Communication from the Commission to the Council and the European Parliament - Trade and development - Assisting developing countries to benefit from trade
Date: 2002-09-18
Institutions: European Commission
Subjects: action programme, cooperation policy, developing countries, development aid, development policy, international trade, poverty, trade agreement, trade policy

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 18.9.2002
COM(2002) 513 final

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE
EUROPEAN PARLIAMENT

TRADE AND DEVELOPMENT

ASSISTING DEVELOPING COUNTRIES TO BENEFIT FROM TRADE

TABLE OF CONTENTS

PART I TRADE AND SUSTAINABLE DEVELOPMENT - CHALLENGES AND

OPPORTUNITIES....................................................................................................... 8

1.

1.1.

1.2.

1.3.

1.4.

1.5.

1.6.

2.

2.1.

2.2.

2.3.

Trade, growth and poverty ........................................................................................... 8

The place of developing countries in world trade........................................................ 8

Many developing countries are lagging behind ........................................................... 9

Poverty, inequality and trade........................................................................................ 9

The need for effective market access ......................................................................... 11

Policy, structural and institutional constraints ........................................................... 12

Regional integration is a valuable strategy ................................................................ 13

The Multilateral Trading System ............................................................................... 14

Advantages of the rules-based multilateral trading system........................................ 14

Difficulties in implementing WTO agreements......................................................... 15

Integrating development into trade: the Doha Development Agenda (DDA) ........... 16

PART II ASSISTING DEVELOPING COUNTRIES IN CAPTURING THE BENEFITS OF

TRADE ...................................................................................................................... 19

3.

3.1.

3.2.

3.3.

3.4.

4.

Integrating trade into development strategies ............................................................ 19

Trade reform in poverty reduction strategies ............................................................. 19

Complementarity, coherence, and co-ordination with other donors .......................... 20

Assistance for effective participation in the multilateral trading system................... 22

Other trade-related development assistance............................................................... 23

A programme of action to improve delivery of assistance ........................................ 25

Annex 1 - Overview of EU trade-related assistance ................................................................ 29

Annex 2 - The Integrated Framework for LDCs...................................................................... 31

2

ACP
ADB
ALINVEST
ALA
ASEAN
CSP
DAC
DDA
DDA GTF
DTIS
Doha
EBA
EBAS
EDF
EDI
EPA
FDI
GATS
GATT
GSP
IAWG
IDB
IF
IFI
IFSC
ILO
IMF
IP

ITC
Johannesburg

LDC
MEA
MED
Monterrey

NIP
OECD
PRO INVEST
PRSP
RIP
RSP
RTA
SPS
SDT
TBT
TRA
TRIPS

List of Acronyms

African, Caribbean and Pacific
African Development Bank
Latin-America Investment Promotion Programme
Asia, Latin America
Association of South-East Asian Nations
Country Strategy Paper
Development Assistance Committee of the OECD
Doha Development Agenda
Doha Development Agenda Global Trust Fund
Diagnostic Trade Integration Study
4th WTO Ministerial conference in Doha, Qatar, in November 2001
Everything But Arms Initiative for Least Developed Countries
EU-ACP Business Assistance Scheme
European Development Fund
Electronic Data Interchange
Economic Partnership Agreement
Foreign Direct Investment
General Agreement on Trade in Services
General Agreement on Tariffs and Trade
Generalised System of Preferences
Inter Agency Working Group
Inter-American Development Bank
Integrated Framework for Least Developed Countries
International Financial Institutions
Integrated Framework Steering Committee
International Labour Organisation
International Monetary Fund
Intellectual Property

International Trade Center
UN  World  Summit  on  Sustainable  Development,  Johannesburg,  Sept
2002
Least Developed Country
Multilateral Environmental Agreements
Mediterranean
UN Conference on Financing for Development (held in Monterrey, Mexico,
March 2002)
National Indicative Programme
Organisation for Economic Cooperation and Development
Investment Programme for ACP Countries
Poverty Reduction Strategy Paper
Regional Indicative Programme
Regional Strategy Paper
Regional Trade Agreement
Sanitary and Phyto-sanitary
Special and Differential Treatment
Technical Barriers to Trade
Trade Related Assistance
Trade Related Intellectual Property Rights

3

TRTA/CB
UN
UNCTAD
UNDP
UNEP
UR
WB
WCO
WHO
WIPO
WSSD
WTO
WTO TA Plan

Trade Related Technical Assistance and Capacity Building
United Nations
United Nations Conference on Trade and Development
United Nations Development Programme
United Nations Environment Programme
Uruguay Round
World Bank
World Customs Organisation
World Health Organisation
World Intellectual Property Organisation
World Summit on Sustainable Development (held in Johannesburg, Sept. 2002)
World Trade Organisation
World Trade Organisation Technical Assistance Plan

4

EXECUTIVE SUMMARY

Building on Doha, Monterrey, and Johannesburg

The importance of the relationship between development, trade and integration of developing
countries into the world economy has been increasingly recognised at the international level,
and notably at three major conferences over the last year:

(cid:1)  The Fourth Ministerial Meeting  of  WTO Ministers  in  Doha  in  November  2001  launched
the  Doha  Development  Agenda,    a  new  approach  to  trade,  centred  on  development  and
supported  by  capacity  building  to  help  all  countries  to  participate  effectively  in  those
negotiations.    The  new  approach  aims  at  fostering  development  directly,  rather  than  by
simply granting developing countries more time to adapt and to implement agreements1.

(cid:1)  The UN Conference on Financing for Development in Monterrey in March 2003, at which
world  leaders  stressed  the  importance  for  development  of  support  to  remove  supply  side
constraints  to  trade  and  of  effective,  secure  and  predictable  financing  of  trade  related
assistance and capacity building.

(cid:1)  And  most  recently,  in  the    Johannesburg  World  Summit  on  Sustainable  Development
(WSSD), world leaders recognised the importance of trade for sustainable development by
underlining  the  need  for  further  efforts  in  support  of  sustainable  trade,  beyond  those
already made in Doha and in Monterrey, and by stressing the need for mutually supportive
trade, development and environment policies. Key outcomes in Johannesburg include: the
need to promote a supportive and open international economic system that would lead to
economic  growth  and  sustainable  development  in  all  countries  and  better  address  the
problems  of  environmental  degradation;  the  recognition  of  the  potential  of  regional
agreements to contribute to sustainable development; the commitment to support capacity
building to enable commodity dependent countries to diversify; the encouragement for  use
of  national  impact  assessment  to  identify  trade,  environment  and  development  linkages;
and finally, the support for initiatives to encourage trade in environmentally friendly goods
and services, including organic products.

Efforts are now required to transform these commitments into action.

What this Communication is about

In this context, the purpose of this communication is to spell out the way the EU can fulfil its
global  commitments  in  support  of  the  efforts  of  developing  countries  to  better  reap  the
benefits of trade and investment.  In doing so, the communication:

(cid:1)  Stresses  the  fact  that  trade  can  foster  growth  and  poverty  reduction  and  be  an  important
catalyst for sustainable development.  Those  countries  that  have  integrated  into  the  world

1  This  programme,  known  as  the  “Doha  Development  Agenda”,  comprises  several  instruments:  a  Ministerial
Declaration setting out the mandate for negotiations in a number of areas, as well as a work programme
for WTO Members in other areas, a Ministerial Decision on implementation-related issues and concerns
(which deals  with  some  of  the  difficulties  that  developing  WTO  Members  have  had  in  implementing
certain  WTO  Agreements),  and  a  Ministerial  Declaration  on  the  TRIPs  Agreement  and  public  health
(which deals with the relationship between intellectual property rights and public health issues).

5

                                                
economy  through  trade  and  investment  have  enjoyed  higher  economic  growth  and  an
improvement  in  many  key  social  indicators.  In  recognition  of  this,  in  2000  the  EU
identified  trade  as  one  of  the  six  priority  areas  for  development  policy2.  However,  trade
openness alone is not sufficient to combat poverty and the extent to which trade contributes
to  poverty  reduction  depends  on  other  policies  as  well.  Trade  reform  must  be  part  of  a
wider,  country-owned  poverty  reduction  strategy  for  which  a  combination  of  better
domestic policies and additional external support is needed.

(cid:1)  Identifies  essential  elements  to  ensure  a  better  contribution  of  trade  to  economic  growth
and sustainable development through the integration of trade and development strategies:
(i) sound macro-economic policies, effective economic and social governance, and human
capital development, including the promotion of core labour standards3; (ii) better market
access and balanced trade rules to underpin domestic reform; (iii) trade-related assistance
and capacity building to help developing countries with these tasks.

(cid:1)  Underscores  the  fact  that  multilateral  trade  negotiations  under  the  Doha  Development
Agenda,  together  with  certain  bilateral  and  regional  initiatives,  and  support  for  regional
integration  among  developing  countries,  are  the  vehicles  to  pursue  market  access4  and
improved  rules.    In  the  DDA,  the  Commission  will  work  to  achieve  an  outcome  that  is
development  friendly  in  both  areas.    For  example,  market  access,  particularly  in  those
products  where  developing  countries  have  a  comparative  advantage,  such  as  agricultural
goods  and  labour-intensive  manufactures,  is  of  course  extremely  important  for  helping
poor countries benefit from trade.

(cid:1)  Builds  on  the  April  2000  Commission  Communication  and  the  November  2000  Joint
Council-Commission  Statement  on  the  EU’s  development  policy  and  identifies  the  main
areas for the EU to concentrate its assistance for trade capacity building, which include (i)
assistance  for  WTO  accession  and  multilateral  trade  negotiations,  (ii)  support  for  the
implementation  of  existing  and  future  WTO  agreements  and  (iii)  support  for  policy
reforms and  investments  necessary  to enhance  economic efficiency and to  ensure  greater
participation in the world economy, including “trade and environment” technical assistance
and  capacity-building.  In  addition,  trade  capacity  needs  to    be  improved  through  other
trade-related  development  assistance  including  promotion  of  sound  macroeconomic,
sectoral and tax policies that improve the investment climate, as well as support for private
sector development; and support for the development of regional markets and institutions
among  developing  countries  particularly  via  the  negotiation,  implementation  and
application of bilateral and regional agreements with the EU.

(cid:1)  Stresses the need for coherence and synergies at all levels, notably as already indicated in

the Communication “Towards a global partnership for sustainable development”5.

2 Commission Communication on “The European Community’s Development Policy”, COM (2000) 212 final,
of  26  April  2000,  and  Joint  Council-Commission  Statement  on  the  European  Union’s  Development
Policy, 10 November 2000.

3  Commission  Communication  on  “Promoting  core  labour  standards  and  improving  social  governance  in  the

context of globalisation.”, COM(2001) 416 final, 18 July 2001.

