Making policies work

GREAT insights Magazine

Interview with EU Trade Commissioner Karel De Gucht

August 2013

Interview with EU Trade Commissioner Karel De Gucht. GREAT Insights, Volume 2, Issue 5. July-August 2013.Maastricht: ECDPM

The Doha Development Round seems to have stalled. Does it mean the trade & development agenda is also stalled? 

No, a stalemate in the Doha Round by no means implies stalemate in the trade and development agenda. There is vibrant support for the Global Aid for Trade Initiative and plenty of international debate about related trade and development issues. I saw this very concretely in a global Aid for Trade policy dialogue at the OECD in January. Donors are working closely with developing countries to enhance their business environment, border procedures and infrastructure. This improves their capacity to attract investments and export. In this respect, investing in good governance, education, security and stability are also vital. But Aid for trade and broader development assistance should not be seen in isolation. Generous tariff preferences, flexible rules of origin, Corporate Social Responsibility and above all appropriate flanking policies in the countries concerned are all part of the picture too. And we should not forget both multilateral and bilateral trade agreements that facilitate developing countries’ integration into global value chains, while providing them with flexibilities depending on their level of development. 

What will it take to revive the Doha Round? What do you expect from the new WTO leadership and from the Ministerial Conference in Bali at the end of this year?

Fortunately, more and more countries realise that the stalemate in the Doha Round cannot go on. The countries that were meant to benefit most from the Round – the developing countries, and the Least Developed Countries in particular, are the ones most affected by the blockage. 

Reviving the Doha Round is no easy task. Given the changes in the global economic landscape since it was launched in 2001 and the rise of emerging economies, there will be a need for a serious discussion on how to properly reflect these changes in the negotiations. More economic and political power on the world stage means more responsibility and this needs to be reflected in the negotiating process. I will spare no effort to help the talks succeed as there is a lot to gain from the Doha Round and too much to lose if we fail.

The first test of our common resolve will be the upcoming 9th WTO Ministerial Conference. Work is underway to prepare an agreement on the trade facilitation agreement, agriculture and development, including LDC issues. The most significant element of this package is trade facilitation. It would greatly reduce red tape at borders and boost trade, which is in everyone’s interest. Our own analysis has shown that all WTO Members stand to gain from such an agreement, but that the biggest winners would be developing countries. One of the key issues under discussion is what flexibility developing countries will be given when implementing the agreement. The EU and others will provide substantial technical assistance to help them in their efforts.

What have been the main achievements of the European Aid for Trade so far? 

The EU, together with its Member States, is the world’s biggest provider of Aid for Trade, accounting for around one third of the global figure. In 2011, we provided €9.5 billion worth of Aid for Trade. We need to encourage developing countries, particularly LDCs, to prioritise trade in their development strategies, as well as in their cooperation with donors. This applies to their relations with us too, as we are currently programming our development aid for 2014-2020.

The EU and its Member States have always exceeded their collective commitment to provide annually at least €2 billion worth of Trade Related Assistance. This is aid for things like customs reforms, trade policy, and meeting European health and safety standards. In 2011, 71% of global Trade Related Assistance came from the EU and its Member States.

But it is about more than just headline figures. We are trying to increase the effectiveness of aid for trade. We give a lot of support to help countries expand their trade and create growth by increasing the amount of value they add to what they produce and by using growth from trade to combat poverty. There are many examples of successful Aid for Trade projects. The creation of a one-stop border post at Chirundu on the frontier between Zambia and Zimbabwe, for instance, or a scheme in Mexico to help farmers and fishermen comply with European food safety requirements thereby taking better advantage of the EU-Mexico Free Trade Agreement.

In the light of the European Agenda for Change, what are the priorities on the way forward for the international AfT agenda? How will the EU contribute to it and what will be different? 

Both Agenda for Change and the EU policy on Trade, Growth and Development highlight the need for better and more targeted Aid for Trade. I see two main ways to achieve this. First, we have to focus on those developing countries most in need, Least Developed Countries in particular. Second, we need to respond to changes in trade patterns and evolving priorities for aid for trade in developing countries.

Agenda for Change singles out the general business environment, competitiveness and regional integration as an area of focus, with obvious impacts on efforts to advance trade, investment and development. Countries eligible for EU financial assistance ought to maximise the opportunities offered under Agenda for Change to seek support for activities that help firms in developing countries connect to and move up global value chains. The EU is a strong proponent of trade facilitation. It lowers the cost of trade and removes logistic obstacles that prevent developing countries from integrating into value chains. All these elements should be high in the international agenda as well.

