In October last year, EU governments decided to prepare plans for spending 2 billion euros (2.6 billion dollars) a year in 'aid for trade' by 2010. The aid is intended to address the marginalisation of the world's poorest countries, who have seen the proportion of international trade that they hold fall from two percent to one percent over the past four decades.

The officials tasked with drawing up the EU's strategy have complained that key international recommendations on aid for trade have paid little attention to the need for poverty alleviation. A World Trade Organisation report on the subject last year was "relatively quiet" on linking such aid with poverty, the officials noted.

The officials' comments are contained in an internal paper for the EU's executive arm, the European Commission.

The Organisation for Economic Cooperation and Development (OECD, a grouping of 30 rich countries) recently called into question the effectiveness of aid for trade.

Experience has shown that this aid can rely too much on advice from external consultants, without enough input from people actually living in poor countries, the OECD said. As a result, there is "relatively little thinking" about the underlying reasons why poor countries have a tiny share of international trade and how financial assistance can help remedy the situation.

Paul Goodison from the European Research Office, which monitors the EU's activities in developing countries, said that the aid for trade schemes funded by the Commission in Southern Africa do not inspire confidence.

"The projects put in place have been a disaster," he told IPS. "This has a lot to do with the way big contracting companies are recruited for the projects and how the EU's people are not in any way connected with what's going on."

After the EU signed a free trade agreement with South Africa in 1999, it decided to help a number of schemes in Botswana, Lesotho, Namibia and Swaziland. As these four countries belonged to a customs union with South Africa, the free trade agreement effectively applied to them, too.

In 2002, the Commission committed itself to a 5.6 million euro (7.5 million dollars) fiscal restructuring programme in Swaziland.

One of the main objectives of this project was to reduce the Swazi economy's heavy reliance on custom receipts, as these were predicted to decrease substantially. Yet when the project was completed in June last year, the level of dependence on customs had risen from 54 percent of government revenue in 2004-05 to 62 percent in 2006.

Meanwhile, a system for collecting value added taxes intended to be formed by this year was found to be off target and is not expected to be set up until 2009.

"Most trade adjustments need to be implemented quickly," said Goodison. "But the EU's timeframe for delivering support can be far too long."

EU governments have stated that African, Caribbean and Pacific (ACP) countries will be among the main recipients of aid for trade. Seventy-five ACP countries are negotiating free trade deals known as Economic Partnership Agreements (EPAs) with the Commission.

But some assessments conclude that the amounts being considered by the EU will fall far short of needs.

The Commonwealth Secretariat has estimated that the cost of compensating ACP countries for the agreements will come to more than 9 billion euros (12 billion dollars). These costs will arise from falling receipts for tariffs imposed on imports and the adverse affects on employment and production from market liberalisation.

"The European Commission has said that a significant proportion of aid for trade will be directed to African, Caribbean and Pacific countries, which -- if it's really new money -- will be welcomed," said Sophie Powell, trade policy adviser with the organisation Traidcraft.

"However, the benefits would be seriously undermined if the Commission shackles its generosity with conditions such as making the ACP sign the highly controversial Economic Partnership Agreements. Using the promise of additional money as leverage to force some of the world's poorest countries to open their markets to EU goods and companies is cynical in the extreme."

The EU's only directly elected institution, the European Parliament, is urging that increased aid for trade should be given to the ACP countries, regardless of whether they sign the accords.

In a new report for the Parliament's international trade committee, the British Socialist MEP David Martin calls on the Commission and the Union's governments to specify how much aid for trade will be available to ACP states before the EPA talks conclude.

Greater clarity is necessary, he contends, to allow the ACP negotiators anticipate how much they will receive to cushion the blow from trade liberalisation and to allay suspicions that the EU is keener to promote its own interests than those of the poor.

"This would help to bring the development dimension of EPAs, which has been hitherto conspicuous by its absence, back to the fore," he said. (END/IPS/EU/WD/DV/IF/WT/DC/SS/ 07)

Source: IPS - Inter Press Service News Agency