4 Without underestimating, however, the role that unilateral market access concessions, through the GSP regime
and the EBA initiative for Least Developed Countries have played and will continue to play.

5 COM (2002)82 final, 13.02.2002

6

                                                
(cid:1)  And finally, proposes some practical, concrete initiatives to ensure greater effectiveness of
existing  and  planned  EU  actions  (by  the  Commission  and/or  the  Member  States)  or
proposals (to the international community at large).

Concrete proposals for action

The Communication proposes concrete proposals for action, grouped in three categories:

(a) Intensification of dialogue with partner countries

- a stronger  emphasis on trade issues  in  the  dialogue  on  Poverty  Reduction  Strategy  Papers
(PRSPs), or equivalent strategies;

- ensure that funding for this new priority, trade-related assistance, is adjusted as necessary in
the review of the Country Strategy Papers  and Regional Strategy Papers.

(b) Enhanced effectiveness of EU support

-  reinforce  trade  component  in  the  programming  exercise  in  EU  development  assistance,
relying on the Commission Task Force for Trade and Development;

- pay particular attention to the least developed countries and other low income countries;

-  examine  the  scope  for  funding  horizontal  trade-related  assistance  initiatives,  including
bilateral, regional and multilateral initiatives;

-  increase  EU  ability  to  design  and  deliver  training  programmes  for  negotiators  and
administrators, and establish networks in higher education institutions;

- provide technical assistance for sustainability impact assessments;

- reinforce efforts to improve developing country capacity in the Sanitary and Phyto-sanitary
field.

(c) Contributing to international effectiveness

-  ensure  policy  coherence  in  provision  of  trade  related  technical  assistance,  building  on  the
principles agreed in the Commission Communication on Development in 2000;

-  review  existing  mechanisms  for  co-ordination  of  Member  States,  and  promote  "best
practices";

- co-operate more efficiently with other international organisations;

-  continue  to  advocate  the  Integrated  Framework  for  Least  Developed  Countries,  and
participate actively in governing bodies of the IF;

- encourage Regional Development Banks to pursue trade capacity building;

- support the WTO Secretariat on WTO Technical Assistance, and continue to contribute to
the DDA Global Trust Fund.

Finally, the Communication proposes an overall review of EU trade-related assistance before
the end of 2005.

7

PART I TRADE AND  DEVELOPMENT - CHALLENGES AND OPPORTUNITIES

1. 

TRADE, GROWTH AND POVERTY

1.1. 

The place of developing countries in world trade

International trade flows have increased dramatically in the past three decades. An important
feature  of  world  trade  over  this  period  has  been  the  growing  participation  of  developing
countries6, resulting in an increase  in  their  share of  merchandise exports  from  less than one
fourth  to  almost  one  third  between  1970  and  1999.  Moreover  these  trends  have  been
accompanied  by  a  shift  in  the  composition  of  their  exports  from  primary  commodities  to
manufactures, particularly since the early eighties. Manufactures now account for 70 percent
of  developing  countries’  exports  after  hovering  at  around  20  percent  during  much  of  the
seventies  and  early  eighties.  The  share  of  agriculture  commodities  fell  from  about  20  to  10
percent over the same period7.

Trade  between  developing  countries  and  the  EU  mirrors  their  increased  integration  into  the
world trading system. After several years of sluggish growth, developing countries’ exports to
the EU have increased by 15 percent per year on average since 1995 and their trade balance
with  the  EU  went  into  surplus  in  1999  (Figure  1).  Developing  countries  as  a  whole  now
account for 42 percent of total EU imports, representing € 432 billion in 2000.

Figure 1: EU trade with developing countries 1995-2000 (billion €)

450
400
350
300
250
200
150
100
50
0

EU imports

EU exports

1995

1996

1997

1998

1999

2000

Source: European Commission

6  The  group  of  developing  countries  includes  all  countries  and  territories  classified  by  the  OECD/DAC  as
recipients  of  official  development  assistance  (ODA)  and  encompasses  Least  Developed  Countries,
Other  Low  Income  Countries,  Lower-  and  Upper-Middle  Income  Countries,  as  well  as  Malta  and
Slovenia. While most of the analysis is also valid for transition economies, the focus is on developing
countries.

7 “Trade and Development Report, 2002”, UNCTAD, Geneva, 2002.

8

                                                
1.2.  Many developing countries are lagging behind

However,  the  impressive  performance  of  developing  countries  as  a  whole  in  terms  of  their
increased share in world trade and their shift toward manufactures over the last three decades,
hides two important facts. First, with the exception of a few East Asian newly industrialised
economies,  exports  by  developing  countries  are  still  concentrated  on  a  limited  range  of
products  that  are  derived  mainly  from  the  exploitation  of  natural  resources  and/or  products
with  low  value-added  that  use  mainly  unskilled  labour.  These  activities  provide  limited
prospects  for  productivity  growth.  Even  though  statistics  show  a  considerable  expansion  of
developing  countries’  exports  of  technology-intensive  goods,  these  countries  are  often
involved in the low-skilled assemblage stages of international production chains. Most of the
technology and skills are embodied in imported parts and components and the greater part of
value-added accrues to producers in more advanced economies8.

Second,  a  large  number  of  countries  are  not  part  of  this  integration  process  and  actually
experienced a decline of their share in world trade.  Indeed, the export share of the 49 least-
developed countries (LDCs) fell from 3 percent in the 1950s to around 0.5 percent in the early
1980s and has hovered around this very low rate over the last two decades9.

A  combination  of  domestic  and  international  factors  helps  explain  why  these  countries  are
lagging behind. Policies that are not conducive to domestic or foreign investment and private
entrepreneurship,  low  levels  of  education,  corruption,  high  transport  costs,  poor  quality  of
infrastructure and services, as well as, in some cases, civil unrest and conflict, are among the
domestic reasons. At the international level key problems are dependence on a small range of
commodities  that  suffer  from  worsening  terms-of-trade;  highly  volatile  world  prices;  strong
competition  among  producers  and  limited  competition  among  buyers;  relatively  high  trade
barriers  throughout  the  world,  especially  in  agricultural  and  labour-intensive  goods;  and
persistent difficulties in exploiting trade preferences offered by OECD countries. Furthermore
increased competition for foreign direct investment puts many smaller economies in a  weak
bargaining position when seeking to attract appropriate investment10.

1.3. 

Poverty, inequality and trade

There  is  now  a  solid  set  of  studies  and  empirical  evidence  on  the  impacts  of  increased
participation in international trade and investment, from which two main conclusions can be
drawn. Firstly, those  countries  with a higher level of participation in international trade and
investment  tend  to  show  higher  growth  rates11.  Secondly,  if  trade  is  to  have  a  sustainable,
positive  impact  on  poverty  reduction,  it  must  be  part  of  a  wider,  country-owned  strategy,
which  includes  a  strong  element  of  human  capital  development  and  pays  attention  to  the
situation of vulnerable groups, including women.

Greater  trade  openness  is  generally  associated  with  higher  economic  growth,  although  both
the  direction  of  the  causality  and  the  measurement  of  “openness”  continue  to  be  debated.
What  can  be  said  with  relative  certainty,  though,  is  that  in  recent  years  “no  country  has

8 “Trade and Development Report, 2002”, UNCTAD, Geneva, 2002.
9 “Duty and Quota-Free Market Access for LDCs: An Analysis of QUAD Initiatives”, UNCTAD Geneva, 2001.
10 According to UNCTAD, developing countries share of FDI flows in 1999 declined for the second  year in a
row  to  19%  compared  to  a  peak  of  41%  in  1994.  In  addition,  FDI  flows  from  the  EU  and  US  are
projected to have fallen by 37% and 42% in 2001 and a rapid recovery seems unlikely.

11  “Globalization,  Growth  and  Poverty”,  World  Bank,  2002,  Washington,  DC,  and,  “Trade,  Growth  and

Poverty”, Dollar and Kraay, mimeo, 2001.

9

                                                
developed  successfully  by  turning  its  back  on  international  trade  and  long  term  capital
flows”12.

The gradual removal of trade barriers combined with domestic reforms, aimed at building up
sound  macroeconomic  policies,  effective  institutions  and  regulations,  and  investment  in
infrastructure and human capital, generally results in a “virtuous circle” of opening up, greater
competitiveness  and  higher  growth  (which  tends  to  become  more  endogenous,  even  when
originally export-driven).

The  countries  that  have  successfully  combined  more  trade  with  higher  growth  and  human
development tend to have some key features in common. They have gradually opened up their
economies as part of a wider development strategy based on two main pillars: improving the
investment  climate  for  the  private  sector  to  generate  jobs  and  empowering  poor  people,
especially through better education. This highlights the fact that the institutional and overall
policy environment within which trade liberalisation takes place is the determining factor of
the impact of trade reforms on economic performance13.

Regarding  the  relation  between  trade  and  inequality,  research  indicates  that  on  average  the
poor  benefit  from  trade-induced  growth  proportionately  as  much  as  the  rest  of  the
population14.  In  addition,  as  trade  barriers  in  many  countries  often  seek  to  protect  a  small
privileged  group,  trade  liberalisation  tends  to  reduce  monopoly  rents  and  the  value  of
connections to bureaucratic and political power15. Most studies conclude that trade does  not
impact extensively on social and economic inequality, which is mainly a function of domestic
policies, on which trade has little impact16.

It  is  inevitable,  however,  that  trade  openness  will  result  in  restructuring  of  the  economy,
negatively  affecting  some  sections  of  the  population,  particularly  when  it  encourages  the
adoption  of  skill-biased  technical  change  in  response  to  increased  foreign  competition.  The
process  of  trade  reform,  in  particular  the  sequencing  and  speed  of  the  reforms  and  any
accompanying measures must therefore be capable of addressing the potential adverse effects
of trade opening. In particular, for trade to have a positive impact on sustainable development,
it  is  important  to  ensure  that  increased  trade  and  economic  growth  will  not  result  in  over-
exploitation of natural resources. Otherwise, short term economic gains are likely to be offset
by  medium  or  long-term  costs,  including  economic  costs,  due  to  environmental  and  health
related consequences.

The  above  brief  analysis  indicates  that  in  order  for  trade  to  contribute  to  the  fight  against
poverty  and  inequality  and  maximise  the  potential  benefits  of  higher  integration  into  the
world economy, trade reforms must be part of a wider sustainable development strategy that

12  “Trade  Policy  Reform  as  Institutional  Reform”,  Dani  Rodrik  in  “Development,  Trade  and  the  WTO—a

Handbook”, The World Bank, Washington, DC, 2002.

