex all policy and legislative initiatives the Council will deal with (i.e. the Indicative Council Agenda and planning of relevant Working Parties with inputs from Member States), not only the Commission Work Programme. The issue of how to handle the highlighted PCD agenda items should also be subject to consultation with Member States rather than being left to the discretion of the Presidency.

- Analyse PCD-specific resource constraints at the Council Secretariat and in the Council Working Parties and consider creating several PCD Expert Groups to advise the Council WPs and Coreper on PCD issues.

POLICY AREAS

TRADE

Trade is probably the policy with the greatest impact on each and every single developing country. All countries engage in trade and all of them rely, for a substantial part on trade for their economy to grow and to fight poverty. Trade is by far the most frequently mentioned PCD issue in developing countries' Country Strategy Papers.

Trade is a powerful engine for economic growth. While trade alone cannot solve development problems, openness to trade and support for supply capacity are important elements in any coherent development strategy.

For trade to serve as an engine for growth a number of conditions need to be fulfilled. Firstly, there needs to be sufficient access to export markets. Exports can be restricted at the border by tariffs, or in the case of services by regulations prohibiting entry, and behind the border by non- discriminatory standards aimed at ensuring health, safety and preservation of the environment.

Secondly, exports of goods and services need to be able to compete with local or imported products from other countries. This requires, among other things, the trade policy of the developing country concerned to encourage competitiveness, and to ensure inputs for industries at competitive prices. The role of trade in development is thus dependent on both EU and other countries' and regions' policy measures in the trade and aid area as well as those of developing countries. This chapter will focus on EU policy and in particular trade policy. It should be noted, however, that the interests of developing countries vary according to their export structures and levels of competitiveness, and that this poses a challenge to ensuring EU policy coherence for development.

1. Policy Framework

The existing EU market access regime in general is already quite favourable for developing countries. The average MFN[22] rate is 4%. In the context of the EU Generalised System of Preferences exports from developing countries receive a discount on this rate (see section on GSP below). Goods from Least-Developed Countries enjoy quota- and tariff-free access to the EU market under the 'Everything But Arms Initiative'. Since the Lomé Convention, that entered into force in 1975, and later under the Cotonou Agreement, the EU has granted duty-free treatment for some 99% of ACP exports. However, for certain developing countries a number of pockets of protection remain, principally for agricultural products. In the area of non-agricultural products, relatively higher tariffs apply to a small number of products such as textiles, clothing, footwear and fish.

Preferential trade arrangements for developing countries, as those granted by the EU, the US or Japan, raise a number of general problems. There is often a risk that production in the partner country shifts away from sectors of comparative advantage towards those with the highest preference margins. When the country offering preferences implements a general tariff reduction for specific products, the value of trade preferences decreases ( preference erosion ) and may render the sectors previously benefiting from preferences uncompetitive. Costly adjustments become necessary that can take a long time as adjustment capacities in developing countries are relatively low due to insufficient diversification, a weak capital market, obstacles to labour mobility as well as missing safety nets and training facilities.

Another problem of many preferential trade arrangements is tariff escalation which means the built-in increase in tariff levels with an increase in the degree of value added or processing of basic commodities. It often creates a disincentive to upgrade into higher value added production which could provide promising trade perspectives. Finally, preferences tend to create a ‘hub and spoke’ bias of developing countries' trade towards the northern hemisphere to the detriment of regional south-south trade.

Developing countries also report difficulties in exporting their products due to non-tariff barriers - sanitary and phyto-sanitary measures (SPS) and technical barriers to trade (TBTs), such as labelling and packaging standards. The same is true for rules of origin. They are designed to preserve the preference system from abuse, but they can have the perverse effect of preventing developing countries from benefiting fully from preferential trade regimes. Under the 10th EDF the CSPs of many ACP countries refer to SPS and EU rules of origin as a coherence issue.

