EU Memorandum 2010

8/15/2019 EU Memorandum 2010

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weakly enforced. More frequent and intense extremeweather events, such as storms, oods and droughts,will put poor countries under additional pressure, andthe EU will be required to spend more on emergencyrelief. Worsening environmental conditions may leadto migration, which could lead to conict and increasethe likelihood of political instability and armed strife.Migration may grow in numbers: some expect up to200 million migrants due to climate change impactsby 2050. 1 Rising sea levels will threaten the coastalregions of many nations – in some cases threateningto engulf small island states entirely. New global legalprovisions will be required for this unprecedentedsituation.

European development policy and cooperationwill have to address both dimensions of climatechange: adaptation and mitigation. Adapting tothe unavoidable impacts of climate change will

be paramount if development investments are tobe made resilient against changes in temperature,extreme weather events and rising sea levels. Theimpacts of climate change will be particularlysevere in the tropical and subtropical zones, i.e. inregions characterised by widespread poverty andweak institutions, and whose economies emit littleor no greenhouse gases. As a party to the UnitedNations Framework Convention on Climate Change(UNFCCC), the EU has committed itself to supportdeveloping countries especially vulnerable to climatechange in their adaptation efforts. In Middle as well

as Low Income Countries (LICs), poverty reductionand broader development strategies need to bedesigned in such a way that economic growth doesnot lead to an increase in greenhouse gas emissions.Recent calculations by the German Advisory Councilon Global Change show that, despite their currentlyextremely low emission levels (both absolute and percapita), even the Least Developed Countries (LDCs)will have to introduce a carbon-free economy withinthis century if global warming is to be limited to anaverage of 2°C. 2 Other developing countries will haveto live up to this challenge even sooner, within 30 to40 years, and they will need the full support of thedeveloped world in order to do so.

Adaptation and mitigation require steep learningcurves and rapid innovation processes in both publicand private sectors, as well as in individual households,to achieve unprecedented rates. Concertedcollective action, both within Europe and at a globallevel, is essential. It is vital, therefore, that the EU givesclimate change-related cooperation utmost priority inits foreign relations and in international cooperation atlarge.

Headwinds for the climate change agenda

The nancial crisis has shifted political attention awayfrom climate change to nancial and economicpolicy. Massive public spending on economic recoverypackages and bank rescue programmes has led to

increasing public debt, placing a heavy burden onfuture budgets. The difculties of achieving consensusamong Member States on nancial burden sharingin the run-up to the December 2009 CopenhagenConference indicate just how scarce and difcult toobtain public resources for climate change will be.Moreover, recovery packages demonstrate that it isstill easier to mobilise large public spending againstimmediate dangers (collapse of the nancial system)than for preventing larger dangers in the future(collapse of the climate system). And, as the term‘recovery’ indicates, the goal is restoring the economyrather than using the momentum for promotingstructural change towards a low-carbon economy.

Likewise, in developing countries, urgent economicproblems are higher on the agenda than addressingthe need for change in the distant future. Butownership of mitigation and adaptation policies in

partner countries is crucial if external support is to beeffective. Ownership cannot be bought with lavishlyendowed thematic funds – it needs to be built overtime. This process will be easier if the EU demonstratesthe feasibility of low-carbon development at home,in the context of ambitious emission reductioncommitments.

Inherent conicts between the climate anddevelopment debatesFirst, European development policy will have to focusstrongly on supporting partner countries in adapting

to and mitigating climate change in the next veyears. To do so, the EC will rst have to overcomethe implementation gap in its own approach todevelopment, environment and climate change. TheEU has been one of the pioneers of mainstreamingclimate change into policy – this has been anobjective since 1998. However, in practice, little visibleand tangible progress has been achieved. Committedfunding from the EC’s budget remains insufcient,and Member States have not yet been convinced tobuy into the EC’s proposals substantially. Moreover,complementarity and coordination of the EC’s andMember States’ activities have not been ensured inthis realm.

