Making policies work

GREAT insights Magazine

Evaluating EU’s Trade-related Assistance

Successes and challenges

August 2013

Christensen, P.F. 2013. Evaluating EU's trade-related assistance: Successes and challenges. GREAT Insights, Volume 2, Issue 5. July-August 2013. Maastricht: ECDPM

EU trade-related assistance has been subjected to an independent evaluation, detailing both substantial achievements and continued challenges. While mostly successful, the EU has both under-analysed and under-estimated the importance and degree of genuine political commitment of its partners.

Trade can be a powerful mechanism for increasing growth, generating jobs and improving living standards. Especially the Doha Development Agenda, launched by the WTO in 2002, catalysed increased focus on harnessing the role of trade in the fight against poverty. EU and its member states have responded robustly and are now the largest providers of trade related assistance with rapid growth in volumes during the past decade. How well has EU been able to utilise the increased funding? A recent evaluation sheds some light on this issue (1).

First of all the sheer rise in funding available has in itself provided the EU with new means and modalities for engagement (quantity as a quality). This has allowed for the development of a diverse portfolio of trade-related interventions that has been tailored to very different context, ranging from support to the development of a sustainable trade system in fast-growing China, to assisting exporters in fragile Côte d’Ivoire. Thus the focus has also expanded beyond the traditional emphasis on trade policy, which dominated the agenda when the Doha was initially launched. This diversity of intervention options has also allowed the EU to stay continuously engaged in trade-related assistance, even under deteriorating and increasingly fragile conditions, by allowing it to flexible switch between different types of interventions that are appropriate to the evolving contexts. The EU is consequently also one of the most persistent providers of trade related assistance.

The trade-related assistance has helped improving the coherence of EU’s policies. It is well-known that many developing countries struggle to meet the health and quality standards imposed by both public authorities (e.g. EU) and private importers (e.g. supermarket chains). Substantial volumes have been allocated to help exporters from poor countries to comply with these increasingly stringent private and public standards and often with considerable success. It is an area where the EU is seen as a reference point and also an area where demand for assistance is growing, as especially privately set standards are become more ubiquitous and demanding. However, a recurrent challenge has been to ensure sustainability of the quality infrastructure (for e.g. testing and certification) provided.

Also undermining sustainability has been the underestimation of the complex institutional set-up characterising not only the standards and compliance systems, but also the wider set of organisations involved in trade facilitation. At times, the EU has neglected the political and organisational challenges in mainstreaming the institutional framework; such reforms often involves transfer of power from one organisation to another which are inherently also political processes that can take time. One area of trade facilitation that has received particular attention is customs, where EU has provided technical assistance, systems and equipment to improve processing time as well as to increase predictability and transparency. Clearly there is a need improve the ease by which exporters can deliver their goods to their customers. In Africa it is estimated that a 5% reducing in waiting times at the borders could boost inter-regional trade with 10% (2). However, while EU has mostly been successful with the individual customs projects, overall the constraints to trade have only been reduced marginally (if at all) as customs only constitute a minor part of overall trade transaction cost. Again, the issue of ensuring better coordination across agencies and organisations deserve more attention and the EU has recently stepped up assistance in this area, often using the ‘behind the border’ approach, which goes beyond customs to address the trading obstacles more comprehensively.

Perhaps due to EU’s own history of successful political and economic integration between European countries, support to regional integration has featured prominently. There is virtually no regional organisation in the developing world that has not been assisted by the EU. However, this is an area with significant discrepancies between the rhetoric and the concrete achievements. While both the EU and its regional partners have had ambitious objectives for closer integration, implementation consistently failed to match these. Too often the member states of the supported regional organisations had neither the political commitment nor the technical capacity to implement the formally agreed regional integration objectives. Thus progress has been far slower in this area than expected, even in the more successful cases, such as ASEAN.

The crucial role of political commitment is not confined to regional integration, but is also key in the assistance offered to trade policy and regulation. It is thus unsurprising that EU’s support has been more effective and sustainable in countries with a strong trade orientation and high ownership of their trade policies. What is perhaps more surprisingly is that the EU has often failed to properly analyse the level of commitment among its partners when designing trade-related assistance in the policy and regulatory area. Too often it has relied on a ‘gap’ and ‘lack-of’ analysis that consistently pointed to lack of capacity, equipment, human resources etc., with the obvious ‘solution’ being the delivery of inputs to fill these gaps, in the form of training, technical assistance, equipment etc. Especially in non-committed environment such analysis failed to identify the underlying causes of the gaps. Too often the ‘lack of’ was only symptoms of wider and deeper dysfunctionalities, with perverse incentive structures and weak governance systems often being key. In these contexts, the provision of the conventional ‘capacity building’ package (technical assistance, training and equipment) did little to address the underlying causes.

