Making policies work

GREAT insights Magazine

Making EU trade and development policy ‘smarter’

02-07-2020

Julia Magntorn Garrett, Peter Holmes and Jim Rollo, ECDPM Great Insights magazine, Volume 9, Issue 2, 2020

Share Button

Coherence in the values the European Union (EU) promotes makes it more likely that partners will take European principles on board. Both the EU institutions and member states have a role to play to reinforce and add value to each other’s efforts.


In ‘The Brussels Effect’ Anu Bradford argued that the EU has, for many years, been emerging as a global economic regulatory hegemon. The rules and regulations governing what can be sold into the EU are adopted by firms around the world, even when their goods are not being sold directly to the EU. China, for example, makes mobile phones to both EU and US standards, but it has chosen to use the EU GSM system internally.

Hand-in-hand with the EU’s regulatory influence comes promotion of broader EU values. For example, alignment with EU environmental regulations promotes EU values about a cleaner environment. By conditioning access to the EU market on partner countries making commitments in areas such as environmental protection, human rights and labour rights, the EU can influence others to follow its example.


Soft power and smart power


The EU’s ability to secure compliance with its norms shows its soft power. Soft power is a force of attraction that induces partners to see a country or bloc as an example they want to copy. An extreme example of pure soft power would be when a partner has internalised EU norms to such an extent that it does what the EU would wish it to do voluntarily in a spirit of emulation. However, we would normally expect some additional incentives, ‘carrots’ or ‘sticks’, to be needed.

Since the EU’s trade policy provides incentives and carries implicit penalties to induce actors to align with its values, it is not an expression of pure soft power. The combination of harder policy instruments with soft power is what Joseph Nye referred to as ‘smart power’. Using incentives in a ‘smart’ way, building on the EU’s existing soft power, can make external action more effective and less costly. For example, if a country already has some goodwill towards the EU (i.e. the EU has soft power), less additional suasion is likely to be needed to achieve a certain outcome.


The significance of coherence


The EU is not a single actor. It is made up of both the EU institutions and the individual member states. As acknowledged in the 2015 Trade for All strategy, the EU’s success in promoting its values and standards depends on its ability to act coherently, both across member states and across policy areas. More coherence in the values projected could increase the chance that partners will adopt common EU principles.

Our research explored how the EU, both collectively and the individual member states, has pursued its soft power ‘objectives’, the values it shares and wishes to instil in other countries. Specifically, we examined whether the institutions of the EU and the member states supported the same goals and projected the same values through their trade and development policies. In other words, we wanted to assess the coherence of the collective impact of the ‘Brussels effect’, alongside the ‘London effect’, the ‘Paris effect’ and so on.


Coherence between member states and the EU institutions


We focused on trade-related aid, since it spans both trade policy and development policy. Trade policy is an exclusive EU competence, meaning that it is made centrally by the EU rather than by the individual member states. Development policy is a shared competence, where the EU implements a collective development policy while member states also have national development policies reflecting their own strategic interests and priorities.

In the absence of a definitive measure of soft power, we tried to infer what might be thought of as the soft power ‘objectives’ of the EU institutions and member states by looking at the types of activities and the countries they support through their trade-related aid commitments. As a measure of similarity, we computed the overlap between the EU institutions’ and member states’ aid allocations across aid activities and recipients. Given the lack of de jure obligations in the development policy area, if the member states and the EU institutions allocated their aid to the same purposes and countries, this was viewed as a manifestation of them voluntarily projecting the same values and common principles.

We found that while the member states and the EU institutions overall pulled in the same direction, supporting similar activities and countries through their development aid, degrees of coherence varied across the member states. In the most recent years, Germany and France were found to be most aligned with the EU institutions’ objectives. Germany showed particular coherence with the EU institutions, having around 60% overlap with the EU institutions’ aid spending across aid categories. With respect to aid allocations across recipients, the UK and the Netherlands displayed considerable divergence. Overlap between Dutch and EU aid recipients was under 10%, and overlap between the UK and EU was around 20%.


Coherence in EU trade and development policy


While most modern EU trade agreements incorporate provisions on sustainable development, some agreements emphasise this dimension more than others. Sustainable development is particularly central to the EU’s GSP+ programme which grants deeper preferences than the original GSP in exchange for the beneficiary countries ratifying 27 international conventions on sustainable development, human rights and good governance. Sustainable development is also a key objective in the EU’s economic partnership agreements (EPAs) with African, Caribbean and Pacific (ACP) countries.

In light of this, we explored the coherence of the EU’s development policy with its trade policy aims by grouping aid recipients by their trade relationship with the EU and looking at whether aid to country groups with agreements emphasising sustainable development received more aid targeted towards these objectives.

Overall, we found the strongest coherence between development assistance and trade policy objectives for the EU institutions. A higher share of EU institutions’ total development assistance to GSP+ countries was focused on sustainable policy objectives compared to the standard GSP group. This is consistent with the stronger emphasis on sustainable development in the GSP+ programme. For example, over 2015 to 2017, some 68% of aid from the EU institutions to GSP+ countries was motivated by an objective to improve participatory development and good governance, compared to 50% for the standard GSP group. Similarly, around 58% of EU institutions’ aid to the GSP+ group had an explicit gender equality objective, compared to 52% for the standard GSP group. The same pattern was found for some, but not all, EU member states.

Development aid from the EU institutions to countries with an EPA was also particularly focused on sustainable development objectives. Around 67% of aid had an explicit gender objective, 48% had an environmental protection objective and 77% was targeted to improve participatory development and good governance. However, there was less coherence among EU member states. For them, we found considerable variation in the focus of aid on sustainable development objectives across the relevant recipient groups.


Smart power in EU trade and development policy


Acting in unity is important to project a common set of European values, where they exist. However, as the case of the West Africa EPA Development Programme (PAPED) shows, declaring a need to act in concert does not guarantee policy coordination. What emerges from our research is a mixed picture. While the EU and member states appeared to pull in the same general direction, they varied considerably in their degree of coherence with the EU institutions. Further, while the EU institutions’ development aid was relatively coherent with its trade policy objectives, less coherence was evident among the member states, where national priorities appeared to influence priorities more.

In practice, acting in complete unity may not always be best. The concept of smart power suggests that where a partner country has a favourable attitude towards a particular member state, it makes sense to let that member state take the lead in engagement to promote the EU’s values. This coordination of development assistance is something which the EU acknowledges. Indeed, the EU has set out measures to enhance the complementarity of aid spending by EU donors, to allow each actor to focus its assistance on areas where it can add the most value. Such coordination among member states and the EU institutions might lead to less overlap of aid spending among the donors, but could enable the EU to maximise its smart power and influence attitudes globally in a more efficient way. In this regard, both the EU institutions and the member states have a clear role to play to reinforce and add value to each other’s efforts.


About the Authors

Julia Magntorn Garrett is Research Officer in the Economics of Brexit at the UK Trade Policy Observatory (UKTPO).

Peter Holmes is Reader in Economics at the University of Sussex and fellow of the UKTPO.

Jim Rollo is Emeritus Professor of European Economic Integration at the University of Sussex and Deputy Director of the UKTPO.


This article was published in Great Insights Volume 9, Issue 2

Economic Transformation and TradeTrade

External authors

Julia Magntorn Garrett

Peter Holmes

Jim Rollo