Second, the EC and Member States will have tomake lasting budgetary decisions on the relationshipbetween poverty reduction and addressing climatechange that go beyond fast-start nancing, asagreed at the EU summit preceding the CopenhagenConference. Climate change-related transfers haveto be additional to Ofcial Development Assistance(ODA). It is clear that both policy elds and theirobjectives are necessarily related, and that broadoverlap exists, particularly between reducingvulnerability to the impacts of climate change and

reducing poverty. However, the two agendas arenot interchangeable. Poverty reduction should not- and cannot - be subordinated to climate change.However, in the context of scarce public funds this is

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exactly what many fear: already, large shares of ODAare used for reducing greenhouse gas emissions in thedeveloping world. This is just as much in the interestof the developed world as for developing nations.At the same time, there has been much less supportfrom Europe for the efforts of the poorest and mostvulnerable in adapting to climate change. Finally,there are doubts that the EU will gather the necessarypolitical strength for achieving its ODA target of 0.56%of Gross National Income (GNI) by 2010, and of 0.7%by 2015.

Third, the EC and Member States will have todetermine their position clearly in relation to thenancial architecture of international climate policy.

The design of the future carbon market and of publicnancing instruments, as well as of new planninginstruments – such as low-carbon development plans –needs to ensure full complementarity and coherencebetween European, bi- and multilateral funds. Thismust also be ensured for the nancial mechanisms andinstruments under the UNFCCC and the Kyoto Protocoland/or a new legal instrument to be established after

2012. A related, open question is the application ofthe principles of the Paris Declaration to climatenancing: there is a clear tension between, on theone hand, establishing thematic funds for mitigationand adaptation, and, on the other, principles such asaligning partner countries’ policies and using countrysystems for accountability and transparency.

As we know, the EU is the largest donor worldwide,with activities at both the bilateral and the multilaterallevel. It is at the forefront of reducing greenhousegas emissions and of planning for adaptation. Withthe implementation of the Lisbon Treaty, sustainabledevelopment and environmental issues belong to theobjectives of the common foreign policy. This providesa new opening for improved policy coordination andimplementation at the level of the EC, and betweenthe EC and the Member States. If the EU uses thiswindow of opportunity and its exceptional positionwisely, in order to nd the right mix of instruments forsupporting developing countries in a complementaryway through climate, development and foreign policy,it can establish itself as a global leader in this eld.

What the EU already does

EU action is relevant both with regard to developmentpolicy and cooperation as well as to climate policy.

Mainstreaming climate change in Europeandevelopment policy and cooperationAs previously indicated, the EU is a pioneer inmainstreaming climate change into developmentpolicy and cooperation. This position is rooted in itsefforts to integrate environment policy considerationsin all relevant EU policy areas. In 1998, these effortswere ofcially extended to include developmentcooperation as well. In 2003, the Commission publisheda Communication on Climate Change in the Contextof Development Cooperation, which proposed anintegrated strategy for addressing climate changeand poverty reduction issues (COM(2003)85 nal, 11March 2003). 3 In 2004, the General Affairs and ExternalRelations Council (GAERC) adopted the strategyelaborated on the basis of this communication, as wellas the Action Plan 2004-2008.

The aim of the strategy was to support developing

countries in addressing climate change, and tohelp them implement the Climate Convention andthe Kyoto Protocol. To this end, “the Commissionconsiders it imperative to fully mainstream climatechange concerns into EU development cooperationin complete coherence with the objective of povertyreduction”. 4 The strategy has four priorities: raisingthe policy prole of climate change; support foradaptation; support for mitigation; and capacitydevelopment. The Action Plan did not establish aspecic funding line or package, but relied on theEnvironment and Sustainable Management of Natural

Resources, including the Energy Programme (ENRTP)and on geographical funds at country and regionallevel. 5 The ENRTP programme is an environment-oriented funding line under the DevelopmentCooperation Instrument (DCI). It has a budget of €804million and its objectives are, amongst others: to assistdeveloping countries in fullling internationally agreedenvironmental commitments; to promote coherencebetween environmental and other policies; to buildenvironmental capacities; and to support sustainableenergy policies and technologies.

