Opinion of the Committee of the Regions on the "Communication from the Commission to the Council and the European Parliament on Trade and Development Assisting Developing Countries to Benefit from Trade"
Date: 2003-10-09
Institutions: European Committee of the Regions
Subjects: European Committee of the Regions, developing countries, development aid, opinion, trading operation

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Opinion of the Committee of the Regions on the ‘Communication from the Commission to the
Council and the European Parliament on Trade and Development Assisting Developing Countries
to Benefit from Trade’

(2004/C 23/02)

THE COMMITTEE OF THE REGIONS,

having regard to the Communication from the Commission to the Council and the European Parliament
on Trade and development — Assisting developing countries to benefit from trade (COM(2002) 513
final);

having regard to the decision of the European Commission of 11 February 2003 to consult it on this
subject, under the first paragraph of Article 265 of the Treaty establishing the European Community, and
to the letter of Mrs Loyola De Palacio, Vice-President of the European Commission, to Sir Albert Bore,
President of the Committee of the Regions of the same date to consult it on this subject according to the
protocol of cooperation of 2001;

having regard to the Protocol on arrangements for cooperation between the European Commission and
the Committee of the Regions, signed by their respective Presidents on 20 September 2001 (DI CdR 81/
2001 rev.);

having regard to the decision of its Bureau of 9 October 2002 to instruct its Commission for External
Relations to draw up an opinion on this subject (Item 7 b of the agenda, 2002/DEV/5);

having regard to Articles 177 and 178 of the Treaty establishing the European Community;

having regard to The Partnership Agreement between the members of the African, Caribbean and Pacific
Group of States, of the one part, and the European Community and its Member States, of the other part,
signed in Cotonou on 23 June 2000;

having regard to the Joint Statement of the Commission and the Council on the European Community’s
Development policy of 10 November 2000;

having regard to the conclusions of the fourth Ministerial Meeting of WTO Ministers in Doha in
November 2001;

having regard to the conclusions of the International Conferences in Monterrey on the financing of
development in March 2002 and in Johannesburg on sustainable development in September 2002;

having regard to the Communication from the Commission to the Council and the European Parliament
on the European Community’s Development Policy (COM(2000) 212 final);

having regard to the Communication from the Commission to the European Parliament, the Council, the
Economic and Social Committee and the Committee of the Regions — Towards a global partnership for
sustainable development (COM(2002) 82 final);

having regard to the report of the European Parliament on capacity-building in the developing countries
of 18 March 2003 (A5-0066/2003 — 2002/2157(INI));

having regard to the opinion of the Committee of the Regions on Continuation of the WTO negotiations
(CdR 181/2002 fin) (1);

having regard to its draft opinion (CdR 100/2003 rev.) adopted on 23 May 2003 by the Commission for
External Relations (rapporteur: Sir Ron Watson, CBE, Councillor, Sefton Metropolitan District Council
(UK/EPP),

(1) OJ C 192 of 12.8.2003, p. 37.

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Whereas:

1)

2)

the integration of the developing countries, in particular the least developed among them, into the
world economy is a precondition for their growth and sustainable economic and social development;

Community policy in the sphere of development cooperation shall foster the sustainable economic
and social development of the developing countries, and most particularly the most disadvantaged
among them, and the smooth and gradual integration of the developing countries into the world
economy;

3)

regional integration and cooperation contribute to the integration of the developing countries into
the world economy and play a decisive role in consolidating peace and preventing conflict,

adopted the following opinion at its 51st plenary session on 9 October 2003.

1.

Introduction

remove supply side constraints on trade and to provide
reliable financing of trade related assistance and capacity
building;

1.1.
on 1 January 1995, the World Trade Organisation
(WTO) replaced the General Agreement on Tariffs and Trade
(GATT) as the key forum for multilateral trade relations. The
decision to establish the WTO was taken at Marrakesh in
1994, which saw the culmination of almost eight years of
multilateral trade talks within the GATT ‘Uruguay Round’;

— the World Summit on Sustainable Development (WSSD)
at
Johannesburg in August-September 2002, which
agreed on the need for mutually supportive trade, devel-
opment and environmental policies;

1.2.
following the significant accession of China to the
WTO in December 2001, 144 countries are now in member-
ship, accounting for well over 90 % of international trade
flows;

1.4.
the European Union has been an active participant in
these WTO and UN Conferences, and in trade and development
negotiations more generally:

1.3.
since the well-publicised failure of the WTO’s Third
Ministerial Conference in Seattle in November 1999, which
witnessed a strong protest against
‘globalisation’ and the
workings of the WTO, there have been a number of important
conferences which have sought to establish an acceptable
common framework for world trade relations which respect
the principles of sustainable development and address the
special needs of the 49 Least Developed Countries (LDCs):