13 Dani Rodrik and others go as far as to say that the institutional setting within which trade policy operates is
more  important  for  economic  performance  than  the  levels  of  trade  barriers  themselves.  See  e.g.
“Institutions  for  High  Quality  Growth—What  They  Are  and  How  to  Acquire  Them”,  Dani  Rodrik,
Studies in Comparative International Development, 2000.

14 Dollar and Kraay, 2001
15 “Trade, Growth and Poverty—a Selective Survey”, A. Krueger and Berg, 2002. Other studies on the subject
include:  “Trade  and  Poverty—Is  There  a  Connection?”  A.  Winters;  “Trade,  Growth  and  Disparity
Among  Nations”,  D.  Ben-David  in  Special  Studies,  WTO,  1999;  and  “Trade  Liberalization  and
Poverty: a Handbook”, CEPR.

16 See, for example papers from the Conference on Globalisation, Growth and (In)equality, 15-17 March 2001,

Warwick, UK at http://www.warwick.ac.uk/fac/soc/CSGR/Conf-papers.html

10

                                                
includes,  inter  alia,  a  combination  of  sound  macroeconomic  policies,  improved  delivery  of
education and health services, appropriate social safety nets, respect for core labour standards,
improved  infrastructure  and  access  to  the  markets  particularly  for  population  in  rural  areas
and  the  effective  enforcement  of  a  regulatory  framework  that  guarantees  the  proper
functioning  of  the  markets  and  prevents  dominant  business  behaviour  and  corruption,
appropriate environmental legislation.

Such  wider  domestic  strategies,  aimed  at  capturing  the  benefits  of  globalisation  and  of
ensuring their fair distribution, call for external financial support focused on reform, capacity
building and infrastructure. Key in this respect is the role of the  Bretton Woods  Institutions
whose leverage is particularly high. It is therefore important for the EU to ensure effective co-
ordination  with  these  institutions,  but  also  to  ensure  that  their  lending  policies  take  into
account  the  priorities  agreed  upon  between  the  EU  and  the  beneficiary  countries  in  the
Country  Strategy  Papers,  through  strengthened  co-ordination  between  the  Commission  and
the Member States.

1.4. 

The need for effective market access

Since the Uruguay Round (UR) of multilateral trade negotiations, obstacles to trade have been
greatly  reduced,  both  in  industrialised  and  in  developing  countries.  The  UR  also  extended
multilateral  disciplines  to  previously  excluded  areas  such  as  standards  for  Intellectual
Property Rights (IPRs), greater discipline in support to agriculture, the abolition of Voluntary
Export Restraints (VERs)  and the gradual liberalisation of trade in textiles and  clothing.  As
far as market access is concerned, average tariff rates have been significantly reduced world
wide.

However,  developing  countries  still  face  considerable  barriers  to  their  exports  to  both
developed and other developing countries. Since most of the world’s poor work primarily in
agriculture  and  labour-intensive  industries17,  further  liberalisation  of  international  trade  in
these  sectors  remains  key  to  poverty  reduction.  Yet,  in  high-income  countries  the  average
tariff  rate  on  agriculture  is  almost  double  the  tariff  for  manufactures.18  And,  despite
significant  progress  since  the  1980s,  import  tariffs  in  developing  countries  remain  almost
double  those  in  industrialised  nations.  Since  a  growing  share  of  world  trade  is  between
developing  countries,  important  potential  welfare  gains  can  also  be  made  by  gradually
reducing trade barriers in these countries as they develop their competitive advantages

Tariff peaks and tariff escalation are of special concern to developing countries, even in the
presence  of  preferential  access  schemes.  In  spite  of  progress  since  the  Uruguay  Round,
support  to  agriculture,  in  the  form  of  subsidies,  remains  sizeable  in  industrialised  countries
and  often  distorts  trade  and  may  penalise  developing  countries19.  Furthermore,  non-tariff
barriers,  such  as  sanitary  and  phyto-sanitary  standards  are  increasingly  complex  and  have
sometimes  constrained  the  export  potential  of  poor  countries20.  Developing  countries
frequently encounter problems in meeting veterinary and phyto-sanitary standards that apply
to  imports  of  agricultural  and  food  products  to  the  EU.  The  monitoring  of  residues  and

17 Rural poverty accounts for around 63 percent of poverty worldwide, and represents between 65 and 90 percent

in Sub-Saharan Africa.

18 “Global Economic Prospects 2002”, World Bank, Washington DC, 2002.
19 Total support to agriculture (as defined by the OECD) is estimated to have reached US$327 billion in 2000

(“Global Economic Prospects 2002”, World Bank, 2002).

20 Otsuki, T et al (2001) Saving two in a billion: a case study to quantify the trade effect of European food safety

standards on African exports, World Bank.

11

                                                
pathogens which are banned or controlled in the EU is an example of one area where there are
particular difficulties. The resulting problems can be a source of trade tensions and also serve
to  reduce  export  and  development  opportunities  in  the  developing  world.  Investment  is
necessary in the countries concerned in order to bring their regulatory, scientific and technical
infrastructure up to the required standards to meet the EU requirements in question. Solutions
to sanitary and phyto-sanitary problems merit particular attention, therefore, in the EU’s trade
and development related assistance.

Recourse to  anti-dumping measures in particular,  has also  increased,  both  in  developed  and
developing countries21. At the 3rd Least Developed Country (LDC) Conference in Brussels in
2001, the EU committed itself not to launch anti-dumping actions against the LDCs.

The EU’s Generalised System of Preferences (GSP), which is in operation since 1971, is an
important  element  of  its  instruments  for  encouraging  exports  from  developing  countries.
Since  1995  quantitative  limitations  were  abandoned,  and  the  whole  GSP  regime  has  been
streamlined  and  made  more  efficient  in  December  200122.  Other  EU  initiatives  to  assist
developing countries take advantage of trade opportunities include the Sustainable Trade and
Innovation Centre.  Yet, the concessions offered through the GSP,  including the  Everything
But Arms (EBA) initiative for the Least Developed Countries, have not always been used to
the  full,  and  improved  and  more  comprehensive  use  of  the  GSP/EBA  facilities  can
substantially increase effective market access for developing countries.

1.5. 

Policy, structural and institutional constraints

Increased  market  access  alone  and  additional  trade-related  assistance  will  not  automatically
lead to trade expansion, growth and poverty reduction in developing countries, especially the
poorest.  There  is  a  clear  need  to  make  market  access  more  effective  to  help  exporters’
compliance with applicable regulations and to exploit market access concessions. Supply side
constraints  often  act  as  obstacles  to  trade  expansion.  Important  factors  constraining  supply
response include: inappropriate macroeconomic and tax policies, weak regulatory frameworks
and  implementation;  dependence  on  a  small  range  of  low  value-added  exports;  and  high
transport costs, unreliable utilities, poor telecommunication and inefficient financial services.

Addressing  these  constraints  requires  strengthening  institutional  capacity,  including  the
promotion of  social dialogue,  developing new legislation as well  as significant  investments.
Examples  of  investments  include  laboratories  to  handle  SPS  standards,  inspection  facilities,
offices  for  standardisation  and  registration,  storage  facilities,  and  upgrading  of  science  and
technology  capacity  through  appropriate  research  programmes,  as  well  as  support  for  the
formulation  of  regulatory  frameworks  and  policies  for  the  effective  use  of  information  and
communication  technologies.  Support  services  to  enterprises  in  the  areas  of  payments,
insurance and transport also need to be upgraded. All this requires considerable resources and
forward  planning.  Therefore,  efforts  by  developing  countries  to  reform  and  increase  their
trade  capacity  need  to  be  accompanied  by  additional  external  assistance  from  developed
nations 
the
commitments  made  at  the  WSSD  the  EU  needs  to  assist  with  enhancing  the  capacities  of
vulnerable countries to benefit from trade opportunities, notably in sectors where they have a

increased  market  access  opportunities.  In 

that  complements 

line  with 

21 Even if anti-dumping investigations do not always lead  to  actual  anti-dumping  measures,  the  simple  fact  of
launching  them  increases  uncertainty  and  leads  importers  to  look  for  alternative  suppliers.  Anti
dumping measures are not applied by the Community in the agricultural sector, nor did the Community
apply the general safeguard clause on agricultural products.

22 Council Regulation (EC) No 2501/2001 of 10 December 2001.

12

                                                
comparative advantage and where there is a potential  for  so-called  “win-win” opportunities,
such  as  environmentally  friendly  products  and  organic  food  products.  In  relation  to  the
problem  of  commodity-dependence,  the  EU  and  other  participants  committed  themselves  at
the WSSD to building the capacity of these countries to diversify through, inter alia, financial
and  technical  assistance  and  international  efforts  to  address  the  instability  of  commodity
prices and declining terms of trade. The Commission will consider how these objectives can
be achieved.

1.6. 

Regional integration is a valuable strategy

Regional Trade Agreements (RTAs) amongst developing countries or between developed and
developing countries, can contribute to the participation of developing countries in the global
economy and reinforce the multilateral trading system provided they are outward-oriented and
lead to lower external trade barriers. South-South integration can enhance efficiency, increase
competition between peers in development, enable economies of scale, increase attractiveness
to  Foreign  Direct  Investment  (FDI)  and  secure  greater  bargaining  power.  Last  but  not  least
regional integration can contribute to the consolidation of peace and security. The importance
of regional integration in supporting sustainable development was confirmed in the WSSD.

The  power  of  regional  integration  is  enhanced  when  co-operation  goes  beyond  border
measures  and  is  extended  to  deeper  integration,  including  the  convergence  of  domestic
policies  such  as  investment  and  competition  policies;  regulatory  convergence  and/or  the
adoption  of  harmonised  or  common  standards,  including  where  appropriate  environmental
standards;  the  development  of  regional  financial  services  and  the  co-ordinated  provision  of
infrastructure  such  as  regional  telecommunications,  energy  and  transport  networks.  The
regional dimension can provide an incentive to put in place sound policies and institutions for
example for macroeconomic stabilisation, social protection and conflict resolution that could
otherwise  be  difficult  to  achieve  at  the  national  level.  It  is  also  possible  to  save  resources
when institutions and capacity building can be set up at regional level. This applies to many
trade-related areas such as standards, intellectual property protection and the whole range of
trade facilitation measures, including customs procedures.

For a long time the  EU has  advocated  and supported South-South  integration,  in  parallel  to
greater  integration  of  developing  countries  in  the  multilateral  trading  system,  as  part  of  a
development  strategy  to  overcome  the  limitations  of  small  economic  size  and  vulnerability.
Yet, it should not be  overlooked  that the  positive  effects of integration can only be realised
when the overall policy framework and the governance and security situation are conducive to
such integration (as is the case with trade reform in general). Therefore, given the limitations
in these areas, many past initiatives have not yet fulfilled their expectations.

