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K4D Helpdesk Reports 341

The EU and its Member States’ Trade Support Programmes for Economic Partnership Agreements (EPAs)

Published on 17 July 2018

Trade is prominently mainstreamed into development policies and the Economic Partnership Agreements (EPAs) between the EU and the African, Caribbean and Pacific (ACP) Group of countries opened a new trade and development chapter based on reciprocity. However, during the negotiations many Least Development Countries (LDCs) and some non-LDCs like Nigeria refused to sign an EPA, jeopardising the EU’s objective of regional comprehensive trade agreements. At the moment there is only one comprehensive EPA with the Caribbean region (CARIFORUM), while in Africa there are agreements in West Africa, East Africa and Southern Africa, however, within each region individual countries that have opted out from signing it.

Most ACP countries fear lifting barriers to European imports as that will place pressure on the agricultural and manufacturing sectors, diverting their diversification efforts that could make them economically dependent on a limited amount of export commodities. Hence, development cooperation was always an important part of the negotiations strategy to improve supply-side competitiveness; business enhancing infrastructure; trade data; EPA institutional capacity building; and fiscal adjustment.

The West African region (ECOWAS) is the only region that succeeded to negotiate EUR 6.5 billion from the EU for its EPA Development Programme (EPADP for the first phase of West Africa’s EPA implementation till 2020. The South Africa region (SADC-minus) is working on its own EPA development fund, but without the EU putting a number on the EPA support contribution. The strategy of the EU is to reaffirm that EPA related trade and development cooperation will be facilitated by existing aid mechanisms linked to the Cotonou Agreement and the European Development Fund (EDF). The most important channels for support and assistance for EPAs comes through: EU Aid for Trade, EU External Investment Plan, EDF Regional and National Indicative Programmes and its ACP Trade and Private Sector Development (PSD) programmes. There are three institutions within the EU that provide the main support/assistance for EPAs: EC International Cooperation and Development via its European Development Fund; European Investment Bank; and EU member states.

The Commission has pledged to commit approximately half of its annual €2 billion Aid for Trade (AfT) contribution to support ACP countries, largely though not exclusively through EPA implementation projects. AfT commitments in two categories (trade related infrastructure and building productive capacity) represented more than 97% of total EU AfT commitments in 2015. The largest remained “trade related infrastructure”, with EUR 6.6 billion of commitments (trade-related physical infrastructures including transport, storage, communication and energy generation and supply), while “building productive capacity” remained the second largest category, with EUR 6.2 billion.

The EU trade and development support evolved from being linked with WTO rules to being linked to bilateral Free Trade Agreements (FTAs), like EPAs and regional economic integration processes. Another trend that can be seen in the literature and online resources is that trade and development support is becoming less technical and shifts towards trade facilitation, PSD and Investment. Over the last 8 years the EU includes more ODA loans from the European Investment Bank (EIB) to their total trade and development support. Although hard infrastructure, like ports and road construction, remain important investments, there is also a new focus on digital connectivity and the importance of investments in online environments.

Looking at the EU member states, France and Germany increasingly focus on the investment side of trade support by providing loans, while the Netherlands, United Kingdom, Sweden, Belgium and Denmark are more focussing on ODA grants. The literature also shows that trade assistance and other trade related support impact positively on improving trade conditions, lowering trade costs and the integration of developing countries in the global trade system. What this means for poverty reduction, gender issues and income inequality is highly debatable in the literature.

This report not only gives an introduction to the state of affairs and channels of which trade related development support is given to ACP countries related to EPAs, it also gives an overview of what kind of support is given per region in Appendix 2. This list does not claim to be extensive, but is an indication for what happened during the last 5 years. What will happen after 2020 is not clear with Brexit negotiations, EU negotiations on the future of the Cotonou agreement (and the future existence of the ACP Group of countries), and the EU negotiations on a new budget for 2020-2027 all happening at the same time.

Cite this publication

Quak, E. (2018) The EU and its Member States’ Trade Support Programmes for Economic Partnership Agreements (EPAs). K4D Helpdesk Report. Brighton, UK: Institute of Development Studies.

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Image of Evert-jan Quak

Evert-jan Quak

Research Officer

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published by
IDS
authors
Quak, Evert-Jan
language
English

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