The EU has also supported the trade-related productive sectors substantially, often focusing on traditional exports within agriculture, forestry and fisheries. It has clearly contributed to the stabilisation of export levels, and with higher commodity prices, also to improved incomes in the latter part of the evaluation period. However, the EU has often struggled to promote effective product diversification that could improve the value added of the exports and promote more innovations and research in the industries supported, especially in the least developed countries (LDCs). Rising commodities prices have arguably also contributed to this ‘push’ back into commodity production by altering the terms of trade in that direction. In the LDCs, the EU has not been able to revert this process and there is only limited evidence for assistance to productive sectors that has catalysed more structural, transformative changes in LDCs. The EU’s trade related assistance could probably have benefitted more from closer and synergistic linkages with especially industrial policies, although the latter remains a somewhat controversial topic, not least in Africa.

Finally, a crosscutting challenge of the EU and its partners is that they have often not ensured monitoring of outcomes and impact, which has reduced learning opportunities and accountabilityThe monitoring has too often been at either input, or, at best, at output level, which did little to address the fundamental issues of the outcomes of the project, or at macro level (e.g. GDP growth), which was too divorced from the trade-related assistance interventions to be informative about contribution. At intervention level there have been several missed opportunities for gauging income and livelihood impacts, especially when supporting trade-related productive sectors. Also, when promoting wider trade reforms, the EU, and more importantly its partners, have often neglected analyses of the significant impact on poverty, gender, regional disparities and labour market dynamics that could have assisted in designing better flanking and compensation measures which increase resilience. This also reflects the key challenge of mainstreaming trade in the sense that trade and regional integration can become even better tools for development.

The evaluation has offered a number of recommendations aimed at improving EU’s trade-related assistance. These closely correspond to the findings and conclusions presented above. Key are the following 4:

1. Continue the diversification of portfolio that allows for better contextually tailored assistance to especially LDCs and fragile states. Different countries and regions have different needs. Least developed and fragile countries in particular face challenges in just maintaining their share of the world market and here the EU should accelerate efforts to identify proper interventions and an appropriate mix of support modalities that can assist both in stabilising current levels but also in the longer term reduce dependence on a narrow export bundle.

2. Rebalance assistance between regional and national levels in areas where political commitment and capacities are weak. While the EU has achieved many successes there have also been many challenges, calling for a more strategic and contextualised approach that recognises different economic and political realities.

3. Increase the analytical use of political economy tools and institutional assessment especially for capacity development interventions. The EU should make better and more consistent use of its own robust tools developed for that purpose including the backbone strategy on technical cooperation. Especially in weak and fragile contexts, such analysis is required.

4. Improve monitoring and evaluation of trade-related assistance. There are many opportunities for the EU to improve its learning from the trade-related intervention. Of particular importance will be to strengthen monitoring efforts in relation to the outcomes to which the trade-related assistance interventions can reasonably be expected to contribute. Of particular interest will be income and poverty changes, distributional consequences and structural transformations.

The evaluation is now available on the EU’s Evaluation Unit’s website and you are encouraged to check it out and obtain more details.

Peter Frøslev Christensen is a consultant who led the evaluation team, managed by Particip. The views expressed above are his alone and not necessarily shared by others.

Footnotes
1. Particip (2013) Evaluation of the European Union’s Trade-related Assistance in Third Countries Final Report. April 2013 http://ec.europa.eu/europeaid/how/evaluation/evaluation_reports/2013/1318_docs_en.htm 
2. Karel De Gucht, “Aid for Trade: Helping developing countries trade their way out of poverty”, OECD Insights, January 2013. 

This article was published in Great Insights Volume 2, Issue 5 (July-August 2013)

Share Button
Economic Transformation and TradeAid for TradeBusiness and DevelopmentEuropean Union (EU)TradeAfrica

External authors

Peter Frøslev Christensen