The EU has increasingly been involved in RTAs with developing countries. Agreements have
been  concluded  with  almost  all  countries  of  the  Southern  Mediterranean,  South  Africa,
Mexico  and  Chile.  There  are  many  advantages  to  linking  developing  countries  with  a  large
industrial country or trade block. The strong points of such North-South integration include:
locking-in  of  reforms,  stable  access  to  large  markets,  improved  governance,  facilitation  of
FDI  flows  and  technology  transfer.  While  multilateral  trade  liberalisation  and  rule  making
within  the  WTO  system  remains  the  major  trade  policy  priority  of  the  EU,  this  can  be
articulated with bilateral and regional agreements in order to better pursue both trade opening
and  development  objectives.  Among  the  conditions  necessary  to  create  such  a  positive
articulation  are:  full  compatibility  with  multilateral  rules;  appropriate  flexibility  in  their
design and implementation, tailored to the level of development of the parties; a high degree
of  regulatory  convergence  taking  due  account  of  legitimate  objectives  and  the  specific

13

situations of countries; rule  making  going  beyond the basic multilateral rules; as well as, in
most cases, effective regional integration among the EU’s partners themselves.

North-South  and  South-South  integration  can  be  mutually  reinforcing.  Better  access  to  a
developed market can be an incentive for developing countries to overcome resistance to open
their  own  markets  to  each  other,  while  making  them  more  attractive  for  investment  flows,
which can strengthen their own competitiveness. By the same token, the effective integration
of the developing economies makes them a more credible partner for the developed countries.

Therefore, in its ongoing RTA initiatives (with Mediterranean countries, Mercosur, the Gulf
Co-operation  Council  and  the  future  Economic  Partnership  Agreements  (EPAs)  under    the
Cotonou  Agreement)  the  EU  promotes  what  can  be  called  a  South-South-North  approach
which aims to combine the strong points of North-South integration with the positive aspects
of South-South integration. This approach also reduces the hub-and-spoke effect when a large
trading  block  engages  in  separate  agreements  with  a  large  number  of  countries.  It  must  be
clear,  however,  that  this  approach  must  maintain  a  high  level  of  ambition  in  order  to  be
successful, especially in terms of going beyond traditional free trade in goods.

2. 

THE MULTILATERAL TRADING SYSTEM

2.1. 

Advantages of the rules-based multilateral trading system

The existence of a rules-based multilateral trading system is a crucial element for developing
countries’ ability to participate in international trade. In the WTO trade liberalisation can be
tailored to the needs and capacities of its Members, through negotiations aimed at securing an
overall  balance  of  rights  and  obligations.  Binding  rules  ensuring  transparency  and  non-
discrimination  underpin  this  balance.  The  rules-based  system  embodied  in  the  WTO
substitutes the “rule of law” for the “law of the jungle”. A strong argument can be made that
the  principles  of  transparency  and  non-discrimination  are  of  particular  benefit  to  smaller
nations  and  developing  countries  that  historically  have  suffered  from  unilateral  actions  of
larger  trading  partners.  These  binding  rules  offer  shelter  from  pressures  exerted  by  both
domestic  and  foreign  interest  groups  or  monopoly  rent  seekers  and  provide  international
credibility that helps lock in beneficial domestic reforms.

The main benefits of WTO membership for developing countries are the fact that multilateral
rules underpin and strengthen  good domestic  governance; the upgrading of a regulatory and
institutional  environment  conducive  to  increasing  Members’  capacity  to  trade  and  to  attract
investment;  improved  and  secure  market  access  to  major  export  markets;  and  access  to  a
dispute  settlement  mechanism.  In  addition  WTO  membership  represents  an  anchor  for
credible  domestic  trade-related  policies  and  an  incentive  for  an  improved  regulatory  and
institutional environment to attract private investment.

Without  attempting  to  go  into  detail  or  to  be  comprehensive,  the  advantages  of  the
implementation of WTO commitments can be illustrated by a few examples:

–  compliance  with  the  Sanitary  and  Phyto-sanitary  (SPS)  and  Technical  Barriers  to  Trade
(TBT) Agreements can help developing countries both to obtain effective market access to
countries  with  high  standards  regarding  protection  of  human  health,  safety,  the
environment, etc., and to raise their own standards;

14

–  better  implementation  of  the  Customs  Valuation  Agreement,  import  licensing,  pre-
shipment  inspection,  and  rules  of  origin,  improves  the  efficiency  of  customs  duty
collection, facilitate trade, increases transparency, and reduces the risk of corruption;

–  compliance  with  the  Trade  Related  Intellectual  Property  (TRIPs)  Agreement,  which  is
technically difficult for many developing countries due to its complexity, will, however, on
a long term basis attract foreign investment and ensure transfer of technology to the benefit
of domestic industrial and technical development.

–  the General Agreement on Trade in Services (GATS) provides key opportunities to attract
stable  long  term  investment  and  to  improve  the  related  infrastructure  (transport,
telecommunications,  financial  services,  tourism,  environmental  services),  fostering  long-
term growth and competitiveness of the economy as a whole. The general flexibility of the
GATS  mechanism  ('bottom-up'  approach  to  liberalisation)  is  particularly  adapted  to
developing  countries’  needs  and  they  have  made  ample  use  of  that  flexibility  (opening
fewer  sectors  and  liberalising  fewer  types  of  transactions  than  developed  countries).  The
current  round  of  negotiations  is  an  opportunity  for  LDCs  to  take  commitments  in  more
sectors,  in  particular  sectors  related  to  the  build-up  of  infrastructure,  in  line  with  the
principle of progressive liberalisation upon which the GATS is based.

2.2. 

Difficulties in implementing WTO agreements

The broadened coverage of the WTO following the Uruguay Round increased the complexity
of  the  rules-based  WTO  system  and  requires    its  Members  to  adapt  their  institutional  and
regulatory  framework.  While  this  framework  is  often  the  same  as  that  which  is  needed  to
ensure effective and fair governance of the domestic economy, upgrading it (or, sometimes,
setting it up from scratch) still strains the capacity of most developing countries.

Implementation

Not surprisingly, developing countries have faced a challenge in implementing and applying
the WTO agreements.  While the  majority  has  succeeded  in  meeting  that  challenge,  others  -
notably  many  least  developed  countries  and  sub-Saharan  African  Members  of  the  WTO  -
have faced difficulties in specific  areas,  compounded  by their  inability to fully benefit  from
the  rules-based  multilateral  trading  system.  While  the  problems  faced  by  many  developing
countries in exploiting the new trading opportunities arise from domestic policy failures, lack
of competitiveness, or infrastructural and other weaknesses, a number of developing countries
have  also  found  that  key  export  sectors  remain  less  than  fully  liberalised  or  that  such
liberalisation has taken place too slowly.

WTO  disciplines,  for  developing  and  developed  countries  alike,  mean 
important
commitments  to  reform    trade  policies  and  practices  (e.g.  greater  transparency  of  trade
measures,  introduction  of  disciplines  on  subsidies,  improvement  of  import-licensing
procedures,  reform  of  customs  valuation  and  trade  defence  instruments),  as  well  as
commitments  with  a  real  or  potential  impact  on  the  domestic  regulatory  and  business
environment  (notably  the  introduction  of  technical  standards,  sanitary  and  phyto-sanitary
standards  and  intellectual  property  laws).  The  WTO  agreements  covering  these  areas  often
include commitments to provide assistance to developing countries in order to improve their
regulatory, administrative and institutional capacity.

15

Accessions

Some  27  countries,  around  half  of  which  are  developing  countries  (for  example  Cambodia,
Vietnam, Samoa, Tonga, Sudan, Cape Verde, Seychelles, and Yemen), are in the process of
accession  to  the  WTO,  which  is  a  demanding  and  lengthy  process.  Applicant  countries  not
only face the challenge of introducing legislative and regulatory changes in their foreign trade
regime,  but  also  need  to  mainstream  trade  into  their  national  economic  and  development
policies. In addition, applicant countries often need to improve their institutional, judicial and
administrative infrastructure.

World leaders committed themselves to supporting this accession process in WSSD. For this
the EU already offers assistance to acceding countries, many of which are LDCs. The EU is
also  very  supportive  for  the  work  in  the  WTO  to  seek  ways  to  streamline  and  simplify  the
accession process for LDCs, in line with the commitments taken at the Third UN Conference
on Least Developed Countries (LDC III), held in Brussels in May 2001.

2.3. 

Integrating development into trade: the Doha Development Agenda (DDA)

Already the General Agreement on Tariffs and Trade clearly recognised that trade rules need
to be adapted to the specific situation of developing countries and this led to the inclusion of
Part IV of GATT. The Marrakech Agreement establishing the WTO brought this recognition
and  the  commitment  to  special  and  differential  treatment  (SDT)  into  the  WTO.  The  Doha
Development  Agenda,  however,  is  the  most  ambitious  attempt  to  date  to  move  the  issue  of
development to the core of the multilateral trading system. It seeks to move the WTO away
from  a  system  where  trade  rules  were  the  best  that  the  negotiating  process  could  produce,
while  developing  countries  were  simply  given  more  time  to  adapt  through  temporary
exceptions  and  exemptions.  Instead,  the  new  approach  agreed  in  the  Doha  Ministerial
Declaration now directs negotiators to establish rules that can foster development and to come
up  with  mechanisms  that  will  enable  developing  countries  to  implement  these  rules  and
benefit from them and from further trade liberalisation. The Doha Declaration on the TRIPs
Agreement and Public Health, adopted by the Doha Ministerial Conference at the initiative of
a  number  of  developing  countries  is  in  itself  evidence  of  this,  as  well  as  of  the  increased
willingness  of  WTO  Members  to  go  in  this  direction  and  of  the  effectiveness  of  the  WTO
negotiating process to this end.

In  this  context  the  Commission  pursues  an  approach  in  the  WTO  which  applies  maximum
possible  flexibility  vis-à-vis  the  developing  countries,  in  order  to  make  the  outcome  of  the
negotiations and the work programme of the DDA responsive to their individual development
constraints.  To  give  but  one  example,  in  its  recent  submission  on  WTO  trade  facilitation
(“Improvements to GATT Article VIII on Fees and Formalities Connected with Importation
and exportation”), the Commission has proposed that individual transitional periods would be
established  for  each  member  seeking  more  time,  in  conjunction  with  a  specific  technical
assistance programme that would be worked out and agreed with the country in question. This
option  would  facilitate  developing  countries’  active  participation  in  the  negotiations,  the
subsequent  implementation  of  the  agreements  reached  and  the  realisation  of  the  benefits
derived. At  the  same  time  it  would  also  support  the  co-ordinated  and  targeted  use  of  donor
funding for trade related assistance.