In 2007, the EC proposed the Global ClimateChange Alliance (GCCA) between the EU and thepoor and most vulnerable developing countries, inorder to strengthen the Action Plan. To the four strategicpriorities listed above, the GCCA added reducingemissions from deforestation and forest degradation,disaster risk reduction, enhancing participation in theClean Development Mechanism (CDM) as well asintegrating climate change into poverty reductionefforts. The EC established a budget of €60 million for2008-2010. From the Member States, only Sweden andthe Czech Republic support the GCCA with €5.5 and€1.2 million respectively. The rst countries selected forimplementation of the GCCA are Vanuatu, Maldives,

Cambodia and Tanzania, a selection consistent withthe EU’s denition of vulnerable developing countrieswhich includes LDCs, small island developing states andthe African countries at risk of droughts, desertication

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and oods.Despite this positive strategic picture, the EU’s

practice does not live up to its own objectives fordevelopment cooperation: there is little progress inmainstreaming or integrating climate change issues,and funding is much below what is needed or whatcould be expected from the EU.

An audit by the European Court of Auditors in 2005showed that the EC had made only limited progress inmainstreaming the environment into its developmentcooperation since 2001: country strategy papers didnot consider environmental issues in an appropriatemanner, and the mandatory environmental analyseswere mostly weak. 6 MDG-7 on environmentalsustainability was not mentioned by any of theanalysed country strategy papers, and only 25%referred to multilateral environmental agreements. Intheir analysis of projects, the audit mentioned a number

of shortcomings that indicate how much the EC needsto learn about the design and implementation ofenvironmental projects in the context of developmentcooperation. Comments from the audit include:“Project effectiveness was problematic because ofover-ambitious project design; … limited progress inbuilding institutional capacity; difculties in addressingthe needs of local communities for development whilemeeting conservation objectives; … insufcient impacton the policy and legal framework; and … unrealisticgoals set for nancial sustainability afterthe end of project funding”. 7

Another analysis8

of 46 countrystrategy papers for African countriesshowed that climate change was onlymentioned in one of them. The papers forthe 2007-2013 period seem to fare better,but an analysis commissioned by threeenvironmental NGOs in 2007 and 2009showed that only a very small number ofEC delegations and regional desks makeuse of planning instruments such asstrategic environmental assessments orenvironmental impact assessments. This reveals largegaps in training, knowledge and communication withregard to environmental mainstreaming.

An analysis of the impacts of the EU Strategy andAction Plan for Climate Change in the Context ofDevelopment Cooperation carried out by the Centrefor European Policy Studies 9 showed a two-foldresult: on the one hand, cooperation between DGDevelopment and DG Environment improved, andcooperation between working parties and expertgroups from both realms has been very constructive.For nancing, on the other hand, the EC relied greatlyon its Member States and did not commit muchin the way of own budget resources. 10 Moreover,

activities have concentrated on dialogue as wellas on assessments of vulnerability and adaptationneeds, but there has not been signicant operationalinvolvement beyond this, on either adaptation or

mitigation (or low-carbon development). Low budgetsdo not allow planning for more substantial measuresand programmes, and planning capacities on theEC’s side (in Brussels and in delegations) are limitedbecause of a lack of investment in training for EU staffand in the development of procedures, tools and skills.

The EU’s climate policy and developmentThe EU’s negotiating position with regard to the post-2012 climate regime can be considered progressive,as it formulates the most ambitious emission reductioncommitments from among the group of developedcountries. It is unsatisfying, however, with regard to thenancial commitments for supporting mitigation andadaptation action in developing countries made sofar.

The EC’s Communication ‘Stepping up internationalclimate nance; A European blueprint for the

Copenhagen deal’ (COM/2009/475) 11 addressesnancial issues through a comprehensive analysis ofmitigation and adaptation needs on a global level.The Communication addresses both public andprivate nance, the future carbon market as wellas start-up nance between 2010 and 2012. It alsoaddresses the issue of complementary developmentnance, and the advantages of using existing (albeitreformed) institutions and instruments.