We also need to engage more with the private sector, especially by leveraging private sector activity and resources for development. The EU is working to combine grant aid with loans from financial institutions to boost resources for development. We already have some encouraging examples, such as the European investment facilities or the EU-Africa Trust Fund for infrastructure, and we would like to exchange best practices with other donors in this area.

With all this in mind, the EU will continue contributing actively to the international Aid for Trade agenda. I look forward to discussions in the Global Aid for Trade Review in July.

In a post-2015 development agenda, what role do you see for trade? And given the need to look “beyond aid” to finance development, should the EU look “beyond aid for trade’ as well? 

In its approach to the post-2015 agenda, the EU sees market-friendly and open economies as key drivers for inclusive and sustainable growth. Companies in developing countries have difficulties to access the global market, though, perhaps because of a weak institutional environment or the firms’ limited capacity. The EU will continue to support the international Aid for Trade agenda to address these issues. We need to make Aid for Trade more effective, including by better international coherence and monitoring. Considering the increasing importance of South-South trade, the EU supports setting up a common platform for the Aid for Trade dialogue with South-South partners and better monitoring of their contributions. Emerging economies have a growing responsibility towards poorer countries, including through making their financial support to them more transparent.

In the EU, we are already looking “beyond aid for trade”. Our approach is holistic. EU trade policies affecting developing countries take account of development objectives. In addition to giving aid – and even more importantly – we negotiate trade and investment agreements with many developing countries. We seek to reduce tariffs, but also to address behind the border issues, such as technical norms and standards, labour and environmental standards, intellectual property rights, services and trade facilitation. Our agreements with developing countries take account of the level of their development by providing transition periods and other flexibilities. We also offer the most generous unilateral tariff preferences in the world, including duty-free quota-free market access for all products from Least Developed Countries except for arms. This is coupled with simplified and flexible rules of origin for developing countries. In addition, we use incentives through our Generalised System of Preferences to encourage developing countries to respect human and labour rights and in the case of GSP+ to apply high environmental protection standards.

The EPA process has been lingering for years. What are the key lessons you draw for the EU trade & development policy? And now that the EU has set October 2014 as a deadline, what are you ready to do to help conclude remaining EPAs and facilitate their implementation? 

EU trade and development policy is tailored to the needs of the poorest countries. Many emerging economies are now able to integrate value chains and take advantage of world trade by themselves. We continue to believe in openness to trade, in domestic reforms to improve the business environment, and in larger integrated regional markets. Behind-the-border issues and governance also need addressing. All these are covered by our Aid for Trade. 

These elements are part of the Economic Partnership Agreements (EPA) that we are offering to our ACP partners. EPAs are true trade and development agreements. They establish lasting and predictable partnerships, modernising our economic relationships and attracting investors. These partnerships are tailored to the needs and capacities of the ACP partners, providing for transition periods, safeguards and even exclusions. I remain convinced that EPAs are the best means to boost growth, jobs and development and I hope we will be able to conclude on-going negotiations soon.

The recently adopted amendment of the Market Access Regulation (MAR) clarifies the options available to ACP countries. The 1 October 2014 concerns past EPAs only, namely those concluded before the end of 2007 and not signed and/or ratified and/or implemented since, as the case may be. As a legal instrument, the Regulation cannot apply to agreements that do not exist. This means that on-going EPA negotiations may continue as long as they have the prospect of bearing fruit. It is not unusual for trade negotiations to take many years. However, the longer it takes to conclude, the longer it also takes to enjoy fuller benefits. With some of the more advanced regions, negotiations are closing in on a small number of open issues that need to be solved politically. I will spend the better part of this year engaging with EPA partners in East, Southern and West Africa to help expedite solutions.

It must not be forgotten that the EU has been very flexible in the EPA negotiations. The agreements on the table are the most generous we have offered to any partner. But we continue to discuss and fine-tune pragmatic solutions to the remaining obstacles in negotiations, with a view to making EPAs real vehicles to foster trade and development. I am ready to go the extra mile with those regions that are ready and committed to facilitate closure of these talks.

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

 

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External authors

Karel De Gucht