More generally, the Doha Ministerial Declaration confirms, in paragraph 2, WTO Members’
overall commitment “to continue to make positive efforts designed to ensure that developing
countries,  and  especially  the  least-developed  among  them,  secure  a  share  in  the  growth  of
world trade commensurate with the needs of their economic development”, and continues to

16

confirm that “in this context, enhanced market access, balanced rules, and well targeted and
sustained  technical  assistance  and  capacity-building  programmes  have  important  roles  to
play”.

Improving market access

In agriculture,  an area of particular interest to developing countries, members have  declared
that  “Building  on  the  work  carried  out  to  date  and  without  prejudging  the  outcome  of  the
negotiations  we  commit  ourselves  to  comprehensive  negotiations  aimed  at:  substantial
improvements in market access; reductions of, with a view to phasing out, all forms of export
subsidies; and substantial reductions in trade-distorting domestic support”. As regards market
access  for  non-agricultural  products,  notably  of  interest  to  developing  countries  producing
labour-intensive manufactures, the Doha Declaration foresees “negotiations which shall aim,
by  modalities  to  be  agreed,  to  reduce  or  as  appropriate  eliminate  tariffs,  including  the
reduction or elimination of tariff peaks, high tariffs, and tariff escalation, as well as non-tariff
barriers, in particular on products of export interest to developing countries”.

However, while improving market access to industrialised countries is a necessary element of
any  final  package,  it  would  not  be  enough.  Developing  countries  can  achieve  very  sizeable
welfare  gains  through  lowering  trade  barriers  amongst  themselves,  and  stimulating  regional
trade. In addition, focusing the question of market access exclusively on a North-South basis
ignores the reality of the competitive situation of developing countries  at different stages of
development. Thus, a satisfactory outcome of DDA negotiations on market access will need
substantial contributions from all participants, developed and developing.

Finally, aside from the question of market access in the strict sense, the European Union will
offer better effective access to its market for developing countries’ products through better and
more  focussed  technical  assistance  to  help  developing  countries  meet  the  EU’s  regulations
and standards (for example in areas of sanitary and phyto-sanitary standards).

Towards more balanced trade rules

In  the  WTO,  “rules”  traditionally  indicate  those  Agreements  that  govern  Members’  direct
actions  concerning  trade  flows.  In  this  respect,  the  DDA  aims  at  the  clarification  and
improvement of existing rules, such as those on anti-dumping and subsidies. Negotiators are
directed to do this “while preserving the basic concepts, principles and effectiveness …  and
taking into account the needs of developing and least developed participants.”23

Two  areas  deserve  particular  mention,  because  of  their  potential  impact  on  developing
countries. The first is Regional Trade Agreements, where the EU’s objective is to clarify that,
to  be  WTO-compatible,  RTAs  must  achieve  a  high  degree  of  economic  integration  among
parties to an RTA and the establishment of an open trade regime, but must contain sufficient
flexibility  to  allow  effective  South-South,  North-South  and  South-South-North  integration.
Secondly, the trade facilitation cluster, mainly centred on customs reform, is liable to have a
very  substantial  impact  on  developing  countries’  ability  to  raise  revenue  through  more
effective  duty  collection  and  increased  trade  volumes,  as  well  as  to  fight  corruption  and
inefficiency,  through  the  introduction  of  modern  and  more  transparent  administrative
practices.

23 See e.g. paragraph 28 of the Doha Declaration.

17

                                                
“Balanced  rules”  in  the  DDA,  however,  also  means  those  (existing  and  future)  agreements
that  underpin  Members’  ability  to  regulate  effectively  economic  activity  on  their  territory
while maintaining open and transparent trade and investment regimes, and while ensuring the
protection of important public interests. Among the DDA issues that fall in this category and
that  are  important  for  developing  countries  are:  the  debate  on  the  TRIPs  Agreement  and
public  health,  where  the  Doha  Declaration  shows  that  the  TRIPs  Agreement  contains  all
necessary  elements  to  ensure  an  adequate  balance  between  public  interests  and  intellectual
property  rights;  the  negotiations  to  ensure  a  clear  and  mutually  reinforcing  relationship
between  trade  rules  and  Multilateral  Environmental  Agreements;  the  negotiation  of  an
investment  framework  capable  of  encouraging  greater  FDI  flows;  the  negotiation  of  an
agreement  on  competition,  underpinning  domestic  competition  laws  and  policies  as  an
effective  tool  for  the  government  of  economic  activity;  and  greater  transparency  in
government  procurement  ensuring  best  value  for  money  in  government  purchases,  reducing
expenditures and fighting corruption.

One of the important issues that the DDA is addressing is the “relationship between trade and
transfer of technology and any possible recommendations on steps that might be taken within
the  mandate  of  the  WTO  to  increase  flows  of  technology  to  developing  countries”,  and
Ministers  in  Doha  set  up  a  Working  Group  to  this  effect.  This  process  will  be  relevant  to
WTO  rule-making  in  several  areas,  as  it  should  encompass  the  whole  range  of  channels
through which technology  transfers  to  developing countries may occur: investment,  trade in
services,  trade  in  goods,  licensing  of  technology,  government  procurement,  development
assistance, multilateral environmental agreements.

All  this  pre-supposes  a  considerable  effort  from  WTO  Members,  and  from  developing
countries  in  particular,  even  while  taking  into  account  suitable  provisions  for  special  and
differential  treatment.  Developing  countries  will  have  to  upgrade  and  modernise  their
domestic regulatory and administrative framework, not only to comply with WTO obligations
but, first  and foremost,  to  benefit  from  greater  economic efficiency  and  increased  trade  and
investment  opportunities  that  the  effective  implementation  of  these  rules  can  bring  about.
This,  in  turn,  will  require  considerable  efforts  from  the  developing  countries  themselves  in
terms  of  creation  of  institutional  structures  and  policy  reform.  Donors  and  multilateral
agencies will support this through significant assistance for capacity building. However, even
before  this  build–up  of  “capacity  to  trade”  is  tackled,  developing  WTO  Members    need  of
assistance  to  be  able  to  participate  effectively  in  the  review  of  existing  rules  and  in  the
negotiation of new ones.

18

PART II ASSISTING DEVELOPING COUNTRIES TO  BENEFIT FROM OPEN TRADE

3. 

INTEGRATING TRADE INTO DEVELOPMENT STRATEGIES

It  is  essential  to  integrate  trade  into  development  strategies  in  a  way  that  contributes  to  the
fundamental  objectives  of  poverty  reduction  and  sustainable  development.  This  calls  for  an
approach  that  brings  trade  matters  into  the  dialogue  on  Poverty  Reduction  Strategy  Papers
(PRSPs)  or  other  national  development  strategies,  which  should  fully  exploit  the  linkages
between trade and all other areas important for sustainable development. For EU co-operation
this  must  be  reflected  in  the  programming  process.  It  is  also  important  to  ensure
complementarity  and  co-ordination  between  the  programmes  of  bilateral  donors  and
international  agencies.  Moreover,  attention  must  be  paid  to  the  coherence  of  different  EU
policies with an external dimension.

Trade-related  assistance  is  a  major  theme  of  the  Doha  declaration.  Strong  commitments  to
better  and  more  assistance  were  made.  These  commitments  were  later  confirmed  at  the
Conference  on  Financing  for  Development  in  Monterrey  (March  2002)  and  in  the  plan  of
implementation agreed in WSSD (September  2002). The EU already dedicates  considerable
resources to trade-related assistance in developing countries (see annex 1) and is committed to
continue doing so in close co-ordination with other bilateral and multilateral donors.

The  EU’s  trade-related  assistance  will  focus  on  enhancing  effective  participation  in  the
multilateral  trading  system,  and  the  policy  and  institutional  reforms  that  are  required  as  a
result.

In  addition,  trade  capacity  will  be  improved  through  other  trade-related  development
assistance including:

(cid:1)  promotion of a sound macroeconomic and tax policy framework;

(cid:1)  support for restructuring and greater competitiveness of the production system; and

(cid:1)  support for regional integration and co-operation.

Expectations  as  regards  trade-related  assistance  are  high.  It  is  important,  however,  to  be
realistic  and  to  acknowledge  that  improvements  in  trading  capacity,  domestic  infrastructure
and  institutions  for  trade  take  time  to  build.  The  experience  of  transition  economies  to
modernise  their  institutions  and  economies  shows  this  clearly.  Extensive  support,  over  long
periods  of  time,  is  needed  for  the  development  of  trading  capacity.  It  is  clear  that  external
assistance  will  only  be  successful  if  it  is  complemented  by  the  country’s  own  efforts  to
undertake  adequate  policy  reforms  to  bring  about  a  favourable  environment  for  investment,
trade  and  growth,  and  if  it  is  well  targeted,  well  co-ordinated,  and  integrated  into  these
domestic policies.

3.1. 

Trade reform in poverty reduction strategies

Trade policy must be part of a  country’s  own  sustainable  development  strategy,  and  should
accompany  macroeconomic  and  institutional  reforms  that  foster  equitable  growth  and
promote human development, as well as ensuring the proper management of natural resources
and the protection of the environment.  This is a key requirement if developing countries are
to reap the benefits of trade expansion. It is also vital to ensure that trade related assistance is

19

effective in raising trade capacity in a way that promotes sustainable development and gender
equality.

The  nature  and  sequencing  of  trade  policy  reforms  should  reflect  the  specific  conditions  in
each  country,  and  should  ideally  result  from  a  national  dialogue  involving  government,  the
private sector and labour and civil society representatives.

Country-owned Poverty Reduction Strategy Papers (PRSPs), or the equivalent, are the natural
vehicles  for  mainstreaming  trade  into  comprehensive  development  frameworks,  that  are  the
basis for national public policy and external assistance. Overall, however, the first generation
of PRSPs has  failed to give trade  issues  the  prominence  they  deserve.  This  reflects  the  fact
that  the  links  between  trade  and  poverty  have  not  been  fully  acknowledged  and  taken  into
account, while at the same time trade policy reforms have often been limited to simple border
measures (tariff and non-tariff barrier reductions). For the future this should be corrected and
PRSPs should show how concrete trade reforms will contribute to growth, poverty reduction
and  gender  equality.  At  the  WSSD  in  Johannesburg  it  was  agreed  that  PRSPs  should  also
operate as the vehicle for developing national sustainable development strategies.

