The EU is unlikely to meet its goal of directing 25 % of Aid for Trade funding to the least developed countries by 2030, according to a new report by the European Court of Auditors (ECA).
The Aid for Trade initiative was initially launched by the World Trade Organization in 2005 to help developing countries, in particular the least developed, to build the trade capacity and infrastructure they need to benefit from trade opening. In 2007, the EU adopted its own Aid for Trade strategy.
The strategy aimed to progressively increase the share of joint EU and member states’ overall Aid for Trade directed towards the least developed countries to 25 % by 2030.
“It is very unlikely that the EU will meet its 25 % funding target by 2030”, said Bettina Jakobsen, the Danish ECA Member in charge of the audit. “The reasons for this will need to be thoroughly examined. On this basis, it should then be reassessed whether the target is still appropriate, and whether an action plan with specific and realistic milestones should be drawn up.”
There are currently 44 countries that are categorised as least developed countries. These countries are mostly located in Africa (32 countries), with smaller numbers in Asia (8), the Pacific (3) and the Caribbean (1). They account for just 1 % of global exports and less than 2 % of world gross domestic product (GDP), and more than 75 % of their population still lives in poverty.
While the EU strategy was updated in 2017 so as better to address those countries’ needs, the funding target never translated into an operational action plan, resulting in difficulties for the EU and its member states in terms of progressing collectively towards it. The funding rate has actually fallen recently instead of rising.
According to the ECA, between 2017 and 2022 the EU and its member states allocated €17.2 billion through the Aid for Trade programme to least developed countries, with €5.4 billion from the EU alone. But this was just a fraction of the €105.8 billion sent to other developing countries. Their share actually declined from 18 % (2010-2015) to just 12 % in 2022.
The auditors found that the European Commission has not carried out any detailed analysis of the reasons for this decline in the least developed countries’ share, even though such analysis would make it possible to plan corrective measures.
One of the factors that may have contributed to the low Aid for Trade allocations is the difficulties these countries face in accessing innovative financing, such as guarantees, and leveraging private funds. The auditors also found cases of limited or unstructured interaction between EU delegations in least developed countries and their regional counterparts.
In developing countries, trade – and especially cross-border trade – is important for growth, which can lift millions out of poverty. However, the least developed countries face significant challenges that affect their access to regional and global trade. The Aid for Trade initiative was designed to address these challenges.
These can include a lack of productive capacity, trade barriers in terms of regulatory, administrative and governance practices, weak business environments, poor infrastructure, the lack of a sound system for standardisation and certifying exports, a weak institutional framework, and very difficult and costly access to financing for the private sector.
ECA Member Jakobsen told The Brussels Times that the goal of the audit is to help improve the Commission’s management of EU Aid for Trade for least developed countries and to inform decision-makers for any future revisions to the governance arrangements of new Aid for Trade interventions.
In its reply, the European Commission welcomed the audit report, accepted all recommendations and asserted that the time is opportune to re-examine some of the aims of the aid for trade strategy. Among others, an analysis of the reasons why EU 25% aid for trade funding target was not achieved will be carried out.
