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AID TO TRADE: SUPPORTING TRADE IN ACP DEVELOPING COUNTRIES THROUGH TARGETED TECHNICAL ASSISTANCE AND CAPACITY BUILDING

Posted on: July 16, 2019

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Introduction

The “trade-not-aid” strategy was heralded by a number of developing countries coming out of the experience of decades of development aid that they felt neither eradicated poverty nor led to economic growth. They postulated that a greater focus on supporting trade, rather than creating dependence on external development aid, would lead to a more sustained creation of wealth and prosperity for all. Many were founding members of the World Trade Organization, formerly General Agreement on Trade and Tariffs (GATT), firm believers that a regulated and disciplined world trading system would lead them to the grail of economic development. Of course, overseas development aid was still welcome but a regulated trading system with the ability to sanction unlawful trading behavior, and provide adequate attention to the needs of its developing Members would be a panacea, thus helping the invisible hand in the global economy.

However, high tariffs and subsidized primary and secondary sectors in developed countries left many developing countries bereft, still seeking for elusive economic growth, stymied by international stand-offs and challenges, as only the more financially able (sometimes perseverant) of these could actually launch dispute settlement cases at the WTO…and win! Others clung to the Enabling Clause that allowed some form of concession for economically weaker or more vulnerable developing countries in the form of grace periods or other “preferences”, but whose scope of implementation remains limited.

The Development Round that commenced in 2001 in Doha gave hope to developing countries that they would finally have their round of negotiations completely, well, almost, dedicated to their issues, challenges and tailor-made trade solutions. However, to date, this Round cannot be concluded and is tapering off into limited gains in trade facilitation or fisheries, to name the few. What of the rest of the major issues of concern to most developing countries’ trade, such as agriculture, non-agricultural market access, special and differential treatment for especially vulnerable categories of Members?

It was during this Round of negotiations that developing countries saw the advent of Aid-For-Trade, in 2005, in Hong Kong.

The EU-ACP TradeComII Programme uses trade support as an encouragement to ACP countries to trade. As such, Aid-for-Trade has evolved over time to take into account the multiplier effect that trade assistance can have when external assistance is used to reinforce the beneficiary country’s self-identified needs, based on its own development trajectory, and targeted to clearly identified and verifiable results/outputs, based on pre- and self-determined strategies, with a clear intention to follow up implementation and ensure sustainability of the actions following foreign intervention.

This is the approach that the TradeComII Programme has pursued so that its technical assistance can have a lasting and sustainable impact within ACP countries.

TradeCom II - Aid to trade, with a meaning

Aid to trade has been championed by the EU-funded ACP-managed TradeComII Programme, that seeks to boost African, Caribbean and Pacific (ACP) trade integration and development through a demand-driven approach. At an institutional level, the role of TradeCom II is to complement EU-funded actions in ACP countries or regions through the principle of subsidiarity. This is done though the provision of funds dedicated to trade promotion, and in coordination with other trade-related programmes running concurrently at respective levels in the country and region. At a practical level, TradeComII is managed though a decentralized procedure that allows the Programme Management Unit (PMU) the freedom to receive requests from ACP countries (demand-driven specificity) and to translate these into Terms of Reference for full-fledged trade-related programmes and projects for implementation. The funds are fully managed by the PMU (Though the European Commission reserves the right to review the proposals and procedures followed for attributing the tenders, and ensures periodic audits of the funds spent).

The strength of the TradeComII Programme and approach is the respect of ACP national and regional economic contexts and needs as expressed by the beneficiary, and the promotion of intra-ACP complementarities through:

  • Promotion of the exchange of best practices among ACP countries and regional economic communities, including through the knowledge sharing tool;
  • The use of regional and international expertise, both ACP and expatriate with a strong ACP background, to work alongside these beneficiaries and stakeholders, to respond to their needs in self-determined areas.
  • Proximity and accompaniment are key to the internalization and appropriation of trade-related assistance provided to ACP countries.

For effective impact and positive outcomes on the ground, the procedures for procurement must be reduced to a minimum so as to increase the amount of time spent by the experts in the field with the beneficiary, while strengthening the oversight of the work to ensure that the needs are being met in a timely and adequate manner. This requires a balance between the need to account for funds spent (ensure that administrative and procedural requirements are met) and ensuring high level technical and sustainable outputs. Of course, the tariff and non-tariff barriers in external markets will still exist and sometimes exert disproportional pressure on ACP’s ability to trade, however TradeComII’s approach ensures that the ACP countries are strengthened in their ability to trade and assists with seeking for other market opportunities, and exploiting already available opportunities such as in regional integration settings.