On their side, donors should ensure that support for trade policy reforms features prominently
in their development assistance strategies. The Commission Communication of April 2000 on
the  Community’s  Development  Policy  and  the  Joint  Council–Commission  statement  of
November 2000 identified trade as one of six priority areas for development policy. Similar
policy developments have occurred in Member States’ own strategies, as indeed they have in
most other developed countries  and  in multilateral agencies.  What is  now  needed  is  a  more
concrete  follow-up  of  this  priority.  Thus,  the  Commission  intends  to  deepen  the  policy
dialogue on trade issues with beneficiary countries and regional organisations. As far as EU
co-operation  is  concerned,  Country  Strategy  Papers  (CSPs)  and  Regional  Strategy  Papers
(RSPs)  are  the  vehicles  to  translate  policy  dialogue  into  concrete  assistance  programmes.
Trade  issues  and  their  linkages  with  other  policies  important  for  sustainable  development
need to be addressed at each stage of CSP and RSP preparation—policy dialogue, analysis of
other  donors’  activities  and  definition  of  EC  intervention.  However,  reflecting  the  general
lack  of  visibility  of  trade  aspects  in  PRSPs,  many  of  the  CSPs  approved  so  far  do  not  put
much emphasis on trade-related assistance. On the other hand, trade-related assistance in the
broad  sense  features  prominently  in  many  RSPs,  with  40  to  50  percent  of  regional  funds
devot-ed to this area in some regions.

3.2. 

Complementarity, coherence, and co-ordination with other donors

Many initiatives for integrating trade into development policies and plans are being pursued at
the  international  level,  notably  through  the  Integrated  Framework  for  Least  Developed
Countries  (IF),  and  the  Joint  Integrated  Technical  Assistance  Programme  (JITAP).
International agencies such as the World Bank, IMF, UNCTAD, UNDP, UNEP, ITC, WTO,
WCO,  WIPO,  ILO,  and  regional  banks  like  the  Inter-American  Development  Bank  and  the
African  Development  Bank,  are  also  increasingly  stressing  the  importance  of  trade-related
assistance  and  capacity  building.  Furthermore,  many  bilateral  donors,  including  some  EU
Member States, are very active in the area of trade and development. In view of this the EU
will  endeavour  to  ensure  complementarity  between  its  own  programmes  and  those  of
international  and  bilateral  donors.  The  OECD  Development  Assistance  Committee  (DAC)
can  play  an  important  role  as  a  focus  for  exchange  of  information  and  joint  analysis.  The
DAC’s  efforts  to  establish  informal  but  regular  exchanges  with  multilateral  agencies  are
essential to this role and the EU should encourage and support further efforts in this direction.

20

Further  co-operation  between  relevant  international  organisations,  such  as  the  joint
UNEP/UNCTAD  capacity  building  task  force  on  trade,  environment  and  development,  will
also be encouraged.  In general it is important to have a more  holistic approach between the
different agencies and initiatives so as to ensure greater impact on sustainable development.

Ownership of the trade reform agenda is key. The Integrated Framework is a good example of
this approach as it encourages the beneficiary LDCs not only to integrate the findings of the
Diagnostic  Trade  Integration  Studies  into  their  Poverty  Reduction  Strategy  Papers,  but  also
insists  that  the  LDCs  demonstrate  their  commitment  to  the  trade  policy  reform  agenda
through the creation of national co-ordination structures (see annex 2).

Within  the  EU  the  principles  of  co-ordination  agreed  in  the  joint  Council-Commission
statement on development policy of November 2000 should fully apply. For this purpose, the
policy framework proposed in the present Communication could serve as a basis for more co-
ordinated action in the area of trade and development.

Greater  policy  coherence  between  different  EU  policies  with  an  external  dimension  is
necessary. The recent Commission communication entitled “Towards a Global Partnership for
Sustainable Development”  24 stresses the need to improve  the coherence  of  EU  policies.  To
that end the EU should continue the process of adapting key policies, including the Common
Agricultural Policy, the Common Fisheries Policy, and EU policies on trade, energy, transport
and industry to the internal and external objectives of sustainable development. At the World
Summit  on  Sustainable  Development,  developing  countries  put  considerable  emphasis  on
these reform issues, further underlining the need to make early and significant progress on the
WTO  track.  The  recent  Commission  proposal  for  the  Mid  Term  Review  of  the  CAP,  if
adopted,  would  present  a  concrete  example  of  steps  taken  to  improve  coherence.  The
Commission’s  recent  decision  to  carry  out  sustainability  impact  assessments  of  each  major
policy initiative in order to assess their social, economic and environmental effects in advance
should also help the EU to be better equipped for this task.

Particular  attention  will  be  paid  to  the  impact  of  EU  enlargement  on  trade  with  developing
countries.  Although  the  overall  impact  is  expected  to  be  positive25,  an  in-depth  analysis  is
necessary.

The EU reaffirms the commitments made at the WTO Singapore Ministerial Conference with
regard  to  internationally  recognised  core  labour  standards,  and  will  continue  to  support  the
work  under  way  in  the  International  Labour  Organisation  (ILO)  on  the  social  dimension  of
globalisation. The EU also intends to continue work on fair trade and trade in environmentally
friendly goods and organic products, particularly from developing countries as we committed
to do in the plan of implementation in WSSD.

24 COM (2002) 82 final, p. 15.
25 Several arguments point in that direction: enlargement will increase further the EU market with the addition of
another 150 million consumers, which should boost import demand; implementation of a single set of
EU-wide  trade  rules,  standards  and  procedures  by  the  candidate  countries  should  facilitate  trade  with
developing  countries;  and  on  average  adoption  of  the  Common  Customs  Tariff  will  lead  to  lower
external tariffs in the candidate countries, improving market access.

21

                                                
3.3. 

Assistance for effective participation in the multilateral trading system

EU assistance will focus mainly on three areas:

(i) assistance for WTO accession and multilateral trade negotiations, mainly through training
programmes and contributions to meet logistical costs;

(ii)  support  for  the  implementation  of  existing  and  future  WTO  agreements  implying  a
significant  financial  effort  and/or  which  require  the  development  of  specific  regulatory  and
institutional frameworks;

(iii)  support  for  policy  reforms  and  investments  necessary  to  enhance  both  economic
efficiency  and  greater  participation  in  the  multilateral  trading  system.  While  the  areas  that
need to be addressed must necessarily be determined on the basis of the specific situation of
each country or region, the following examples are typical of what needs to be done in many
developing countries:

(cid:1)  Reform  of  the  administration  of  Customs  and  other  trade  facilitation  measures:
simplification  and  harmonisation  of  import  and  export  documentation  based  on
international standards, including use of simplified declarations; improvement of customs
procedures, through methods such as risk assessment, simplified procedures for entry and
release  of  goods,  granting  of  authorised  trader  status,  using  electronic  data  interchange
(EDI) and automated systems; improvement of transparency and appeal procedures against
customs  decisions  and  rulings;  regular  consultation  with  the  trade  community  on  import
and export regulations and procedures.

(cid:1)  Standards  and  Conformity  Assessment:  identification,  in  conjunction  with  the  business
community  and  all  other  stakeholders,  of  priority  sectors  for  increasing  regulatory
convergence to international standards, in order  to  reduce  barriers and improve  access  to
markets,  while  taking  due  account  of  legitimate  objectives;  intensification  of  the  use  of
international  standards-setting
international  standards,  with  active  participation 
activities; strengthening of standardisation and conformity assessment institutions with the
aim to develop common and compatible mechanisms at the regional level; implementation
of the WTO Agreement on Technical Barriers to Trade (TBT).

in 

(cid:1)  Services:  supporting 

the  establishment  of  a  domestic  pro-competitive  regulatory
framework,  and  the  build-up  of  regulatory  capacity  necessary  to  undertake  and  benefit
from  liberalisation  of  trade  in  services,  in  particular  for  services  such  as  financial  or
telecom services, or transport and environmental services; support  for measures  designed
to strengthen the domestic services capacity to increase  efficiency and competitiveness of
the services sector.

(cid:1)  Investment:  identification  of  administrative  means  to  facilitate  investment  flows;  support
for  investment  promotion  activities,  including  in  relation  to  research,  and    technology
transfer, as well as transparent, stable, open and non-discriminatory rules for investors.

(cid:1)  Intellectual  Property  Rights:  ensuring  that  adequate  TRIPs  compatible  legislation  is
implemented  and  enforced  in  conformity  with  high  international  standards;  ensuring  that
national registration authorities and  courts are properly  equipped and staffed with trained
officials; accession to the most important international IP treaties; cooperation in the fight
against piracy and counterfeiting.

22

(cid:1)  Competition  policy:  progressive  development  of  competition  law  and  policy,  with  an
adequate  enforcement  capacity  (at  the  national  or  regional  level);  competition  advocacy
towards the business community and the public at large; integration of competition policy
in the domestic policy toolbox, to help avoid abuses of economic power by both domestic
and foreign firms.

(cid:1)  Legislation  for  adequate  labour  standards,  including  effective  compliance  with  the  core
labour  standards  set  out  in  the  ILO  1998  Declaration26,  and to  be  addressed  in  close  co-
operation with ILO.

(cid:1)  Environment  standards:  development  of  appropriate  and  effective  environmental

legislation to address local, regional and global environmental problems.

3.4. 

Other trade-related development assistance

Macroeconomic and tax policies

At a more general level, support to enhance trade capacity should also aim for sound macro-
economic  and  tax  policies,  to  achieve  a  policy  mix  that  is  conducive  to  improved  trading
conditions  and  economic  and  financial  stability.  A  delicate  question,  which  could  have  a
significant impact on policy reforms in developing countries, is that trade liberalisation in the
form  of  lowering  tariffs  generally  leads  to  a  reduction  in  government  revenue.  For  many
developing countries the share of government revenue derived from trade-related taxation can
be quite high. However, the fear of loss of government revenue is sometimes exaggerated. If
lower tariffs are combined with increased efficiency in the customs services and reduction in
politically motivated exemptions, the fall in revenue may be offset or limited. In the case of
developing countries where customs administration and enforcement is particularly weak, and
where  smuggling  and  corruption  are  widespread,  customs  reform  would  in  fact  increase
revenue  even  as  tariffs  fall.  Moreover,  to  the  extent  that  tariffs  were  in  place  for  revenue
purposes, tax restructuring is generally desirable, as tariffs are not the best or fairest form of
taxation. The fiscal adjustment process should be assessed within the overall macroeconomic
context.

The  Commission  has  experience  with  assisting  the  fiscal  adjustment  process  in  the  form  of
advisory services and training, but also in the form of temporary budget support to contribute
to  covering  transitional  shortfalls  (for  example  in  West  Africa  and  in  Eastern  and  Southern
Africa). In order to facilitate the adjustment process resulting from multilateral and regional
trade agreements, the Commission intends to continue and extend this kind of support.