— the fourth Ministerial Meeting of WTO Ministers in
Doha in November 2001, which launched the Doha
Development Agenda, an approach based on a positive
emphasis on development and the importance of capacity
building to assist countries to participate effectively in
trade negotiations. The Doha Round, which superseded
the Uruguay Round (which itself ran from 1985 to 1997),
is due to end on 1 January 2005;

— the UN Conference on Financing for Development in
Monterrey in March 2002, which stressed the need to

— EU Trade Commissioner Pascal Lamy has strongly pro-
moted the need for a comprehensive new round of
negotiations (i.e. the Doha Development Agenda) and
supported the WTO’s drive to extend trade rules and their
enforcement to services, through the General Agreement
on Trade in Services (GATS);

— the EU is engaged in an ongoing and politically highly
contentious debate about the need to reform the Com-
mon Agricultural Policy (CAP), and is in the process of
developing its negotiating position within the WTO on
agriculture (Mr Bocklet, Bavarian Minister of State for
Federal and European Affairs, was rapporteur for an
opinion on this matter, which was adopted in the plenary
session of 9 April 2003);

— the EU has produced an initiative known as ‘Everything
But Arms’ (EBA), encouraging duty-free import by indus-
trialised countries of all agricultural products from the
poorest countries of the world (the Least Developed
Countries, or the LDCs, currently numbering 49);

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— the European Commission published a Communication
in April 2000 on ‘The European Community’s Develop-
ment Policy’ (1), which focused on the need to help
developing countries build their capacity to engage
meaningfully in trade negotiations and to provide support
for policy reforms which would help foster trade and
inward investment (e.g. promotion of sound macro-
economic policies, support for private sector partici-
pation);

1.5.
whilst one strand of EU policy has emphasised the
importance of economic development, trade and competition,
within a clear agenda of ‘liberalisation’, another strand has
focused on the broader concept of ‘sustainable development’,
defined as the integration of the ‘three pillars’ of economic
development, social development (including issues of health,
equity and labour rights), and environmental protection. In
some formulations, a fourth pillar — cultural development or
cultural identity — is added. Other key principles of sustainable
development are ‘futurity’ or inter-generational equity (i.e. not
advantaging the present generation at the expense of future
generations, by focusing short-sightedly on short-term ben-
efits) and ‘globality’ (recognising the importance of looking at
the consequences of actions in terms of their impact on the
global environment, again in the longer term);

1.6.
the EU has recognised the need for these two strands
to be ‘coherent’ and ‘synergetic’, most notably in the Com-
mission’s Communication ‘Towards a Global Partnership for
Sustainable Development’ (2). There has been an explicit
attempt to ensure that key EU policies (e.g. CAP, the Common
Fisheries Policy, as well as trade, energy, transport and industry
policies) are made more consistent with the principles of
sustainable development.

2. The Committee of the Regions views

The Committee of the Regions

2.1.
acknowledges that the relationship between the expan-
sion of trade, economic development and poverty reduction is
a very complex one;

2.2.
believes that, as a broad generalisation, both historically
and currently, increased trade openness between nations leads

(1) COM(2000) 212 final.
(2) COM(2002) 82 final.

to positive outcomes in terms of investment and economic
development;

2.3.
is of the view, however, that the link with poverty
reduction is less clear, in that it depends on a combination of
other domestic political and institutional factors: a ‘virtuous
circle’ of trade and economic growth may lead to a reduction
at the societal level in absolute poverty, but to an increase in
inequalities of wealth and income within developing societies;

strongly supports the increased emphasis on the links
2.4.
between trade, development , poverty reduction and capacity
building represented by the Doha Development Agenda.

A positive model of trade openness

The Committee of the Regions

2.5.
believes that, for trade openness to be a positive force,
a number of key conditions need to be met; these conditions
are generally well covered in the Commission’s Communi-
cation, but some require greater emphasis;

asserts that, overall, what is required is a proper balance
2.6.
between, on the one hand, the drive towards trade, investment
and economic growth, as part of an agenda based on
liberalisation and globalisation — which undoubtedly has the
potential for bringing about significant improvements in the
welfare of less developed countries — and, on the other hand,
respect for the principles of sustainable development, the need
for transparently fair terms of trade, and a clear acknowl-
edgement by the richer, industrialised countries of the acute
problems faced by less developed countries in trade nego-
tiations, caused by over-dependence on a limited range of
agricultural and manufactured goods which are highly vulner-
able to market fluctuations, and by lack of capacity to engage
in complex negotiations on an equal footing;

regrets that this balance does not currently exist, in

2.7.
that:

— despite the recent World Summit on Sustainable Develop-
ment (WSSD), which sought to integrate the three pillars
(economic development,
of sustainable development
social development and environmental protection), econ-
omic development — including trade — is given greater
prominence by governments and business corporations
than the other two principles;