Following tried and tested guidelines TradeComII has realized a number of technical assistance and capacity building (TACB) programmes across ACP countries over the years, with tangible results. ACP-origin and international experts who have relevant experience are selected to create and support enabling environments, inter alia, through the development of national technical capacities in the extensive trade and related fields that are of relevance to the economic development of the requesting country.  Capacity building remains central to acquiring skills that are available internationally to build and assess local understanding of the issue and its importance/relevance for trade. 

The focus of the trade-related technical assistance and capacity building that TradeComII has provided to ACP countries under its first Programme Estimate, can be divided into five focal areas:

  • Building trade capacities of national and regional institutions
  • Building capacity for trade negotiation and agreement implementation
  • Strengthening customs/trade facilitation systems
  • Strengthening private sector competitiveness
  • Enhancing ACP ability to take advantage of market access opportunities

Building trade capacities of national and regional trade institutions (policy and practice)

The purpose of building capacity in national and regional administrations is to provide them an increased understanding of trade, an increased capacity to formulate suitable trade policies, and to be able to mainstream trade and trade policy into the global economic positioning of ACP countries.

This includes focusing on developing new and relevant, and optimizing existing trade policy and instruments for increased market access.

TradeComII has provided expertise to ACP national and regional trade institutions, in a number of areas: understanding specific trade issues and agreements (WTO, TFA, EPA), customs administration, laboratory assessments and capacity building, providing technical needs assessments, assistance with formulating and implementing trade policies, project cycle management, trade and enhancing the regional integration agenda (theory and practice), trade and standards. This is also accomplished through the preparation of policy briefs (sectoral) to be able to feed into negotiations let by national or regional economic communities.

Building capacity for trade negotiation and agreement implementation

Capacity building for the negotiations of specific trade agreements has been a recurrent need expressed by ACP countries because of the level of technicity of the legal requirements and the plethora of issues that must be dealt with before agreement implementation. The aim is to support ACP countries to participate more effectively in trade negotiations and to implement the trade agreements to their benefit.

With respect to the negotiation of agreements, TradeComII technical assistance supported the accession process (EPA and WTO) of ACP countries. Support has also been provided to develop and strengthen officials’ understanding of trade agreements and negotiations from a developing country or ACP perspective, such as developing an ACP perspective on public stockholding for food security purposes at the WTO.

With respect to the implementation of trade agreements, the needs expressed by beneficiaries have been greater than with respect to the negotiation of these. Expertise was therefore provided to assist with enhancing the implementation of EPAs in ACP regions as well as with implementing other FTAs and the WTO Trade Facilitation Agreement (TFA).

One example of TradeCom II support with respect to the implementation of trade agreements, was to enhance the capacity of the EPA Implementation Unit of the CARIFORUM Directorate to implement the CARIFORUM-EU EPA. This was done through the enhancement of the legal and regulatory framework and support to monitor the effective implementation of the EPA. Experts provided support to:

  • Transpose HS 2002 codes to HS 2017 while flagging issues that may arise for CARIFORUM Member States during the transposition
  • Draft model bills to implement the CARIFORUM liberalisation commitments (in the following areas: Temporary Entry and Stay of EU Services Providers; Professional Services; International Maritime Transport Services; and Telecommunications – Regulatory Authority and Interconnection and Access to Facilities) and develop guides to their implementation.
  • Draft and finalize a Mutual Recognition Agreement for Architects including assistance with transposition into national legal frameworks.
  • Assist with monitoring (design of monitoring instruments) the implementation of the EPA and gathering of data to provide to the WTO in its implementation

Some countries required support to establish legal assistance frameworks to be able to deal with trade disputes, anti-dumping, compensatory measures, safeguards, understanding the SDT provisions of many negotiations, such as in Services domestic regulations, provision of working matrices on specific dossiers such as WTO fisheries subsidies negotiations, trade distorting domestic support, DS PSH and cotton, legal assessments of negotiating proposals, understanding trade remedies, anti-dumping proposals; SCM, ROO, Services. In some cases, fiscal and legislative reports/documents were required to be developed prior to the implementation of a trade agreement, and TradeComII provided expertise to assist with drafting these.

Support to strengthening customs / trade facilitation systems

Functioning customs systems are key to improving trade performance in ACP countries. These, however, manifest a number of bottlenecks and other challenges that are at the root of reduced trade performance and efficiency at the border.

Technical assistance has focused on capacity building for effective trade facilitation and support for the development of trade facilitation instruments, such as the development of a single administrative document and related single window, as well as training in customs valuation. These must be accompanied by a robust capacity to analyse the country’s customs data collection procedures, regulation procedures, HS coding, tariff schedules and corresponding agreement that were ratified and should be implemented and whose implementation should be regularly monitored.