Supporting the repositioning of the business sector

The  benefits  resulting  from  trade  opportunities  arising  from  trade  and  investment
liberalisation (through multilateral or bilateral initiatives or regional integration) can only be
captured  by  moving  from  less  efficient  to  more  efficient  productive  activities.  Adjustment
capacity not only depends on the private sector in the strict sense, but also very much on the
overall  investment  climate.  This  comprises  a  range  of  flanking  elements  such  as  human
capital  development,  reliability  of  transport  and  communication  infrastructure,  effectiveness
of  public  utilities,  efficiency  of  financial  services  and  trade-related  institutions  and  good
governance.

26 ILO Declaration on Fundamental Principles and Rights at Work (86th Session, Geneva, June 1998).

23

                                                
In order to support the repositioning process and to increase the competitiveness of the private
sector  in  developing  countries  a  variety  of  private  sector  facilities  (for  example  EBAS,
PROINVEST,  ALINVEST)  have  been  set  up  both  at  the  national  and  regional  level.  In
addition, strengthening support services and improving infrastructure has also been one of the
core areas of EU support. In view of the DDA and regional integration initiatives, assistance
to  enhance  supply  response  will  be  further  increased.  An  important  example  for  the  ACP
group is the newly created “investment facility” under the 9th EDF.

CSPs  and  RSPs  will  seek  to  fully  exploit  the  synergies  between  trade  related  assistance  as
defined  above  and  support  to  the  areas  that  typically  affect  the  supply  response:
macroeconomic and fiscal policies, rural development and agricultural research, transport and
telecommunications  infrastructure  and  the  effectiveness  of  the  financial  sector.  This  is
consistent  with  the  priority  areas  of  EC  development  aid  identified  in  the  joint  Council-
Commission Statement of November 2000.27 The programme of action for the mainstreaming
of gender equality in development co-operation should also be taken into account.

Last but not least, assistance for the implementation of core labour standards will be part of
the  supply-side  support.  There  is  mounting  evidence  of  a  positive  correlation  between
adherence to core labour standards and productivity gains in developing countries, and the EU
has made this kind of assistance a key element of its strategy to improve social governance in
the  context  of  globalisation28.  This  important  element  of  the  international  agenda  will  be
addressed in close co-ordination with the ILO.

Supporting regional co-operation and integration

Whenever appropriate, the activities to be implemented as part of EC trade related assistance
will  be  executed  at  the  regional  level.  These  activities  will  complement  and  reinforce  those
actions  supported  at  the  national  level.  There  are  clear  advantages  in  intervening  at  the
regional  level,  among  which  are  the  support  for  deepening  of  the  regional  integration
processes—an EU priority29—as well as economies of scale and scope.

Regional integration is supported both as a component of development strategy and in relation
to the EU’s own trade regime towards groupings of developing countries. This is the South-
South-North  approach  introduced  in  section  1.6    On  the  basis  of  this  approach,  the  EU  is
negotiating  agreements  with  regional  groupings:  for  example,  with  the  Mercosur  group  of
countries,  with  the  explicit  aim  of  assisting  Latin  American  regional  integration;  and  in  the
Mediterranean, where the MED Market regional programme (2001-2003) is a good example
of efforts to deepen the process of regional  integration in the  area.  And  in South-East Asia,
the EU has long been a supporter of ASEAN integration.

But  this  approach  applies  in  particular  to  the  Economic  Partnership  Agreements  (EPAs)
between the ACP and the EU for which negotiations start in September 2002.

EPAs will be based on four fundamental principles:

27 The joint Council-Commission statement identifies 6 priority areas for EC development aid: the links between
trade  and  development;  regional  integration  and  co-operation;  macroeconomic  reform  and  the
promotion of equitable access to social services; transport infrastructure and management; food security
and sustainable rural development; and institutional capacity-building.

28  Commission  Communication  on  “Promoting  core  labour  standards  and  improving  social  governance  in  the

context of globalisation”, COM (2001) 416 final, of 18 July 2001.

29  See  for  example  the  commitment  at  the  2002  Madrid  Summit  to  support  further  regional  integration  in  the

Andean Community and Central America.

24

                                                
Partnership.  EPAs  are  partnership  agreements,  implying  rights  and  obligations  for  both
sides. The respect of the obligations by each side is essential for the achievement of the entire
undertaking.  In  particular,  while  the  EU  will  be  prepared  to  further  open  up  its  market  for
ACP  products,  to  tackle  all  other  trade  barriers,  and  give  trade  related  assistance,  the  ACP
States  must  be  prepared  to  open  their  market  and  to  implement  appropriate  policies  to
strengthen their supply capacity and reduce transaction costs.

Regional integration. Regional integration is a forceful means to foster integration into  the
world economy. The recent progress made in regional integration within the ACP reflects the
political decision of the ACP States equally to base their integration into the world economy
on  regional  economic  integration.  EPAs  will  therefore  strengthen  regional  integration
initiatives existing in the ACP.

Flexibility. EPAs are above all instruments for development. They will therefore be designed
with  all  the  flexibility  that  is  required  to  take  account  of  the  economic,  social  and
environmental constraints of the ACP countries concerned as well as of their capacity to adapt
to  the  new  trading  environment.  On  the  other  hand,  they  must  be  integrated  into  the
development policy of the ACP countries and into the support strategies of the EU.

Link  to  WTO.  EPAs  are  not  an  end  in  themselves,  but  intended  to  act  as  a  stepping  stone
facilitating the integration of the ACP countries into the world economy. They will therefore
build  on  the  rules  of  the  WTO,  taking  account  of  the  results  of  the  Doha  Development
Agenda. However, in some respects they will go beyond the WTO. They will define, within
the  framework  of  those  rules,  more  specific  and  more  operational,  bilateral  trade  relations
intended to alleviate practical barriers to trade between the ACP and the EU and to establish
closer integration between both sides' economies.

4. 

A PROGRAMME OF ACTION TO IMPROVE DELIVERY OF ASSISTANCE

Objectives and approach

Section 3 of this Communication has outlined the key areas where EU trade-related assistance
needs to  be focused. This section spells out a programme of action which outlines practical
ways for the Commission to improve the delivery of trade related assistance, both through its
own activity and in co-ordination with Member States and/or with other bilateral donors and
multilateral  agencies.    Some  EU  political  initiatives  to  promote  actions  by  the  international
community as a whole are identified.

As  mentioned  earlier,  trade-related  programmes  and  activities  are  already  part  of  CSPs  and
RSPs. In those countries or regions in which trade has not received appropriate attention, the
mid-term review of the strategies, which will be launched starting in 2003 will seek to ensure
that  trade  issues  are  properly  addressed  and  adequately  funded.  In  the  meantime,  the
Commission  will  identify  additional  measures  to  complement  trade  capacity  building
activities already under way, so as to enable if needed a rapid scaling up of assistance in this
area following the CSPs and RSPs mid-term reviews.

It should be stressed that the recommended programme of action can only succeed with full
commitment  and  ownership  of  the  process  of  trade  reform  by  the  developing  countries
themselves. Developing countries should create adequate national structures for the definition
of  trade  policy  and  for  the  integration  of  trade  into  their  development  strategies  and
programmes. As policy coherence is of great importance for any country that wants to benefit

25

from  trade  as  part  of  its  development  strategy,  the  EU  will  promote  a  comprehensive
approach  to  the  trade  reform  agenda,  which  will  be  integrated  with  appropriate  policies  for
poverty reduction and sustainable development, including adequate environmental and social
legislation, good governance, and supply side development.

Therefore, the Commission intends to take or press for the following actions:

Intensify dialogue with partner countries

(cid:1)  In general terms, greater emphasis will be put on trade issues in the EU’s policy dialogue
with developing countries, in particular with a view to better integrate trade policy issues
in  PRSPs  or  similar  mechanisms.  The  Commission  will  launch  discussions  with  the
authorities in recipient countries in order to raise awareness about trade issues. Joint action
and complementarity between the Commission and EU Member States is essential in this
context.

(cid:1)  Ensuring  that  funding  for  this  new  priority,  trade-related  assistance,  is  adjusted  as
necessary,  particularly  for  LDCs.  This  issue  must  be  addressed  by  both  sides  in  the
dialogue relating to the mid term review of the CSP/RSP, which will be launched starting
in  2003.  This  exercise  will  assess  and  address  the  integration  of  trade  into  the  national
development policies of the partner  countries, and will be based on  the  specific needs of
each country, taking into account the principle of complementarity with the action of other
bilateral or multilateral donors.  It should cover a broad concept of trade-related assistance,
comprising not only technical assistance, but also training, capacity building, institutional
and policy support, support for budgetary and tax reform, assistance for the repositioning
of  the  private  sector  and  improvements  in  support  services.  In  its  annual  report  on  EU
development  assistance,  the  Commission  will  report  on  the  total  amounts  allocated  for
trade related  assistance.  In  the  short-term  the  Commission  will,  where  appropriate,  make
use of the flexibility for non-focal areas in existing RSPs/CSPs.

(cid:1)  Reinforce where appropriate and in consultation with the partner country/region, the trade
component in the programming exercise for EU development assistance, with the elements
of (i) assistance for effective participation in the multilateral trading system; (ii) supporting
institutional  and  policy  reforms;  (iii)  supporting  the  restructuring  and  competitiveness  of
production and (iv) supporting regional co-operation and integration.

Enhance the effectiveness of EU support

(cid:1)  The recently created inter DG Task Force for Trade and Development, which was set up
to  help  improve  internal  Commission  coherence  will    guide  the  different  Commission
services involved, including the Delegations, in their task to mainstream trade in the CSPs
and  RSPs,  provide  know-how  and  input  for  the  identification  and  implementation  of
programmes  and  projects,  and  liaise  with  those  in  charge  of  trade  negotiations  and  of
monitoring the implementation of trade agreements.

(cid:1)  Pay  particular  attention  to  least-developed  countries  (LDCs)  and  other  low-income
countries  in  the  allocation  of  resources  for  trade-related  assistance,  while  respecting
current rules applying to the allocation of development aid.

(cid:1)  Examine  the  scope  for  funding  horizontal  trade-related  assistance  initiatives  that  benefit
all developing countries, especially in collaboration with multilateral agencies. At present,
practically all EU development assistance is provided on a country/region basis. However,

26

in this field there is an increasing need to support multilateral initiatives (such as those by
the  World  Bank,  the  WTO,  UNCTAD  and  the  joint  UNEP/UNCTAD  capacity-building
task force on trade, environment and development) and some EU ones  (especially in the
field of training of administrators) without limitation to specific countries or regions.