Why does this proposal, despite all its merits and far-reaching perspective on facilitating low-carbon development on a global level,

face mistrust and not support amongdeveloping countries?The mistrust is related to the EU’s failure

to make substantial and credible pledgesfor nancial support to developingcountries willing to engage in low-carbondevelopment planning and investment,as well as for adaptation measures.Linking nance to the elaboration of low-carbon development plans is interpretedas a conditionality, which is the opposite

of honouring commitments derived from historicalresponsibility for most of global warming measuredto-date. Mistrust is also fuelled by the EU’s decision tofavour existing ODA-related institutions for channellingthese funds.

Moreover, the EU’s proposal of negotiating a singlenew agreement for the period after 2012, with theaim of accommodating the USA as well as integratingcommitments from the major emitters among thedeveloping countries, did not create a new dynamismin the negotiating process. Instead it was confrontedwith a surge of mistrust from the developing worldwhich was not willing to make the required leap offaith. A new single agreement is interpreted by many

developing countries as paving the way for linkingnew ambitious commitments from Annex I countriesto binding commitments from developing countries –without guarantees of sufcient nancial support.

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Another part of the answer is related to the EU’smixed track record with regard to commitmentsalready made towards the developing world. Financialtransfers pledged under the Bonn Declaration atthe COP in 2001 have not been met, and there isno clear reporting of nancial transfers as yet. Atthe same time, commitments made in the narrowerrealm of development policy and cooperation (PCD;stepping up nance for development; improving aideffectiveness) have not been honoured as muchas would have been possible and desirable. Thisimplementation gap refers also to the fragmentednature of European development policy andcooperation – the EC and 27 Member States all toooften act in parallel, and not in a coordinated manner;and there are no signs that the agenda on division oflabour is being actively promoted.

This nurtures the belief that the EU’s demand for

trust from developing countries in the good intentionsof its most recent proposal for a Copenhagendeal is unjustied, as the EU’s fullment of otherdevelopment-related agreements could be better. Ifthe claim is that political realities always constrain swiftimplementation, why should this be any different inthe case of negotiating a new climate agreement?

Recommendations

If we accept that climate change is the dening issue

of our time, then several challenges must be faced:

Designing new policies and frameworksIn general, it will be necessary to increase thecoherence between the broader climate changeagenda and development policy. Climate policyshould be designed in such a way that it opensup new opportunities for developing countriesto reduce poverty by engaging in low-carbondevelopment, and by adapting to the inevitableimpacts of climate change. Increasing nancialtransfers and reforming the Clean DevelopmentMechanism (CDM) will not be enough (Box 6).If this scenario turns out to be impossible, the minimumneeded of a new policy approach would be toensure coherence and coordination between climateand development policy, to advance operationalmainstreaming of climate change in developmentpolicy, and at the same time, to ensure that thisprocess does not lead to a replacement of the povertyreduction agenda by the low-carbon developmentagenda. Aid diversion will be a real threat. Therefore, itwill be paramount to full commitments to collectivelyreach ODA of 0.56% of GNI by 2010, to increase climatenancing (at least in the range of what is proposed

in the ‘European blueprint for a Copenhagen Deal’)and to make it additional to ODA. Transparent andregular reporting will be fundamental.

Dening new nancial commitments in theshort termIn order to overcome mistrust and enhance credibility,the EU Summit in December 2009 agreed to step

up nancing for low-carbon development andadaptation to climate change in developmentcooperation between 2010 and 2012. The offer of €2.4billion a year represents about a third of the moneyneeded, and it goes beyond what had been proposedin the ’European blueprint for a Copenhagen deal’.In order to make an impact, however, this needs tobe additional to ODA, and additional to the nancialcommitments of the EU and its Member States under theBonn Declaration of 2001 to the UNFCCC Conferenceof the Parties. Fullment of these commitments shouldbe achieved and reported by 2011.

