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What the new EU trade boss should do about development

September 29, 2014

A new publication from the Overseas Development Institute lists 10 policy priorities for the new EU trade boss. The last trade commissioner, Karel de Gucht, was said to be a bit, ahem, brusque with poorer countries. In an attempt to get in early while his replacement Sweden’s Cecilia Malmstrom is still arranging the pencils on her desk, the ODI lists ways in which the EU can help developing countries trade their way out of poverty. Dishing out billions of euros in aid makes less sense unless the EU helps poorer countries take part in the global economy.

The ODI calls broadly for measures aimed at helping developing and least developed countries to build the export engine. Until now global efforts have focused largely on market access rather than the supply-side, imagining that the smallest countries can magically develop the ability to sell to the EU market without support. Some countries can’t meet EU standards. The ODI asks the Trade Commissioner to bear in mind the consequences of EU bans on poorer countries. Europe should have helped Nepal to meet its rules on honey rather than the product being banned.

The ODI booklet also encourages the EU to reduce average tariffs on developing country imports and to abolish the tariff peaks which effectively restrict some of the main exports from developing countries. Apparently Pakistani whey exporters have to pay a levy of over 100%.

The thorny issue of agricultural exports also makes a justified appearance. Despite deciding to abolish support for farm export subsidies the EU still spends 50 billion euros on agricultural subsidies, nearly 40% of the total EU budget. “The EU currently spends 255 million euros subsidising its farmers to grow cotton rather than importing cotton from developing countries”, says the ODI. The EU should make its abolition of agricultural export subsidies legally binding and shift subsidies away from crops like cotton that developing countries produce more efficiently.

The ODI also says that developing-country voices must be heard whilst making trade rules, urging a commitment to the UN sustainable development goals which includes a commitment to a new global trade framework that goes beyond market access for the poorest nations.

Another particularly sensible aim is to increase services exports from Least Developed Countries, which until recently received less preferential access for services exports to the EU than for goods. A waiver agreed at the WTO would help the EU grant preferential access to these countries. The waiver hasn’t been applied yet.

Whether the controversial and headline-grabbing Transatlantic Trade and Investment Partnership between the EU and the US consumes Malmstrom’s time remains to be seen, but the 10 points listed by the ODI would be a useful place to start on development.

The 10 points are:

1. Strengthen the link between development and trade in EU policy-making

2. Ensure developing-country voices are heard in making trade rules

3. Diversify trade with developing countries

4. Abolish tariff peaks

5. Revise rules of origin for 21st century trade

6. Protect poor countries from trade defence measures

7. Provide a level playing field for agricultural trade

8. Promote environmentally-friendly trade with developing countries

9. Build the capacity of developing countries to meet EU trade standards

10. Increase business networks between EU and developing countries.

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