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— the World Trade Organisation (WTO), which plays a key
role in creating a rule-bound framework for the conduct
of trade relations, pursues a vigorous agenda of economic
liberalisation, paying insufficient attention to social devel-
opment (health, labour conditions, equity and poverty
issues), to environmental protection, and to what some
consider to be the fourth pillar of sustainable develop-
ment, cultural identity; this single-minded pursuit of one
element of sustainable development would not be a
problem if the WTO operated within an overarching
institutional and normative framework capable of striking
a balance between the competing pillars, but this does
not exist, even at the level of the United Nations, leaving
the WTO to operate in a largely autonomous realm,
with a disputes resolution machinery and powers of
enforcement not available to equivalent international
environmental protection organisations (e.g. UNEP, Com-
mission on Sustainable Development);

— the richer,

industrialised countries have been slow in
matching promises with actions in respect of tariff and
export subsidy reductions: it has been estimated that, as
a result, poor countries lose nearly $2 billion every day
because of unjust trade rules, some 14 times the amount
they receive in aid (1);

— the developed world has, so far, failed to recognise the
importance of creating a more ‘level playing field’ in trade
negotiations, by first acknowledging that poorer countries
lack the capacity to match the much better resourced
negotiators from the industrialised countries and second,
by providing assistance to develop that capacity: some
30 WTO member countries cannot afford an office in
Geneva,
the WTO, and few
developing countries can afford delegations large enough
to cover the 40 to 50 important trade meetings held in
Geneva in an average week (2).

the headquarters of

Increasing Market Access

The Committee of the Regions

and other developing countries, and that further liberalisation
of trade in agriculture is essential if progress is to be made in
poverty reduction: in high-income countries the average tariff
rate on agriculture is almost double the tariff for manufactures,
and import tariffs in developing countries remain almost
double those in industrialised countries;

is concerned that, despite progress since the Uruguay
2.10.
Round, support to agriculture, in the form of subsidies, remain
very large in industrialised countries, reaching US$327 billion
in 2000 (3);

2.11.
supports the EU’s Generalised System of Preferences
for encouraging exports from developing countries, and other
forms of concession, such as the Everything But Arms (EBA)
initiative for the Least Developed Countries;

2.12.
recognises that the conclusion of free-trade agree-
ments and the consequent reduction in (or abolition of) duties
can result in a significant problem of loss of government
revenues in developing countries: in many countries, customs
duties represent a major source of government finance (e.g. in
1999, 32 % in Papua New Guinea, 77 % in Guinea); transitional
financial support is required to dampen the impact of such
losses;

2.13.
acknowledges the difficulties faced by the EU in
considering the reform of the CAP in balancing the competing
objectives of, on the one hand, reducing agricultural tariff
barriers, and export subsidies in particular, and, on the other,
protecting the ‘EU agricultural model’,
involving domestic
support measures in the interests of maintaining biodiversity,
fostering sustainable rural development, animal welfare and
consumer protection (as well, of course, as the incomes of
farmers);

2.8.
welcomes the fact that significant progress has been
made in recent years in reducing obstacles to trade in both
industrialised and developing countries, and in extending
multilateral disciplines to areas such as intellectual property
rights, agriculture, textiles and clothing;

2.9.
is aware, however, that developing countries still face
considerable barriers to their exports to both industrialised

2.14.
is concerned, however, that the arguments used to
support the integrity of the EU agricultural model and to reject
further reductions in tariffs beyond those already agreed under
the Everything But Arms initiative — as so cogently argued in
Mr Bocklet’s opinion on the ‘Negotiation position on agri-
culture for the next WTO round’ — may come to block all
further progress on trade liberalisation, with the well-founded
concerns expressed in Mr Bocklet’s opinion being used by
those with an interest in the status quo as an excuse for
opposing all reasonable reforms in this area.

(1) The Least Developed Countries Report, UNCTAD, 1999.
(2) World Development Report 2000/2001: Attacking Poverty, World

Bank, 2001.

(3) World Bank, Global Economic Prospects 2002.