Trade-related intellectual property rights (TRIPS), and in particular in relation to access to affordable medicines are another area of concern to developing countries. Striking the right balance between (a) providing incentives for research through patents and (b) ensuring access to the products of such research such as new drugs is crucial, e.g. in the fight against HIV/AIDS.

In conclusion, developing countries enjoy important tariff preferences, especially on the European market. But they still face a number of obstacles. The poorest countries' share in international trade remains marginal. To facilitate their integration into the world economy, these obstacles must be tackled along with a range of other factors, including those relating to competitiveness of exports.

Regional integration is one important way to improve the position of developing countries, by creating regional markets and generally improving the business environment. This is particularly important for the poorest countries since it will put them in a position to take advantage of emerging markets in other developing countries.

Trade integration challenges are particularly pressing across a large group of countries highly dependent on commodity exports, in particular agricultural ones, for whom unstable commodity prices have threatened progress towards the MDGs. When prices of commodities fell at the turn of the century a consensus developed on the need to step up the attention paid to commodity-dependent countries' efforts to restructure and diversify their commodity sectors in ways that are consistent with the market, provide greater revenue to producers and reduce their vulnerability. Even though the price situation is different today, in particular with the impact of the growing demand from China, India and other emerging economies, this needs to be monitored to ensure that commodity-dependent countries equip themselves to better adapt price fluctuations and continued competition but also with regard to the implications on net food importing countries and the effects of biofuel demand on commodity prices for the poorest countries.

The EU deals with trade policy issues at multilateral level through the WTO negotiations, at bilateral level through the negotiation of trade agreements with countries or regions, such as the EPAs with the ACP countries, and at unilateral level through its Generalised System of Preferences, as well as through its significant support to Aid for Trade expenditure which can support developing countries in tackling the challenges outlined above.

2. Practical Steps

WTO Negotiations

The EU is one of the key players in the WTO because it is one of the major defenders of multilateral trade rules as the best way to organise trade, since they are non-discriminatory, increase predictability and stability and they can provide important opportunities for developing countries to better integrate into the world economy. Through a well sequenced opening-up of their markets and proper flanking policies, developing countries will be able to seize the opportunities to promote economic development and to tackle poverty reduction.

The EU has been a major proponent in making development the key issue in the WTO negotiations and it has since been active in seeking a successful outcome of the DDA. However, as the negotiations are still ongoing and the principle of 'single undertaking' (nothing has been agreed until everything has been agreed) applies, the development-friendliness of EU trade policy cannot yet be assessed against the results of this Round but only by looking at the negotiation position.

On agriculture, the EC position strikes a good balance between European interests and the various diverging interests of developing countries. Whilst all developing countries perceive an interest in the reduction of trade-distorting domestic subsidies and the elimination of export subsidies, interests are more divergent when it comes to agricultural tariffs. While major agricultural exporters such as Brazil, Argentina and others see an interest in substantial reductions of agricultural tariffs, other developing countries are concerned about the possible effects that MFN tariff cuts on certain agricultural products will have on their preferential access regime. The EU has proposed, under certain conditions, substantial cuts in trade distorting domestic support and has already accepted the phasing out of its export subsidies by 2013. On agricultural tariffs it has signalled its readiness, under certain conditions, to accept average cuts close to those proposed by the G20 group of developing countries'.

On industrial goods, the EU has offered an ambitious cut in its tariffs that will eliminate tariff peaks and escalation. Developing countries have an interest in many of the products affected by tariff cuts. In turn, the EU is demanding cuts that will affect real tariffs imposed by more advanced developing countries as well, although cuts in tariffs for these countries will be less ambitious than those for developed countries and flexibilities are offered for sensitive sectors. This approach will offer opportunities for the EU's own trade but also for increased South-South trade. The Least- Developed Countries should be exempted from making such cuts.

On services the EU has offered various improvements relevant for developing countries, such as additional market access in computer and related services and as regards temporary access of service suppliers. It follows a strongly differentiated approach in its requests, fully taking account of the regulatory capacity of developing countries to manage liberalisation. Developing countries are encouraged to open sectors to foreign companies since their presence can strengthen the economic infrastructure and reduce costs such as in telecommunication services.