(cid:1) 

Increase  the  EU’s  ability  to  design  and  deliver  training  programmes  for  developing
countries’ trade negotiators and administrators. The results of the first training programme
for  negotiators  and  administrators  from  Asian,  Latin  American  and  Mediterranean
countries will be assessed and, further activities of this kind will be undertaken, including
with  the  ACP  countries.  An  important  component  of  these  programmes  will  be  the
involvement of highly qualified and internationally recognised European higher  learning
institutions, chosen on a competitive basis.

(cid:1)  Use  the  results  of  these  programmes  to  establish  networks  between  European  higher
learning  institutions  and  their  counterparts  in  developing  countries  and  help  these
countries to set up their own training capacity in trade and trade-related matters, including
on a regional basis.

(cid:1)  Where  developing  countries  wish  to  do  so,  technical  assistance  for  sustainability  impact
assessments  will  be  provided,  to  consider  the  trade,  environment  and  development
linkages as trade is liberalised, in line with the EU’s commitment in the WSSD.

(cid:1)  Reinforce  current  efforts  to  improve  developing  countries’  capacity  in  the  sanitary  and
phyto-sanitary  field,  as  compliance  with  sanitary  and  phyto-sanitary  standards  has
emerged  as  one  of  the  major  constraints  on  the  increase  of  exports  by  developing
countries to industrialised markets.  In particular, pursue the development of a programme
of action in the sanitary and phyto-sanitary field, including a standard approach to country
assessment,  a  menu  of  possible  technical  assistance  measures  for  common  problems,
including  relevant  training  programmes,  and  the  identification  of  sources  of  additional
funding and relevant expertise.

Contribute to international effectiveness and co-ordination

(cid:1)  Ensure  that  policy  coherence  between  the  EU’s  multilateral  and  bilateral/regional  trade
agendas produces adequate synergies in the provision of trade related  assistance. This is
essential to the EU’s relations with all developing country partners, but needs even greater
attention in relation to the more vulnerable among them, such as many ACP countries.

(cid:1)  Review  existing  mechanisms  for  EU  Member  States  co-ordination  and  introduce  the
necessary changes. Promote greater exchange of “best practices” between the Commission
and Member States and between Member  States themselves. Promote similar exchanges
with other donors (including in the OECD DAC).

(cid:1)  Engage  in  more  efficient  co-operation  with  organisations  like  WHO,  UNCTAD,  WTO,
ITC, UNDP, UNEP, WB, IMF, UNIDO, WIPO and ILO possessing specialised expertise
in  trade  and  trade-related  matters.  Assess  the  strengths  of  the  different  international
institutions involved in trade matters and establish how  co-operation  with them can best
take place. Where appropriate, this could include channelling assistance via organisations
that  have  a  comparative  advantage,  so  as  to  increase  effectiveness  and  efficiency  and
reduce duplication.

27

(cid:1)  Continue to advocate the Integrated Framework (IF) as a sound vehicle for mainstreaming
trade in the development policies of LDCs. At the same time, work towards extending the
principles and methodology of the IF to other developing countries, in particular and as a
priority  other  low  income  countries  with  similar  needs  and  constraints  as  the  LDCs.
Support  the  IF  Trust  Fund,  where  appropriate  from  the  development  co-operation
resources.

(cid:1)  Support for the WTO Secretariat in its role as provider of technical assistance through its
WTO  Technical  Assistance  Plans.  These  Plans  need  to  ensure  that  all  developing
countries are involved. They should be “needs-driven” rather than “demand driven”. They
should  cover  all  negotiation  and  implementation  subjects  and  focus  more  on  directly
relevant training and less on general seminars and information sessions. The Commission
intends  to  continue  to  contribute  to  the  DDA  Global  Trust  Fund,  which  is  the  funding
source for the WTO TA Plan.

(cid:1)  Continue  to  participate  in  the  governing  bodies  of  the  IF  (the  Inter  Agency  Working
Group  and  Steering  Committee).  Two  priorities  need  to  be  addressed:  (a)  reinforced
participation  of  bilateral  donors  in  the  Diagnostic  Trade  Integration  Studies;  (b)  further
developing the role of “facilitators”: i.e. donors who would assist a country in the setting
up of an adequate national capacity to mainstream trade in development policy. Moreover,
the Commission’s own role, as well as that of EU Member States, as “facilitators” should
be extended.

(cid:1)  Encourage  Regional  Development  Banks  (such  as  the  African  Development  Bank,  the
Asian Development Bank and the Interamerican Development Bank) to devote additional
resources to the trade capacity building agenda.

In  the  light  of  these  specific  commitments,  the  Commission  intends  to  prepare  an  overall
review of the EU’s trade-related assistance before the end of the year 2005.

28

ANNEX 1 - OVERVIEW OF EU TRADE-RELATED ASSISTANCE

It  is  not  straightforward  to  determine  the  amount  of  EU  trade-related  assistance.  There  are
many projects/programmes that deal explicitly with technical assistance and capacity building
for  trade  policy.  But  often  activities  in  this  area  are  a  component  of  a  sectoral  programme,
such  as  transport  or  agriculture.  It  is  also  common  for  capacity  building  and  institutional
support  to  be  general  and  open-ended  in  order  to  fit  the  specific  needs  of  the  stakeholders.
The  detailed  activities,  which  can  include  trade-related  ones  may  only  be  decided  during
implementation. Therefore, for such projects, it is only at the stage of ex-post evaluation that
the share of trade-related activities can be determined.

A first exercise to assess the amount of EU trade-related assistance carried out during the last
five years resulted in a total project value of around € 640 million for 117 operations. About
30 per cent can be considered as technical assistance and capacity building in the strict sense.
Most  of  the  rest  is  trade  development  and  support  for  the  private  sector.  In  terms  of
distribution  over  regions,  61  per  cent  went  to  the  ACP  group  and  14  and  12  per  cent
respectively  to  Latin  America  and  the  Mediterranean.  The  remaining  part  was  allocated  to
Asia and the former Soviet Union (9 and 4 per cent).

Overall, 60 per cent of the projects are regional and 40 per cent are national. The trade-related
programmes  are  often  linked  to  new  trade  agreements  with  the  EU  (e.g.  in  the  ACP,  Latin
America  and  the  Mediterranean).  Some  programmes  in  Latin  America  and  Asia  have  a
significant  trade-related  component  supporting  closer  relations  between  the  region  and  the
EU, through encouraging joint ventures and investment.

Some of the recent trade-related assistance programmes are:
(cid:1)  €  10  million  programme  to  support  ACP  countries   with  implementation  of  the  Uruguay

Round agreements, accession to the WTO and participation in DDA.

(cid:1)  €  20  million  programme  to  prepare  ACP  countri es  and  regions  for  the  negotiations  of

Economic Partnership Agreements.

(cid:1)  € 45 million  programme for capacity building to 

improve sanitary conditions in fisheries

exports.

(cid:1)  €  29  million  pesticides  initiative  programme  to  improve  the  competitiveness  of  the  ACP

horticultural sector.

(cid:1)  € 60 million trade enhancement programme for Egypt.
(cid:1)  € 6 million trade development programme for Pakistan.
(cid:1)  € 2 million WTO related capacity building programme in the Philippines.
(cid:1)  € 8 million programme for facilitating the FTA with Mexico.
(cid:1)  € 8 million programme for helping the Customs Union in Central America.
(cid:1)  € 4 million programme for Mercosur norms and technical standards.
(cid:1)  € 5 million programme for co-operation on customs matters with Mercosur.
(cid:1)  € 1.2 million for UNEP/UNCTAD capacity building 

task-force on trade, environment and

development

29

A number of new initiatives and activities are foreseen during 2002 directly as a result of the
Doha Development Agenda. These include:
(cid:1)  an additional contribution to the Integrated Framework Trust Fund (€ 750,000)
(cid:1)  a contribution to the Global Trust Fund (€ 700,000)
(cid:1)  preparation  of  an  intensive  training  course  for  developing  country  negotiators  (€2.4

million).

30

ANNEX 2 - THE INTEGRATED FRAMEWORK FOR LDCS

The Integrated Framework is a joint undertaking of six international agencies (WTO, World
Bank,  IMF,  UNCTAD, UNDP, and  ITC) and  was  established  in  1996  with  the  objective  to
assist LDCs to mainstream trade into their development policies. This is done on the basis of
a comprehensive analyses of the trade potential through a Diagnostic Trade Integration Study
(DTIS),  resulting  in  the  identification  of  trade-related  technical  assistance  and  capacity
building needs, which would help alleviate the weaknesses of their production and marketing
systems,  and  their  institutional,  regulatory,  and  judicial  capacity  to  take  part  in  the
international trading system.

The  follow-up  on  the  early  studies  was,  however,  disappointing  and  the  IF  process  was
considered  not  to  work  satisfactorily.  Therefore,  in  early  2001,  the  collaborating  agencies
decided to revamp the initiative. Under the leadership of the World Bank a methodology and
model  terms  of  reference  were  defined  for  a  new  series  of  DTISs.  Three  pilot  studies
(Cambodia,  Mauritania,  and  Madagascar)  were  finalised  by  November  2001.  In  Cambodia
and Mauritania the studies were followed-up with in-country workshops.

The  next  step  is  to  identify  the  funding  for  activities  recommended  in  the  DTIS.  This  is
ideally done through the Consultative Group mechanism, under World Bank auspices, or the
Round  Table  mechanism,  under  the  auspices  of  the  UNDP.  In  cases  where  no  Consultative
Group/Round Table is foreseen within a reasonable short time after the in-country workshop,
and in order not to loose momentum, the country, assisted by the donor country “Facilitator”,
will organise a special meeting with all donors, to ensure funding. In these cases the country
commits itself to integrating the findings of the DTIS in its Poverty Reduction Strategy Paper
(PRSP), so as to ensure that the mainstreaming objective is respected.

Diagnostic studies will be undertaken over the next 15 months in 11 more countries: Malawi,
Senegal, Lesotho, Yemen, Ethiopia, Nepal, Eritrea, Djibouti, Burundi, Guinea, and Mali.

Diagnostic  studies  are  funded  from  the  IF  Trust  Fund,  which  is  managed  by  the  UNDP.
Bilateral donors were asked around the middle of 2001 to pledge contributions to the IF Trust
Fund.  The  European  Commission  provided  an  amount  of  €200,000  for  the  year  2001.  The
Commission  intends  to  contribute  €750,000  for  th e  year  2002,  specifically  for  those  LDCs
that are part of the ACP group. The total Integrated Framework Trust Fund amounts to over
US$10  million,  half  of  which  is  pledged  by  the  European  Union  (Member  States  plus
Commission).

In  view  of  its  solid  methodology  and  the  ownership  by  the  LDCs  the  IF  constitutes  an
important  tool  to  mainstream  trade  into  the  national  economic  and  development  policies  of
the LDCs.

31