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Strengthening Institutional Capacity

The Committee of the Regions

(ii) more general assistance directed at strengthening the
country’s economic, social and political institutions and
practices; including:

2.15.
strongly welcomes the emphasis in the Communi-
cation on strengthening institutional capacity in developing
countries to assist them in maximising the benefits from trade;

— support for policy reforms, and investments necess-
ary to enhance economic efficiency and to ensure
greater participation in the world economy;

2.16.
recognises a wide range of domestic capacity prob-
lems faced by developing countries, which need to be helped by
a combination of Official Development Aid (ODA), investment
and reform; these problems include:

— policies which are antipathetic to investment and entre-

preneurship;

— an underdeveloped financial sector;

— support for technical assistance and capacity build-
ing in relation to the linkages between trade and the
environment (e.g. training in environmental impact
assessments);

— the promotion of sound macro economic sectoral
and tax policies which improve the climate for
inward investment;

— inadequate physical

infrastructure,

including transport

links, utilities and telecommunications;

— support for the involvement of the private sector in

the economy;

— low literacy and educational standards;

— institutionalised corruption;

— civil unrest;

2.17.
further recognises a set of interconnected problems
faced by developing countries in the international trade arena,
including:

— excessive dependence on a narrow range of agricultural
and manufactured commodities, making them particu-
larly vulnerable to worsening terms of trade and volatile
world prices;

— high levels of competition between a large number of

small producers;

— high trade barriers, particularly for agricultural and

labour-intensive goods;

2.18.
recalls favourably the Commission Communication
of April 2000 on ‘The European Community’s Development
Policy’
(and the Joint Council-Commission Statement of
10 November 2000) which helpfully identified the main areas
for the EU to concentrate its assistance for trade capacity
building; these fall into two broad categories (not explicitly
identified as such in the original Communication):

(i)

assistance specifically directed at
trade negotiations
(including assistance for WTO accession and multilateral
trade negotiations, and support for the implementation
of existing and future WTO agreements);

— support for the development of regional markets
and institutions among developing countries, par-
ticularly through the negotiations and implemen-
tation of bilateral and regional agreements with the
EU: Regional Trade Agreements (RTAs) amongst
developing countries can lead to ‘South — South
integration’ which can enhance efficiency, increase
competition, enable economies of scale, and increase
the attractiveness of Foreign Direct Investment (FDI);

2.19.
agrees with the Communication about the need to
integrate trade with development strategies in a way which
contributes to the objectives of poverty reduction and sustaina-
ble development,
trade issues are
through ensuring that
included within Poverty Reduction Strategy Papers (PRSPs)
and other national development strategies, in line with the
approach adopted at Doha, Monterrey and Johannesburg;

2.20.
draws attention, in this context, to the huge potential
of tourism — and in particular eco-tourism — to produce
high value developments which generate local employment,
make a significant contribution to infrastructure improve-
ments and which — if done properly — respect the environ-
ment and local culture;

2.21.
assistance on:

supports the Commission’s proposal to focus EU

— assistance for WTO accession, mainly through training

programmes;

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— support for the implementation of WTO agreements,
particularly in respect of the need to help develop relevant
institutional and regulatory frameworks;

— support for wider policy reforms, including reform of
customs administration (e.g. simplification of import and
export documentation and procedures); ensuring that
regulatory and enforcement systems (e.g. health, labour
standards, sanitary and phyto-sanitary agreements) meet
international standards; and ensuring that adequate intel-
lectual property rights legislation is implemented and
enforced;

2.22.
when it comments that:

agrees with the report of the European Parliament (1)

‘even if the poorest countries have non-reciprocal right of
access to the markets of the developed countries, this will
be totally inadequate as a means of ensuring that trade
actually develops unless at the same time those countries’
industrial and agricultural development capability is
increased, their ability to comply with the rules and meet
the standards (in particular health and plant-health ones)
in force in the importing countries is enhanced and their
knowledge of marketing networks is improved.’;

2.23.
draws the attention of the Commission to the signifi-
cant role which local and regional authorities can play in
capacity building through international cooperation links
between municipalities and regions; these links — such as
town twinning and involvement in international development
in ‘Type 2
cooperation projects (including,

in the future,

(1) A5-0066/2003 — 2002/2157 (INI).

Brussels, 9 October 2003.

Partnerships’ launched at the World Summit on Sustainable
Development at Johannesburg in 2002) — allow local and
regional authorities in the EU to transfer their skills and
experience in the management of local economic development
and trade relations to authorities in developing countries;

recognises that in this regard,

2.24.
local and regional
authorities in the EU enjoy considerable powers and responsi-
bilities (and consequently skills and experience) in respect of
policies and services which have an important influence on
economic activity and trade, including:

— strategic planning;

— transport infrastructure and services;

— economic development management;

— encouragement and incentivisation of inward investment,

including tourism;

— development of economic partnerships between business
firms and local authorities (including public/private finan-
ce initiatives);

— promotion of and regulation of local markets;

— education and skills training;

— procurement policies (allowing of
specifying ‘fair trade’ conditions);

the possibility of

urges the Commission to create an enabling environ-
2.25.
ment,
including a higher level of grant aid, for local and
regional authorities, as well as civil society players such as
NGOs, churches and trade unions, and business corporations,
to engage in capacity building in less developed countries.

The President

of the Committee of the Regions

Albert BORE