Economic Partnership Agreements

EPAs are conceived as long-term partnerships between the ACPs and the EU to promote poverty reduction and sustainable development by fostering the smooth and gradual integration of the ACP countries into the world economy. EPAs are essentially different from traditional Free Trade Agreements. They are asymmetric and take a comprehensive approach to development. The EPA negotiations are still ongoing, but should be finalised by the end of 2007 as agreed by the parties in view of the expiry of the WTO waiver to the commercial regime under the Cotonou Agreement. They are conceived with a view to creating markets among 6 ACP groupings rather than just opening them. Through reinforcing regional integration and by addressing supply-side constraints EPAs should stabilise the economic and regulatory environment and provide incentives for investment, trade and wealth creation.

Development objectives are at the centre of the EPA negotiations, in line with Article 34(1) of the Cotonou Agreement. Article 18 of the Agreement states that development strategies and economic and trade cooperation are mutually reinforcing. Article 34(3) of the same Agreement stipulates that economic and trade cooperation will aim to enhance the production, supply and trading capacity of the ACP countries as well as their capacity to attract investment. Support to ACP regional integration, flexibility and asymmetry, and WTO compatibility, are key principles of the negotiations.

Regional integration is a means to help ACP countries develop internal markets, create economies of scale and address supply-side constraints. It is true that some regions face overlapping membership. But the Commission is convinced that the EPAs can play a role in sorting out, reinforcing or accelerating existing integration efforts. The Sustainability Impact Assessment of the EU-ACP Economic Partnership Agreements concludes that "since the domestic markets in ACP countries are, on their own, relatively small and in many instances internationally uncompetitive, the current regional integration initiatives in the ACP regions are a key component in the development of more integrated and competitive markets"[23].

While keeping in mind WTO compatibility, the EC will use all available flexibility to offer a high degree of asymmetry in market-access commitments. Liberalisation will be progressive over long transition periods. "Flexibility (…) should include asymmetry in transition periods as well as in ACP market access commitments. Taking into account the development needs of ACP States, flexibility may be needed for sensitive products: exclusion of products, safeguards, as well as long transition periods, and in very exceptional cases even longer periods for very sensitive products".[24] The definition of sensitive products will reflect the countries' economic, social and environmental constraints, for instance in terms of food or income security.

This being said, EPAs will establish reciprocal preferential access and they will comply with WTO rules providing thereby the EU and ACP countries with a stable and sustainable framework for their trade relations. This will secure market access for ACP exports to the EU and provide opportunities by attracting investment and increasing productivity in those countries.

In response to the expected adjustment costs, the Commission has made clear its commitment to use the long transition period to support the implementation of reforms that help ACP countries move away from unstable tariff revenues towards a modern tax system that supports growth. In parallel the Commission has also committed itself to help countries to face and adjust to a possible fiscal impact observed due to trade liberalisation.

While in some regions there is still some opposition to include services in the EPA negotiations, the SIA sector studies suggest that there are benefits to be gained by making commitments in the sector. "Improved intra-regional and international transportation is a key component of improving trade, development and regional integration. Moreover, liberalisation of financial services can increase access to affordable credit, particularly for small and medium-sized enterprises, to encourage development."[25] Opening up the service market will however not be enough. It is clear, that a strong regulatory framework is crucial to ensure that these services are provided in a way that promotes development. Additional measures will need to be put in place, for example, to overcome problems of lending to small-scale economic actors, where lack of collateral is often the key problem.

Good progress has been made with the establishment of Regional Preparatory Task Forces (RPTFs). These are technical committees aimed at ensuring the link between the EPA negotiations on the one hand and the design of development strategies and definition of relevant development finance cooperation on the other. They are typically composed of representatives of the regional and national Authorising Officers[26] staff and regional institutions. Other donors and development banks have also been invited to join. The Commission core members of the RPTFs comprise representatives from different sectoral departments. Where specific expertise is required, the RPTFs may invite additional experts of either side to attend its meetings, on a temporary basis.