Implementing new actionIt is vital that capacities for action are improved andthe gap between policy intention and practice isreduced as quickly as possible. Fast progress in theimplementation of the GCCA is paramount here, aswell as tangible progress in mainstreaming climatechange in country strategy papers. To promote this,the EC should dene clear targets to be achieved,i.e. to include climate change-related measures inall country strategy papers for the period 2014-18.This requires measures for training the EC’s staff onlow-carbon development and adaptation, and

how these interact with development strategiesand poverty reduction. Another practical measurewould be to introduce a helpdesk for mainstreamingclimate change in development that would give

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practical support to staff in delegations and inthe EC when writing country assistance strategies.Furthermore, the EC and the Member States shouldadopt clear guidelines on nancial reporting. Thisincludes the introduction of an OECD/DAC marker foradaptation and mitigation nancing, and improvingnancial reporting under the UNFCCC.

1. Stern, N. (2006), ‘The Economics of ClimateChange: The Stern Review’, London: HMTreasury. Available at http://www.hm-treasury.gov.uk/stern_review_report.htm 2. WBGU (2009), ‘Solving the climatedilemma: the budget approach’, WBGU SpecialReport , Berlin: WGBU. Available at https:// www.wbgu.de

3. See: http://ec.europa.eu/development/ icenter/repository/env_cc_com_2003_85_en.pdf 4. Van der Grijp, N. and Etty, T. (forthcoming),‘Mainstreaming climate change into

EU development cooperation policy’,in Mainstreaming Climate Change inDevelopment Cooperation Theory, Practice andImplications for the European Union , Gupta, J.and van der Grijp, N. (eds), Cambridge:CUP

5. See: http://europa.eu/legislation_summaries/ development/general_development_framework/ l14173_en.htm

6. See: http://www.europarl.europa.eu/meetdocs/2004_2009/documents/ dt/629/629542/629542en.pdf 7. Van der Grijp, N. and Etty, T. (forthcoming),‘Mainstreaming climate change intoEU development cooperation policy’,in Mainstreaming Climate Change inDevelopment Cooperation Theory, Practice andImplications for the European Union , Gupta, J.and van der Grijp, N. (eds), Cambridge: CUP

8. Williams, R. (2007), ‘The integration ofenvironmental protection requirements intoEC development cooperation policy’, Draftpaper for the rst EPIGOC conference ‘Betterintegration: Mainstreaming environmentalconcerns in European governance’, Brussels, 15

February 2007 9. Hudson, A. (2006), ‘Case study: climatechange in the context of developmentcooperation’, in Policy Coherence forDevelopment in the EU Council: Strategiesfor the Way Forward , ed. L. van Schaik, M.Kaeding, A. Hudson, and J.N. Ferrer. Brussels:Centre for European Policy Studies 10. van Schaik, L. 2006: Fiche on EU climatechange policy. In Policy Coherence forDevelopment in the EU Council: Strategiesfor the Way Forward , ed. L. van Schaik, M.Kaeding, A. Hudson, and J.N. Ferrer. Brussels:Centre for European Policy Studies

11. See: http://ec.europa.eu/environment/ climat/pdf/future_action/com_2009_475.pdf 12. See: http://www.wbgu.de/wbgu_sn2009_en.html

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M ore than 30 developing countries areclassied as ‘fragile states’ (Table 2). They arehome to many of the world’s poorest people.They are a source of exported security problems.They constitute the biggest political, military anddevelopment challenge facing the European Union(EU) in the developing world. The EU’s developmentpolicy will thus be judged in great measure by its

success in responding to fragile states.Indeed the European Consensus on Developmentlists fragile states and conict prevention as one of themain challenges facing EU development cooperation,and they are also identied as a key security issue inthe European Security Strategy, as well as being thefocus of the rst European Report on Development.The list of fragile states includes Afghanistan, Haiti,Myanmar, Nepal and Tajikistan, as well as severalAfrican countries such as Somalia and Zimbabwe.What these countries all have in common is thatthey lack the core functions of the state, such as theexistence of a state monopoly on the legitimate use offorce or a rudimentary system of public welfare.

Fragile states exert a tremendous nancial burden:the total global cost of ‘state failure’ is US$276 billionper year. 2 According to Lisa Chauvet et al, thisamount is “double what would be generated werethe Organisation for Economic Cooperation andDevelopment (OECD) to raise aid to the United Nations(UN)target level of 0.7% of GDP.” 3 These states are indire need of implementation of better developmentpolicies; Europe must rise to this challenge.

