Because trade takes place between unequal partners in terms of economic development, the WTO launched the Aid for Trade initiative in 2005, with the objective to help developing countries accessing the benefits of expanded trade. The EU's Aid-for-Trade Strategy was adopted in October 2007 in response to the WTO-led Initiative.
Back in 2007, the EU committed to enhance the pro-poor focus of EU Aid for Trade (AfT). Poverty reduction was prominent in the approach, in line with the EU treaties which imposes that the primary objective of the EU development policy is the reduction and eradication of poverty. In fact, Aid for Trade represents today a third of the total amount of EU and member states aid. This is massive!
However, the 2016 EU 106 pages thick progress report on EU Aid for Trade says nothing about the impact of AfT on poverty eradication while an independent evaluation of EU Aid for Trade (2004-2010) concludes that “Poverty reduction has not been sufficiently mainstreamed in trade related assistance design and implementation; convincing evidence of EU interventions’ poverty impact is not available as monitoring and evaluation systems were not able to capture this”. This same evaluation also drew lessons for the future: “When designing Trade Related Assistance and support for trade reforms, the EU should systematically assess their impact on poverty-distribution. Complementary or transitional policies, as well as compensation mechanisms and targeted programmes, may be needed to ensure that firms and workers can benefit from the new opportunities generated by trade reforms, and that the reforms have widespread political acceptance.”
This reflects the fact that today, a more meticulous approach is required: the problem of unequal access to the benefits of trade is not only between rich and poor countries. This problem has also become a top-concern within countries. In Europe as well as in the Global South, where many countries with high growth rates continue to count very high (and sometimes increasing) numbers of people living in poverty, and a growing gap between the richest and the poorest.
In 2017, the EU decided to update its AfT Strategy to better respond to the complex challenges of today, better focus on poorest countries and increase the impact of its actions, taking into account the Paris climate agreement and Agenda 2030. Member states have adopted Conclusions about the proposed communication in December 2017, which notably put emphasis on the social and environmental dimensions, and call for CSO and trade unions’ participation. The new AfT strategy adopted in November 2017 puts emphasis on participation, results, generating more value in partner countries, supporting the circular economy – all good and important things. However, ActionAid believes that Aid for Trade could and should be much more ambitious in three specific areas: fighting inequalities; prioritising the social and environmental dimensions of development over narrow economic indicators such as GDP growth; and support the removal of the obstacles to women’s economic justice.
The EU and member states firmly committed in the new Consensus for development to fighting inequalities. However, the only reference to inequality in the new Aid for Trade Strategy is a footnote commitment “not to exacerbate inequalities and consider both the intended and unintended consequences of aid for trade interventions in situations of fragility and conflict”. That is not sufficient. Aid for Trade should prioritise support to those most in need and firmly seek to reduce inequalities and leave no one behind. This involves supporting social dialogue and workers’ representation, which will help ensuring that the benefits of trade and investment are distributed more fairly. AfT could also support labour inspectorates, decent work programmes, women’s cooperatives, and litigation by producers in supply chains e.g. Trade unions play a unique role to advance the decent work agenda. Multi stakeholder approaches and dialogue with businesses are important but cannot be a substitute for social dialogue, on which Europe has a rich history and experience.
The EU should pay much more attention, and even prioritise, the environmental and social dimensions of development. Under the new Aid for Trade strategy, as in the new Consensus, responsible business conduct is supposed to be tackled through “multistakeholders dialogues” and “best practices” – which everybody knows is not enough. We need a binding legal framework to regulate European companies operating abroad. In parallel, Aid for Trade should expressly support the UNGPs implementation at national level in partner countries, support watchdog organisations and the establishment of effective remedies for victims, for example.
Last but not least, Aid for Trade and other sources of EU development cooperation should assertively support the removal of structural barriers preventing women from benefitting equally from trade, in line with the EU Gender Action Plan. Women’s unpaid care work and discrimination in accessing productive resources are major obstacles to women’s economic justice. EU Aid should address the lack of redistribution of unpaid care work by supporting gender-responsive public services (health care, education, child care, etc). As far as productive resources are concerned, women’s access to land is only mentioned in a footnote in the AfT Communication.
The link between growth and poverty reduction is not automatic, neither is the link between trade openness and poverty reduction or increase. The new AfT strategy seems to assume that growth equals poverty reduction, which is contradicted by a wealth of evidence. It’s time to move away from the GDP growth dogma, and to ensure that human rights effectively underpin the approach to EU aid.