Simplified trade regimes development have also proven themselves to be quite functional in ACP countries and often serve to support trade development among vulnerable groups such as women and youth entrepreneurs.

TradeComII has also focused its assistance on strengthening trade facilitation efficiency overall and specifically, for remote or insular economies, analyzing and strengthening air connectivity and harbor facilities such as for shipping and cruises are a necessity for ACP countries whose trade and economy are largely open and depend on maritime and air transport.

Strengthening private sector competitiveness

Supporting the private sector in ACP countries, which is the engine of economic growth, has also been a focal area for TradeComII support, with specific focus on MSMEs and SMEs.

Boosting private sector competitiveness must be a pillar and objective of technical assistance and capacity building efforts as SMEs and MSMEs represent 90% of ACP export capacity. That includes all efforts to unlock their trade potential along the value chain, assisting them to climb the value chain through value addition and ensuring quality throughout production and manufacturing processes.

Strengthening export competitiveness has been a pillar of support to the private sector and has brought many positive results in the field, as it combines quality management, the development of business centres, allowed for SME coaching on business development and marketing, and the development of business canvas model technologies. Some assistance provided focused on researching and presenting export trends and opportunities for the private sector, awareness building for cross-border business communities and the development of good practice value chain compliance systems for exports to the EU: market access, how to export, compliance requirements for manufacturing, horticulture and aquaculture (Kenya, Zimbabwe).

Linking private sector companies to each other and making business information available for access by international exporters have also proven to be a useful tool, as in the cases of the development of a compendium of Trade, Business and investment laws and the preparation of business directories. A number of studies have been prepared for ACP countries including studies on the impact of subsidizing of fisheries.

Guidelines have also proven to be a tool of great worth as they speak to the specificity of a need and provide direct responses to deal with that need. Specific cases include the development of guidelines to regularize the marketing system and export of gold and gemstones.

TradeCom II has made the inclusion of women and youth one of its verifiable objectives and can boast of the increase of gender-sensitive indicators in its analysis of the impact of the support it provides to support the trading capacity of vulnerable groups in ACP countries. Special attention has been placed on women-led and youth-led enterprises that require focused and deliberate support to harness the challenges and opportunities presented to the private sector as they seek increased competitiveness both nationally and beyond their borders. Technical assistance provided under this objective therefore empowered women and youth in their role in promoting cross-border and international trade.

Sectoral strategies were also developed with a keen interest to reflect the needs of the beneficiaries on the ground and to adapt the strategies to their capacities while seeking to increase their export capacities. This includes work done on the improvement of ecommerce environment for the business sector.

Enhancing ACP ability to take advantage of market access opportunities

Market access is often a challenge for ACP countries as entry into another country’s market hardly depends only on the exporting country. There are a number of hurdles to be able to sell goods and services into another market, including legal, technical, tariff and non-tariff related. Though an ACP country cannot control the bottlenecks on the other side, they require at least information as to what the requirements are and the support or capacity to respond to these requirements, mainly at the private sector or economic operators (exporter) level but also from a policy and legal perspective.

Market access also implies the ability of ACP countries to open their markets based on intelligent policy and to provide access to other exporters from other countries desirous of selling their products (goods or services), while supporting, or not impeding local importers from acquiring these products for sale/consumption in-country. Quality is therefore key to accessing foreign markets and also to protect a country from sub-standard products. This requires updating national and regional standards (including through quality infrastructure and regulations) and solid knowledge of relevant international standards, such as ensuring compliance with multilateral (WTO) and regional (EPA) standards.

Therefore, the varied assistance with export development to regional and the EU markets go hand in hand with the support provided to eliminate NTBs through reviews of regulation and strengthening and adaptation of the related legal frameworks. Support was also provided to apprehend what rules of origin are and how they work, while assisting to understand their importance in regional and multilateral trading agreements that the ACP countries are party to.

Technical assistance also included information gathering on market access opportunities (guide development) of interest to ACP countries. 

Conclusion

The challenges are still robust when one considers that ACP countries represented only 2% of world trade in 2018 and about 5% of UE imports and exports. However, this must be read in the light of fact that ACP involvement in global trade has increased over the last five years, from 1.9% in 2015. However, one can consider that once the foundations that are required for building strengthened bases for trade development are in place, then ACP countries will be prepared to pursue trade opportunities and face challenges without being forced to take giant economic leaps backwards. TradeComII Programme has therefore been a useful tool to buttress the foundations of ACP economies and to assist them to trade, allowing for their increased dynamic engagement in the global economy

 

Paula HIPPOLYTE BAUWENS

TradeCom II Programme - Regional Trade Expert

Programme funded by European Union at the request of ACP Group - Implemented by AESA CONSORTIUM