Problems faced by fragile states tend to spill outsideof national boundaries. These can include forced

migration as a consequence of immediate physicalthreats or economic fallout, the rise of criminal activitiessuch as piracy, or international criminal networksengaged in trafcking women, weapons or drugs.

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In addition, climate change looks set to exacerbateboth violent conict and state fragility. An estimated46 countries with a combined population of 2.7 billionpeople are at risk of increasing armed conict relatedto the effects of changes in the environment. 4 Whilethe evidence is not entirely clear-cut, it seems likelythat the current economic downturn will exacerbateboth violent conict and fragility.

The nature of the challenge, however, is notstraightforward, as ultimately it will be the action oflocal actors within these settings that will be key intransforming politics, society and economy. Yet the EUcan support or undermine such efforts through its ownpolitical priorities, policies, instruments and actions.The EU has been successful in ending interstateconict between its members, securing politicaltransitions towards democracy and promotingeconomic development and security. Beyond its

borders, however, the EU’s record is mixed at best. Itis already involved indirectly or directly in many of theconicts and situations of fragility globally. Its focus isparticularly on Africa and the Caucasus – althoughthe ongoing conicts in Afghanistan, Iraq, the MiddleEast and Pakistan are set to hold most of the higherlevel policy focus.

The reality on the ground of the relationshipbetween security and development is a good dealmore complex than the slogan, ‘no developmentwithout security’ would suggest. In the long term,sustainable economic development is the best guard

against conict and fragility. Conict and fragilityhave a complex mix of social, political and economiccauses and the response must be nuanced enough toacknowledge this complexity.

The EU would seem to be uniquely placed to offerthis in collaboration with other local and internationalactors. Yet, some question whether the EU’s potentialand the capabilities at its disposal have been matchedby its action and impact. Despite considerable progressin policy development on security, conict prevention,fragility and their interface with development, it isuniversally recognised that the EU suffers from a policy‘implementation gap.’ 5

The Lisbon Treaty offers an opportunity to begin toaddress this gap. The combined Ofcial DevelopmentAssistance (ODA) to developing countries from Europe(European Commission – EC – and Member States)is 60% of the global total, 6 which, if better targeted,could play a useful role. Yet this is only one part of thestory. It is the EU’s institutional capabilities (such as itsCivilian Headline Goal 2010 for crisis management,the new European External Action Service - EEAS - andthe role of development and conict experts in it) thatare key to providing for both overall policy coherenceand exible, context-specic responses. Indeed some

have contended that addressing fragile state offers anew paradigm for development, 7 while others suchas the OECD have called for whole-of-governmentapproaches. However, policy coherence has to

reach beyond development, diplomacy and defenceto areas such as energy, agriculture and trade, all ofwhich can have considerable impact on conict andfragility.

International alliances are crucial to makingprogress. Europe’s traditional partners, such as theUS and multilateral agencies such as the World Bankand UN organisations remain important. Yet effectiveengagement in the 21st century must also includecountries such as China, India, or Russia as well asregional actors such as the African Union (AU). Theserelations must be carefully cast in win-win scenarioswhile not undermining European values. In a globalisedworld, it is simply not credible or effective for the EUto promote and engage in narrow approaches toits security and economic well-being. Nor can suchapproaches be top-down. As international efforts to‘re-create’ the state in Afghanistan and Somalia have

shown, these are doomed to failure.

EU policies for conict resolution

The EU deploys military and civilian assets and supportsregional initiatives (especially in the context of the AU/African Peace and Security Architecture through theAfrica Peace Facility). This is not an easy task giventhe EU’s complex political machinery, where theinstitutional design of development policy as a sharedcompetence requires coordination between (and

within) the EU institutions and Member States from theoutset. At a strategic level, the EU has produced anumber of key documents seeking to forge a commonunderstanding of fragility and conict (Table 3),drawing on international standards established by theOECD-Development Assistance Committee (DAC)and the World Bank (Box 7).

