Trade Negotiations Insights • Volume 9 • Number 2 • February 2010

Coordinating EU trade and development policy-making in a new context

by Davina Makhan

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The recently enforced Lisbon Treaty bears the promise of improving the consistency of the EU’s external policies, including trade and development. It is a most challenging task - as illustrated by the EPA and Aid for Trade processes - which call for the streamlining of both Community and member states’ policies. Achieving a whole-of-the-Union approach will require difficult choices and clear-cut decisions over a division of labour. Much will depend on the extent to which EU member states allow for a stronger and more coherent EU to emerge.

While it is widely assumed that trade can be a key aspect of the EU’s international development policies, the EU’s multilevel system of governance has posed a challenge for linking trade and development. Indeed, whereas the Community holds an exclusive competence over trade issues, the competency over development policy is shared with the EU member states. Harmonising communitarised and semi-communitarised policy areas is thus a political as well as an administrative challenge.

The Economic Partnership Agreements (EPAs) with the group of African, Caribbean and Pacific (ACP) States are the EU’s flagship endeavour to make better use of trade for development. They also intend to bring the trade and development policy areas closer together, by better linking the negotiation and implementation of the EPAs to EU development support strategies, including Aid for Trade (AfT).

Effective and timely coordination of policies and of the different actors involved - including the ACP - is therefore crucial for trade and development to be mutually supportive, as illustrated through the EPAs and AfT processes[i].

EPAs - The “trade leap forward” that got stuck

Despite trade being a communitarised area, EU member states have played a determining role in shaping the Commission’s response on key issues in the EPA negotiations with the ACP, notably through the Article 133 Committee[ii]. Partly due to the complex dynamics of EU decision-making, the system could not provide timely responses on crucial details for the development relevance of the EPAs. Indeed, substantial answers on market access, rules of origin and development support for the EPAs - including through the Aid for Trade initiative - came late in the run up to the December 2007 deadline for the formal negotiation process. Until then, the development benefits to be derived from the EPAs remained largely hypothetical for the ACP.

The EU has nonetheless been the main driver of the EPA process in the ACP-EU partnership, from the conceptual design of the EPAs to the content of the current agreements. Within the trade agenda, the EU was relatively coherent and acted as one body. It is questionable, however, whether it did so for development, not least of the ACP: while the trade objectives were met (WTO compatibility) the development dimension (for example, issues such as the sequencing of liberalisation and support measures, and support for regional integration) remains an unresolved challenge.

Admittedly, this outcome was not exclusively due to the EU pushing its own agenda and being inflexible to ACP concerns: there was little capacity on the ACP side to formulate well-informed strategies and policies that could shape the EU’s response. Yet, there had been too little and too inconsistent support from the donor community - including the EU system - for trade policies and trading environment in ACP countries over the years (i.e. under the Lomé Conventions). This shortcoming played a significant role in the capacity and political will of the ACP side and was not adequately addressed until almost the start of the EPA negotiations, at a time when the information was already needed. Trade and development were thus not sufficiently coordinated.

Great potential but no quick fix: AfT

The picture has significantly changed with the emergence of the AfT agenda. It indeed offers a multifaceted opportunity for increasing policy coherence through greater coordination of trade and development policies within the Union (Community and member states), and with ACP countries, at both the national and regional levels of implementation.

However, coordinating AfT is a complex endeavour as it calls on the different qualities, rationales and modes of operation of the various actors involved. Within the EU, operationalising AfT has unsurprisingly been characterised by a significant level of confusion and mixed signals. Understandably, because the initiative is quite recent, time was (and is still) needed to allow for clarification. But the lack of clarity has also raised expectations amongst the ACP as to whether AfT would result in fresh and predictable funds linked to the EPAs. Unfortunately, much of the focus so far has been on identifying the EU’s collective policy response, which — while necessary - has come at the expense of being more responsive to ACP concerns and coordinating policies with them.

The Lisbon Treaty: towards a stronger EU for development?

Although reaching compromises that are acceptable to all and meaningful for development requires time, there are promising signs that the Lisbon Treaty’s institutional innovations and the choice of personnel for the new European Commission (EC) will deepen policy coherence for development and reinforce coordination among EU actors[iii].

But Lisbon is no panacea and the Treaty has not changed the fact that the EU can only act forcefully and coherently on development issues when member states’ political will and development imperatives concur[iv]. If greater centralisation is an undesirable option for member states, complementarity must be achieved through a workable division of labour. Notably, this would require member states to mainstream AfT more deeply in their aid strategies and support a stronger coordination role for the EC[v]. Clear, creative decisions (and concessions) are therefore needed to make EU trade and development policy-making mutually supportive. Only on the basis of such a concerted approach, inclusive of partner countries’ perspectives, can the old foundations of the EU’s trade policy for development be improved and fresh ones provided[vi].

Author: Davina Makhan is a Researcher at the German Development Institute/ Deutsches Institute für Entwicklunspolitik (DIE)

[i] This article draws mostly on the study by Makhan, D. (2009): Linking EU Trade and Development policies: lessons from the ACP-EU trade negotiations on Economic Partnership Agreements, Bonn: Deutsches Institute für Entwicklunspolitik (Studies 50), Available online: http://www.die-gdi.de/CMS-Homepage/openwebcms3.nsf/(ynDK_contentByKey)/ANES-7YUFTE/$FILE/Studies%2050.pdf

[ii] Under the Lisbon Treaty, the Article 133 Committee will become the Trade Policy Committee. See Woolcock, S. (2010): The Treaty of Lisbon and the European Union as an actor in international trade, Brussels: ECIPE Working Paper No. 1/2010. See also Woolcock (2009). The Treaty of Lisbon: Implications for EU Trade Policy. Trade Negotiations Insights. Vol (8), N.10

[iii] Furness, M. / D. Makhan (2010): The Barroso II Commission: one small step for European development policy, Bonn: Deutsches Institute für Entwicklunspolitik, The Current Column, 1 March 2010 (Available online at www.die-gdi.de)

See also “Creating a pro-development trade policy in a post-preference world” in European Think-Tank Group (2010): New Challenges, new beginnings: Next steps in European Development Cooperation, February 2010. Available online: http://www.die-gdi.de/CMS-Homepage/openwebcms3_e.nsf/(ynDK_FileContainerByKey)/MRUR-82CFDB/$FILE/EU-Memorandum-2010_New%20Challenges-New%20Beginnings_2.8%20MB.pdf?Open

[iv] Furness, M. / D. Makhan (2010)

[v] See for instance, Voionmaa, P. / Bruentrup, M. (2010): German Aid for Trade: Past experience, lessons learnt and the way forward, Bonn: Deutsches Institute für Entwicklunspolitik (Studies 50) and related article pp 6-7 (this issue)

[vi] See “Creating a pro-development trade policy in a post-preference world” in European Think-Tank Group (2010): New Challenges, new beginnings: Next steps in European Development Cooperation, February 2010 and related article pp 4-5 (this issue)