Trade Negotiations Insights • Volume 7 • Number 5 • June 2008
Aid for Trade in the agricultural sector: reflections on a fruitful dialogue
It has become obvious that agriculture and rural development need to be given a more prominent position on the international policy agenda. Rural development strategies should take market demands for agricultural products as well as other goods and services into account, which in most cases is a process that can be successful if led by the private sector. However, market-led development should stress the importance of local, national and regional markets, not just international ones.
In this context, ‘Aid for Trade’ (AfT) could act as a catalyst and support to private sector initiatives through creating a strong institutional and policy environment that will sustain domestic initiatives and attract financial support from international donors. To this end, there is a need to improve delivery mechanisms for aid and to demand assessment to effectively support private initiatives. Some characteristics of such an AfT agenda deserve to be explored in more depth:2
An integrated approach
AfT efforts are likely to be most sustainable if they integrate social, economic, environmental, institutional, infrastructural and human resource aspects into one coherent approach. This means going beyond a narrow focus on the agricultural sector and agro-industry towards supporting rural development in a wider sense. In essence, such an approach consists of creating a healthy business environment – including rules, regulations and institutions – to enable rural entrepreneurs to explore various strategies, including non-agricultural activities, in line with changing market demands.
The concept of an integrated approach to rural development is not new. Already in the 1970s and 1980s, development cooperation endeavoured to involve stakeholders and address the various needs of rural populations, such as housing or infrastructure, in a comprehensive way. However, this approach neither addressed the regulatory policy environment nor focused decisively on opportunities outside the agricultural and agribusiness sectors. Moreover, earlier efforts often did not pay sufficient attention to market demands. In contrast, today’s integrated focus which encourages rural entrepreneurship should be diverse, private sector driven and market-led.
Public support to private initiatives
Traditionally, EU development cooperation has been based on a state-by-state approach; as a result, procedures to assess demands and to deliver funds have often not taken account of private sector needs appropriately.
Flexibility and timeliness of delivery
Investment needs to be available in a flexible and timely manner to support market-oriented processes and allow emerging opportunities to be seized. Delays in planning or delivery may result in a project becoming redundant as market conditions could have changed in the meantime. Finding a solution faces the challenge of a trade-off between, on the one hand, the need for detailed formulation and thorough assessment of AfT demands (emphasised by many donors) and on the other, the need for flexibility and responsiveness to changing market conditions when allocating funds (stressed by those in the private sector). Finding ways to address this trade-off is likely to be essential to making the AfT initiative meaningful for private entrepreneurs.
Involving all stakeholders effectively
Public–private dialogue is crucial to a process in which private sector initiatives are supported by public funds and policies. Functional dialogue structures allow an assessment of policy instruments from a private sector perspective and can make public officials aware of the most important constraints faced by the private sector.
However, in this respect, the existence of a multi-stakeholder body is necessary but not sufficient.3 For a dialogue to produce well-founded recommendations that effectively feed into the policy-making process, respecting the bottom-up principle of development is key. This means that while discussion should take place at different levels, including the national and regional ones, it always needs to be informed by the concrete requirements of those at the local level. Without this input, a consultative body will not be able to assess which theoretically relevant measures should be adopted to respond to practical needs on the ground.
Lessons from the EU rural development policy
The EU’s rural development policy (RDP) provides a good example of an integrated approach that aims at improving the competitiveness of the agricultural sector, while also foreseeing diversification into other areas. In this context, the LEADER axis of the RDP could be a useful point of reference for designing participative local governance structures that ensure ownership to public and private stakeholders.4 A concrete example is the Local Action Group in Nord Grande Terre, Guadeloupe, in which private actors (business and civil society) make up a share of 60% of the members.
Way forward
Market-led and private sector driven approaches to AfT are likely to gain even more importance as increasing attention is given to the wider AfT agenda, which includes productive capacity development, as well as sustainability in the face of rising food prices and climate change. Accordingly, a rethink of policy and delivery instruments and new incentives for public-private dialogue have become imperative in making AfT effective.
1 Paul Engel is the Director of ECDPM and Corinna Braun-Munzinger is a member of ECDPM’s Economic and Trade Cooperation Programme.
2 On April 14 – 15 2008 a wide range of EU and ACP stakeholders accepted the invitation by the Technical Centre for Agricultural and Rural Cooperation ACPEU (CTA) and ECDPM to reflect on an AfT agenda that supports the agricultural sector in the ACP under changing market conditions. This article builds on some key issues raised during the meeting.
3 To give a recent example, the Regional Preparatory Task Forces that were meant to identify accompanying measures to trade liberalisation in the context of EPA negotiations have not met some observers’ expectations. For more details see ECDPM, 2007. Overview of Article 37(4) Reviews of the EPA Negotiations (ECDPM Discussion Paper 81). Maastricht. www.ecdpm.org/dp81
4 LEADER stands for Liaison Entre Actions pour le Développement de L’Economie Rurale (links between actions for the development of the rural economy). See article by Vincent Fautrel and Paul Goodison in this issue.