The EU is about to strengthen its overall presencesignicantly. It has the potential to act as a diplomatic

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block in international forums (like the UN) andnew formations like international contact groups.Geopolitically, the EU adds value to the ‘globalpeace and security architecture’, different in naturefrom the UN, OECD or World Bank. In addition to thepresence of Member States, the EU has delegationsin more than 130 countries, many of which are basedin fragile states. It has strong political and economicrelations throughout many countries – in particularin the framework of the Cotonou PartnershipAgreement with the African, Caribbean and Pacic(ACP) countries. The EU has not only strengthened thepolitical dialogue with the ACP, the agreement alsoincludes provisions on humanitarian and emergencyassistance which foresee ‘exible mechanisms’for post-emergency action and transition to thedevelopment phase. The EU is also involved in anumber of special missions in many, mostly post-

conict, countries, such as Afghanistan. However, asstated in a critical recent review by the EuropeanCouncil on Foreign Relations (ECFR), most of themremain small, lack ambition, are strategically irrelevantand are further hampered by micromanagement fromBrussels instead of responsibilities being delegated tomissions on the ground. 9 Clearly, it is not enough toforge coherence at the strategic policy level, it is alsoimportant to reinforce coherence in country-specicdecision-making and implementation.

Nevertheless, the EU has made some strides inimproving its policies on conict prevention since

2000. Most of the European Security and DefencePolicy (ESDP) missions have been launched in Africaproviding a test ground for the EU’s capabilities in ESDP,and also in longer term conict prevention. The 2001‘Göteborg EU Programme for the Prevention of ViolentConicts’ anchored conict prevention as a main

objective in the EU’s external relations, including ESDP,development cooperation and trade. The EuropeanConsensus of 2005 encourages a comprehensiveand coordinated approach to mending fragility,and builds on a broader EU external action policyframework and a series of instruments, programmes,methods and institutional mechanisms. In 2007, the EUlaunched an Instrument for Stability (IfS). This enables aquick response to political crises and natural disasters

– and substantially increases its capacity for sustainedfunding from Community sources.

Financial instruments such as the EuropeanNeighbourhood and Partnership Instrument (ENPI)explicitly refer to ‘fragile states and post-conictreconstruction’ as areas for intervention. The EUagreed upon the Civilian Headline Goal 2010 toensure the deployment of “civilian crisis managementcapabilities of high quality, with the support functions

and equipment required in a short time-span and insufcient quantity”. 10 In nancial terms, the EU hasmade a signicant investment of resources amountingto US$6.2 billion (not including the Balkans) over theyears 2001-2008 (Figure 13). What must follow now ispolitical leadership to devise policies and institutionalarrangements that can turn these instruments intotools which make a real difference for those whosuffer most from fragility and conict: the people wholive in fragile states.

The EU’s normative and intellectual soft power aswell as its non-governmental specialist agencies give

the EU somewhat of an edge. Europe has some of themost effective non-governmental agencies dealingwith peace, conict and fragility and effective networkslike the European Peacebuilding Liaison Ofce (EPLO).Several EU Member States – Germany, Netherlands,Sweden and the UK – are global leaders in developing

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innovative responses to conict and peace. The EUhas acquired the image of a well-respected brokerand is considered to be more impartial than other

international powers or even many of its individualMember States. Yet weak political leadership andlack of follow-through in many instances mean thatthe EU’s comparative advantage or its many policiesand tools are not used effectively.

Furthermore, instruments of domestic securitysuch as the EU listing of terrorist organisations haveclearly limited the EU’s scope of action in mediatingin conict situations. When the EU has made progress,it has usually been because it has taken risks throughan ad-hoc coalition driven by committed EU ofcials,Member States, and non-governmental actors whilemaking strong local and international partnerships.The EU’s multi-faceted response in Aceh, Indonesiaand its growing work on women, peace andsecurity are good examples. And arguably the EU’sdirect involvement and support to the internationalcommunity’s engagement in Macedonia since 1991prevented both a conict and the emergence ofa fragile state. Now, with the advent of the LisbonTreaty, there are opportunities to create furtherinstitutional space to see these informal networks bemore effectively supported institutionally.