Free Trade Agreements with Countries in Latin America and Asia

In other regions, the EU also negotiates trade agreements with individual countries or with several countries as part of a regional integration organisation.

The EU seeks to develop an enhanced partnership with Latin American countries through a network of free trade agreements embodied in association agreements between the two regions. The aim is to establish a favourable climate for trade and investment contributing to growth and employment and to regional integration. Agreements with Mexico and Chile are already in force, while negotiations with Mercosur are still ongoing. The EU is also starting negotiations with Central America and the Andean Community.

In Asia, the EU has started to negotiate a free trade agreement (FTA) with ASEAN. This agreement is expected to lead to increased imports from ASEAN to the EU mainly in the service sector. As highlighted by the qualitative and quantitative feasibility studies on a potential EU-ASEAN FTA, EU imports in business services from ASEAN are expected to increase by 80% (or a €14 billion one-shot effect. The expected rise in total imports from ASEAN is estimated at 18.5% (one-shot effect as well).

The EU will take account of the development dimension in an overall context of sustainable development including a specific chapter on sustainable development, addressing both social and environmental aspects. The individual ASEAN countries will benefit from a certain degree of flexibility as regards transitional periods for liberalisation of trade in goods and services depending on their level of development. In addition, the Commission will undertake a Sustainability Impact Assessment in parallel with the negotiations to clarify the effects of the FTA on sustainable development on both sides. To strengthen the ASEAN countries' negotiating capacity, the FTA negotiations will be accompanied by capacity-building measures.

The EU is pursuing a similar approach in its negotiations with India, with whom it has also started to negotiate an FTA.

GSP

In addition to the multilateral and the bilateral level, the EU applies unilateral preferential market access schemes to all developing countries under the Generalised System of Preferences (GSP).

With the reform approved in 2005 the GSP has been made simpler, by reducing the number of arrangements from five to three. Since the principles guiding the GSP system have been established for a ten-year period, the system now provides more stability and predictability. The trading opportunities for its users have been increased by extending the product coverage of the general GSP system to 300 additional mostly agriculture and fishery) products.

The EC has also geared its GSP more towards promoting sustainable development and the social dimension of globalisation. A special incentive scheme for sustainable development and good governance, GSP+, has been set up and granted to countries that have ratified and effectively implement key international conventions on sustainable development, labour rights and good governance. It covers around 6400 products which enter the EU duty free (see also chapter on the Social Dimension of Globalisation) .

To direct the benefits of this system to the countries that really need it, beneficiary countries are regularly reviewed. When they are judged to have attained a level of economic development equal to that of developed countries they are excluded from the GSP. Similarly, when countries have reached a level of competitiveness in certain sectors which ensures further growth even without preferential access to the EU market, such sectors may be graduated. This graduation procedure is no longer done annually but on the basis of a three year period. Use is made of the sectional divisions of the internationally recognised Harmonised System, for the various categories of products, a method which is not only simpler but which gives the countries an incentive to diversify their economies.

Moreover, under the so called 'Everything But Arms/EBA Regulation' the Community grants duty-free market access for all LDC exports. EBA provides the most favourable regime available. Roughly 2 400 products already enter the EU market duty-free from all countries. Practically all remaining products are covered by EBA and are granted duty-free access (zero-duty rate) to the EU market. Only products from Chapter 93 (arms and ammunition) of the EU's Combined Nomenclature are not covered by EBA. In addition, imports of rice and sugar are not being fully liberalised immediately. Duties on those products will be gradually reduced until duty-free access will be granted for sugar in July 2009 and for rice in September 2009. In the meantime, there are duty-free tariff quotas for rice and sugar, which are increased annually.

Rules of Origin

Rules of Origin are necessary to ensure that the benefits of the beneficial trade regime accrue to the countries for which these preferences are intended. They need to be sufficiently stringent to avoid preferences being exploited by countries for which they are not intended - otherwise, trade circumvention risks undermining the whole system. At the same time, RoO need to be as simple and as relaxed as possible, so as not to undermine the ability of beneficiary countries to take advantage of the preferences available.

