EU-ACP relations and a move 'beyond aid'

In Brussels, Belgium, the 79 countries that make up the Africa, Caribbean and Pacific Group of States have embarked on a strategic review aimed at “repositioning” the group within the global arena and readying itself for negotiations on its future relationship with the EU.

Details regarding the timing of negotiations remain unclear, but a group of “eminent persons” has been tasked with steering the issue through a series of internal consultations. Devex has learned that an ACP position paper is in the works.

The next five years will be crucial for the future of the European Union’s development cooperation with ACP countries with the the Cotonou agreement — which sets out the details of the EU-ACP partnership — due to expire in 2020.

According to ACP Secretary-General Patrick Ignatius Gomes, appointed in December 2014, the lead-up to negotiations is characterized as a period of “deep reflection,” aimed at ensuring a “much more mature relationship with Europe that is not at all aid dependent. ... We want to let aid be pushed into the background,” he told Devex in an exclusive interview on the sidelines of a U.N. Food and Agriculture Organization conference in Rome, Italy.

The ACP group was created in 1975 when a partnership with the EU — today based on trade, economic cooperation, development assistance and policy dialogue — was established with a binding agreement. Forty years on, ACP members are taking a stock of their access to the world’s largest trading bloc and of the knowledge and experience acquired in the co-management of the European Development Fund. “What we have to do is to consolidate the gains,” Gomes said.

Even if it’s too early to tell what the future makeup and role of the ACP Group will be — not to mention how its partnership with the EU may change — the direction the 79 countries are taking on the 40th anniversary of its historic agreement is beginning to come into sharp focus.

Indeed, the group has already identified five “strategic policy domains” at the core of its future work, namely rule of law and good governance; global justice and human security; building sustainable, resilient and creative economies; intra-ACP trade, industrialization and regional integration; and financing for development.

However, the overall vision is broader and the message is clear: ACP countries want to move “beyond aid.”

According to the ACP secretary-general, development assistance has to be looked at not just in terms of aid, but also “in terms of foreign investment” or, for instance, the mobilization of remittances — worth $41.17 billion in 2013 alone to ACP states, according to UNCTAD data.

“Aid is such small portion of development finance,” he said, adding that it is necessary to assess to what extent aid contributes to development finance or to countries’ GDP. “For some, yes, it is sizeable — 20-30 percent of the annual budget — but in several other countries it is miniscule in relation to foreign direct investment [and] what countries are able to mobilize on their own if they had better tax systems and [could] avoid becoming indebted.”

Finding a mechanism for regulating the transfer of finance was another challenge, Gomes said, asserting that, just as with direct grants, aid should be better focused and allocated to the countries most in need.

Technical assistance and capacity building too could be provided for improving public debt management in developing countries, in order to prevent debt crises and build up ACP countries’ capacities in tax administrations and systems. At last week’s third International Conference on Financing for Development in Addis Ababa, Ethiopia, ACP representatives advocated for increased domestic resource mobilization and private funding to finance investments. In Addis, representatives also raised concerns about the level of support for middle-income countries, arguing that they should continue to be provided with the necessary resources and means to tackle ongoing challenges.  

But what will the move beyond aid mean for future EU-ACP negotiations?

The partnership ACP countries envision is a “mature political engagement … reducing and overcoming any sense of a relationship that is primarily based on aid,” Gomes told Devex.

However, even if aid can be regarded as “secondary” compared to the policy areas that will be negotiated, including trade, the discussions around the EDF — which has been the main instrument for disbursing aid to the ACP countries since 1959 and has allocated about 30.5 billion euros ($33.4 billion) for the period 2014-2020 — remain central to the architecture of a new EU-ACP partnership.  

Question marks remain, however, on the issue of whether the EDF will remain an extrabudgetary instrument, or whether it will become part of the central EU budget. Currently, the EDF is an intergovernmental fund, managed by the European Commission, but if included in the central budget, approval may fall under the auspices of the European Parliament and Council under its co-decision procedure.

Although the central budget is approved annually, Gomes said that one of the EDF’s strong points is that it is not subject to the risk of cuts each year and hopes that it will remain a multiannual instrument. He also suggested that the European Parliament may in any case be asked to perform a supervisory role on the formulation of strategies and monitoring in any future arrangement.    

Beyond the EU

In repositioning itself, ACP countries are looking beyond Europe. “The third aspect of our repositioning is really a diversification of our partnerships,” Gomes said.

The EU will remain the main ACP partner, according to Gomes, but not the only one. “When Europe is relating to us, they must understand that ACP relates to other partners,” he said, adding that it’s not a question of finding alternatives, but rather to be more “active” in those issues that require global attention. Gomes envisions a closer engagement with the “global south,” and said its relationship with the BRICS nations is key to the future direction of the ACP group.

The Cuban experience of providing assistance, for instance, can be used for “enhancing the health systems of the ACP countries, beginning with West Africa that has been ravished by Ebola”, he said. However, according to Gomes, “intra-ACP cooperation” is key to “enhancing productive capacity, to add value and [boost] exchange and trade within the region,” he said.

The ACP is also looking to mobilize its own resources to implement programs and ensure the sustainability of the group through the setup of a long-term endowment and development fund. Such an instrument would aim to pool resources coming from ACP countries into a trust fund for specific priority programs, overseen by the ACP secretariat.

Access to markets is not enough  

At the core of EU-ACP negotiation will the sticky issue of trade and economic relations between the two blocs. According to Gomes, the question is engaging Europe in a “political dialogue” around trade to address the issue of “regulatory mechanisms,” including nontariff barriers for sectors such as health. “Those are negotiable issues and those are the things to be negotiated,” Gomes said.

However, access to markets alone is not enough to allow trade generate growth and resources for development. What is needed instead, said Gomes, is a structural transformation to enhance productive capacity.

According to Gomes, the quality of the relationship with EU must be redefined “so that, for instance, even in our trade we are not focusing so much now on trade as a primary commodity, but how we look at industrializing and increasing the value addition of our raw materials, whether sugar, cocoa, but also minerals and mining.”

Read more international development news online, and subscribe to The Development Newswire to receive the latest from the world’s leading donors and decision-makers — emailed to you FREE every business day.