The Commission is presently in the process of revising its Preferential Rules of Origin, both those applying to the GSP, including Everything But Arms, and those to be negotiated with ACP countries under the ongoing EPA negotiations. Simplification and relaxation of the rules of origin are the key thrust of this revision, as set out in the Commission's Communication of March 2005 which identifies the key objectives of reforming the Preferential Rules of Origin. In this Communication the Commission expressed its view that Rules of Origin needed to be made simpler, more transparent and easier to use, particularly with a view to making them more development-friendly. Given the important trade implications of changing the preferential rules of origin, an impact assessment will be undertaken prior to presenting substantive proposals. The reformed rules of preferential origin should be based in principle on the across-the-board value-added criterion, with other elements of trade facilitation referring to the simplification of procedural aspects and an improvement in the mechanisms for control. It should be noted, though, that developing partner countries are far from having adopted a unified position on the reform of the RoO. The challenge for the Commission will be to strike the right balance between, on the one hand, the views and interests of those opposed to a wide-ranging relaxation, and on the other hand, the development objectives set out in the 2005 Communication.

Rules of Origin – an example

The Swedish National Board of Trade has studied the degree of use of the EU's preferential systems for the least-developed countries, the 'Everything But Arms' initiative. The report shows that many developing countries, despite the absence of customs tariffs, cannot derive benefit from existing market access. This is due to the low added-value operations that normally take place in these countries, which are considered as insufficient for the product to gain the preferential status. For example, if a plastic pipe is produced in a developing country, normally this is not enough for ensuring origin in that country and preferential treatment for export to the EU. In principle, the country must start a chemical industry and produce the plastic in-country for the pipe to fulfil the requirements. The same is often true with regard to the assembly of machinery and home electronics, as they imply normally low added-value operations: a processing going beyond a simple assembling of non-originating inputs is required to consider the machine originating in the country for preferential purposes.

An ODI Study on Rules of Origin (ODI Briefing Paper 12 on 'Creating Development-Friendly Rules of Origin in the EU', October 2006, p. 1, gives the example of Lesotho. The country exports trousers made from Chinese cloth to the USA under the African Growth and Opportunity Act (AGOA), since US origin rules currently accept for a limited number of developing countries to use Chinese fabric to export garments under preferential origin to USA as long as the volume of these garments does not exceed a cap fixed annually; Lesotho cannot profitably export the same trousers to Europe because the EU deems them not to be really originating in the country as the operation carried out in Lesotho implies a too low added value(and therefore the trousers are ineligible for the trade preferences that it notionally offers to Lesotho and not to China).

SPSs and TBTs

SPSs and TBTs are important in order to ensure human, animal and plant health, safety and preservation of the environment. At the same time, they pose challenges to exporters from developing countries.

There are both public/compulsory and private /voluntary standards, with the latter often being the more stringent ones. Lowering standards is seldom an option as they serve important policy objectives and provides assurance to consumers on the quality and safety of the products, without which consumers may not be interested in buying the product at all.

To address the problem the EC finances projects and initiatives to strengthen developing countries' capacity to respect SPSs and TBTs.

For example, the Commission supports developing countries in implementing[27] Regulation (EC) No 882/2004[28] on official controls performed to ensure the verification of compliance with feed and food law, animal health and animal welfare rules in order to build the institutional capacity required to meet the requirements referred to in the said Regulation through

- a phased introduction of some of the requirements under the Regulation, under certain conditions;

- assistance with providing the information related to general import conditions, if necessary by Community experts;

- the promotion of joint projects between developing countries and Member States;

- the development of guidelines to assist developing countries in organising official controls on products exported to the Community;

- sending Community experts to developing countries so as to assist in the organisation of official controls;

- participation of control staff from developing countries in the training courses under the DG Health and Consumer Protection on 'Better training for safer food'.

The Regulation is a good example of how assistance to developing countries is made explicit, and is of particular importance as it recapitulates the role and tasks of official bodies that need to carry out inspection, verification and certification activities. Many of the deficiencies identified by the Commission's Food and Veterinary Office in developing countries are exactly those related to the lack of control competence of the Competent Authorities. Providing for the opportunity to address these issues bottom-up is a major step forward in building capacity in developing countries as well as in opening/maintaining market opportunities towards the EU.

The European Commission launched in 2007 a specific project called'Strengthening food safety systems through SPS measures in ACP countries' amounting to €30 million. The objective of this project is to allow food and feed trade to contribute more to poverty reduction in beneficiary ACP countries by establishing food and feed safety systems for export products in ACP countries that are in line with regional, international and EU standards.

In addition, the Commission contributes to the Codex Trust Fund and other international standard setting bodies to ensure active and effective participation of developing countries in standard setting work, as well as to the Standards and Trade Development Facility (STDF). This facility is a global programme in capacity building and technical cooperation established by the Food and Agriculture Organisation of the United Nations (FAO), the World Organization for Animal Health (OIE), the World Bank, the World Health Organisation (WHO) and the World Trade Organisation (WTO).

The strategic aims of the STDF are:

- to help developing countries enhance their expertise and capacity to analyse and implement international sanitary and phyto-sanitary (SPS) standards, thereby improving their human, animal and plant health situation, and thus the ability to gain and maintain market access; and

- to act as a vehicle for coordination among technical cooperation providers, the mobilisation of funds, the exchange of experience and the dissemination of good practice in relation to the provision and receipt of SPS-related technical cooperation.

To achieve these aims, the STDF acts both as a coordinating and a financing mechanism.

It is important to note that in addition to facilitating international trade, SPS capacity-building can result in improved human and agricultural health conditions for local markets and so favour economic and social development.

Aid for Trade

Aid for Trade is one of the means by which the EU supports progress towards the Millennium Development Goals. Beyond technical assistance for implementation of trade policies (including, for instance, customs policies), a consensus has developed in recent years as to the need to go further and incorporate into cooperation strategies support for the development of productive capacity, support for trade-related infrastructure and support to overcome other supply constraints.

In December 2005 the EU pledged to collectively increase its aid for trade to €2 billion a year from 2010 for all developing countries, €1 billion of it in Community aid and €1 billion in bilateral aid from the Member States. A significant share of these resources will be attributed to the ACP countries in the context of the EPAs. The EU supports the recommendations of the WTO Aid for Trade Task Force and is at present engaged in developing a joint Commission and Member State Strategy on Aid for Trade which will be finalised in the autumn of 2007, with strong support from most Member States. The basic elements to be included in this strategy were agreed by the Council on 4 April 2007.

While Aid for Trade is not part of the single undertaking, it delivers an important complement to the negotiation agenda ensuring assistance to help developing countries to take advantage of new and existing opportunities to trade, assisting them with the implementation of new agreements and if necessary helping them to adapt to a changing external trading environment.

Member States praised the decision taken by the EU to pledge €2 billion a year from 2010 for aid funds to support trade, including the partner countries' supply capacity. Some Member States have already indicated by how much they will increase their bilateral development funding earmarked for trade, in order to reach the collective target of €2 billion. One Member State has voiced a concern related to the calculation of the bilateral contribution to the Aid for Trade initiative. The difficulty stems from calculating the contribution of bilateral programmes in the area of private-sector development to Aid for Trade. A more comprehensive definition of Aid for Trade in the context of the partners' country's national development plan is suggested.

The general commitment of all Member States towards a more coherent EU trade policy is demonstrated by their willingness to contribute financially to this PCD thematic area. The graph below shows that the large majority of respondents (20 out 23) provided 'some', 'substantial' or 'full' additional assistance to support developing countries in strengthening their trade capacity.A survey recently published by the Commission[29] shows that additional efforts are needed though. According to this report in 2006, most Member States had not yet started to increase their trade related assistance (TRA). Only nine Member States (Belgium, Germany, Greece, Finland, Ireland, Luxembourg, Poland, Sweden and the UK) increased their TRA allocations in 2006. 18 Member States did not increase their spending. As far as the future geographical focus of TRA is concerned, some patterns emerge although not very clearly: Member States seem to attach great interest to neighbourhood countries, in particular Eastern Europe, and to Africa as a continent. Asia and Central and South America attract little interest. The Caribbean and the Pacific attract virtually no interest for future TRA.

The additional assistance provided by Member States is directed through the different development cooperation channels. Most Member States provide significant funds through international channels, by funding international organisations and their own initiatives. The most frequently used are the Doha Development Agenda Global Trust Fund (the DDAGTF) and the Integrated Framework (IF). The DDAGTF provides technical assistance and advisory services to developing countries to build capacity and participate fully in the Doha Development Agenda. The IF and its 2007 offshoot, the Enhanced Integrated Framework (EIF), have a wider objective: targeting least-developed countries to assists them to expand their participation in the global economy whereby enhancing their economic growth and poverty reduction strategies. The importance of linking trade to developing countries' poverty strategies is highlighted by two Member States as a key factor of successful sustainable development. Member States supported several international organisations: UNCTAD, ITC, World Bank, ACWL (the Advisory Centre on WTO Law), AITIC (the Agency for International Trade Information and Cooperation).

Several Member States funded research studies and position papers that significantly contributed to enhancing the policy debate on trade within the EU and internationally. Other MS have provided direct support to individual partner countries (both developing countries in the South and transition countries in the East) to enhance their capacity to deal with trade issues, to incorporate them into their national strategies and/or to improve their business environments. One Member State also mentioned the support it provided to selected NGDOs involved in trade projects, for example ICTSD, the International Centre for Trade and Sustainable Development based in Geneva.

Commodities

The Commission supports efforts by commodity-dependent countries to restructure and diversify their commodity sector. After the agreement on an EU Action Plan on Commodities in 2004, the Commission is now in the process of setting up a specific programme to help the most dependent countries to implement effective commodity strategies and manage commodity-related risks.

The Community pays specific attention to these issues in the WTO context, for example by working towards a solution regarding cotton. The EU is willing to help the C4 (Burkina Faso, Benin, Chad, Mali) and on 16 June 2006 tabeled a very ambitious proposal suggesting the elimination of the most trade distoring support in line with the EU cotton reform in place since 1 January 2006, elimination of export support as well as duty and quote free market access for LDCs. The EU is also one of the largest contributors to the 'Cotton initiative'.

Trade-Related Intellectual Property Rights (TRIPs)

The entry into force of the TRIPS Agreement in 1995 marked the emergence of political debates on the impact of intellectual property rights on development. The main focus of this controversy was that TRIPS, obliging WTO Members to introduce patent regimes for pharmaceuticals, could have a negative impact on the affordability of drugs. From the outset the EC has been at the forefront of the debate on TRIPS and access to medicines, and has played a lead role in the WTO. These discussions first led to the adoption of the Declaration on TRIPS and Public Health at the Doha Ministerial Conference in November 2001. This Declaration clarifies the relationship between TRIPS and public health policies of WTO Members and rebalances its interpretation, confirming the Members' right to use flexibilities contained in the TRIPS Agreement, including compulsory licensing. However, countries with no manufacturing capacity in the pharmaceutical sector were not able to use compulsory licensing, as TRIPS limited such use predominantly to supply of the domestic market. Therefore, the TRIPS Council was instructed to find a solution to this issue. After long and difficult negotiations, in which the EC took an active part, the WTO adopted a temporary decision (waiver) on 30 August 2003 allowing WTO Members to export patented medicines to third countries with no manufacturing capacity in the pharmaceutical sector, by making use of compulsory licences. On 6 December 2005 the WTO adopted a decision transforming the waiver decision into an amendment to TRIPS. On 17 May 2006 the EC adopted Regulation (EC) No 816/2006 to implement the waiver decision into Member States' patent laws. Developing countries are starting to make use of this amendment to the TRIPS agreement.

Another debate has taken place in the WTO/TRIPS context on the relationship between intellectual property and biodiversity. This debate mainly revolves around the alleged contradiction between (i) the recognition by the Convention on Biological Diversity (CBD) of the States’ sovereign rights over their generic resources and (ii) the possibility, under TRIPS, to grant patents on inventions incorporating genetic resources. As part of their sovereignty rights States can regulate property, access and contracts relating to access to genetic resources, and regulate conditions, in particular as regards the fair and equitable sharing of the benefits arising from the use of genetic resources. Developing countries claim that TRIPS would encourage bio-piracy, i.e. abusive patenting, by Northern companies of genetic resources from the South, and should therefore be reconciled with the CBD. They propose amending TRIPS to introduce disclosure requirements with regard to the origin of genetic resources used in inventions, evidence of prior informed consent and benefit-sharing. Some WTO Members oppose any amendment to TRIPS, considering that the patent system is not the appropriate means of meeting CBD objectives and preventing erroneously granted patents. The EC has adopted a constructive approach, saying that it was ready to look at concrete solutions, provided these do not affect the balance of rights and obligations under TRIPS. In this spirit, the EC submitted a comprehensive contribution to the WTO in September 2002. In December 2004 the EC submitted a detailed proposal on disclosure of origin to WIPO. This issue is still under discussion in the context of the DDA negotiations.

3. Assessment

The EC has not only a well established policy regarding policy coherence for development in the field of trade but also the institutional mechanisms and capacity to execute this policy. The positions taken by the EU in the negotiations reflect a coherent approach towards development, with a specific focus on the needs and interests of the poorest and least-integrated countries.

Besides the ISC, the main tool to ensure PCD in trade consists of the Trade Sustainability Impact Assessments. They are carried out by independent external experts and identify the potential economic, social and environmental impacts of any given trade agreements, not only in the EU but also in the countries or regions with which the EU is conducting negotiations. The aim is to bring the SIA findings to the attention of the negotiators and all interested parties in order to help to optimise policy decision-making. The SIAs assess not only the more traditional economic impacts of trade liberalisation (e.g. trade and output growth), but also its non-trade impacts such as development, environmental and social dimensions, including gender-specific outcomes. By informing negotiators of the possible effects, these assessments can help policy-makers and trade negotiators to integrate sustainability into trade policy more effectively. Trade SIAs can also provide material for the design of possible accompanying measures to maximise the positive impacts of an agreement and to reduce any negative impacts.

Member States are supportive of SIAs but they have been questioning the timing, quality and participatory approach.

Member States' assessment of the EU's overall progress on PCD commitments covering trade is among the most positive for all PCD commitments. Out of 22 Member States replying to this question, 21 gave a score of 'average' or higher, almost 50% indicating a 'good' or higher score.

Despite the fact that trade is an exclusive Community policy, Member States play an important role though the Article 133 Committee, which advises the Commission on negotiating trade agreements. Negotiation mandates and final results are approved by the Council. It is therefore also important that Member States integrate development concerns into their position adopted at this committee. Most Member States consider the various EU internal mechanisms to be constructive vehicles for policy dialogue and consensus building. In particular they mention the meetings focusing on trade and development of the ACP and CODEV expert working groups and the 133 Committee in charge of trade.

A separate survey carried out by the Commission[30] asked for the Member States' assessment of the existing coordination tools in Brussels on Aid for Trade, such as the Council Working Groups on ‘Development Cooperation' the 'ACP' Group, the Article 133 Committee, as well as the EU informal trade and development expert group. In contrast to their replies to the survey in previous years, there is now a clear agreement among Member States that these groups are adequate and that coordination of EU positions in international fora is sufficient.

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Many Member States praised the actions and decisions taken by the EU to help developing countries to benef