Recommendations for a better EUresponse to conict

If Europe is to rise to the challenges posed by violent

conict, state fragility and other security threatsacross the globe, it needs to make better use of itsinstruments and unlock the potential resting in its

collective diplomatic action, institutional strength,historical experience and economic power. Aboveall, this will require creative leadership and workingtogether from the new High Representative/EC VicePresident and the new Development Commissionerand their respective institutions. The implementationof the Lisbon Treaty offers a unique opportunity to doso.

Address development and security togetherThe EU must embrace and recognise the fundamentalpolitical challenge posed by conict and state fragilityin the developing world. High-level policy discussionswill not be enough, it will be important to ensure thatthe experience and concerns from developmentpolicy and structural long-term conict prevention arean integral part of the debate from the very beginning.Neither a narrow securitisation of the developmentagenda, nor addressing development and securityseparately are likely to reduce fragility and conict orserve Europe’s long-term interest.

Focus on conict prevention from bothpolitical and economic perspectivesWhile it does so in policy documents, at the practical

level, activities have so far concentrated far more onthe management of ongoing crises and post-conictsituations. The Russia-Georgia war in 2008 has clearlydemonstrated the limits to the EU’s current approach.

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Peace consolidation & prevention of future conict

Rapid intervention

Democracy, rule of law & civil society

Population ows & human trafcking

Reconstruction & infrastructure

Economic support & trade cooperation

Security sector

Multisector

Environment & natural resources

Anti-drug actions

Health & communicable diseases

21%

20%

15%

14%

14%

6%

5%

3%

1%

0.9%

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Revitalising the Civilian Headline Goal and improvingits implementation could be a useful starting point.Forging international alliances and playing an activerole in bringing about modernised continental andglobal security architectures that include a strongdevelopment perspective should be the long-term objective. Sharpening the ‘conict sensitivity’of existing EU engagements will assist this. This willrequire clear and consistent political leadership andinstitutional focus on prevention (rather than merelycrisis management) from the new High Representative/EC Vice President, the EEAS and the EC.

Conict and fragility need a customisedapproachThe causes of conict and state fragility are complexand a one size-ts-all approach will not work. Effectivebottom-up policies are needed whereby a strong

European presence and partnerships on the groundinform policy formulation and decision-making at thetop level. There are roles for the newly mandated EUdelegations and EU Special Representatives here, yetthe most appropriate EU leadership on the groundmust be found on a case-by-case basis.

Integration of different policy perspectivesActors in diplomacy, development and defence mustbe involved both in strategic decision-making and atthe implementing level. Some Member States havemoved faster on this issue than others. What is needed

is creativity in seeking positive outcomes in conictprevention and resilient functioning state-societyrelations rather than merely having EU initiatives andbureaucratic top down action plans for the sake of

them.The creation of the EEAS is a window of opportunity:

integrating diplomatic and development expertisein a single service under the shared responsibility ofthe High Representative/EC Vice President and theDevelopment Commissioner whose responsibilities aredivided functionally, not geographically, should beseriously considered.

Yet having the right people with the rightcompetences and creative and exible attitudes iskey. It will be difcult for the EEAS to grow signicantlyfor political reasons, but the ‘quality of people’ atevery level, including their experience, skills, exposureand attitude will be a decisive factor in whether theEU is able to rise to the challenge.

Building local and global alliancesThe EU can be a better partner by acting coherently,

supporting long-term capabilities, ensuring thatdialogue is ongoing and building alliances with otherrelevant international actors. The EU is already a majordiplomatic player in international forums such as theUN and often collectively the most signicant nancialcontributor to agencies such as United NationsDevelopment Programme (UNDP), the World Bankand the AU, but a post-Lisbon Europe needs to followthrough better on these commitments.

The EU also needs more of a political economyunderstanding of local power dynamics and needs tobe able to forge partnerships beyond state institutions.

Overcoming fragility and conict is mostly related tolocal conditions and has to grow from within affectedsocieties.

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1. Ziaja, S., Fabra Mata, J. (2009), Users’Guide on Measuring Fragility , Bonn: GermanDevelopment Institute and United NationsDevelopment Programme 2. Chauvet, L., Collier, P. and Hoefer, A.(2009), ‘The Cost of Failing States and theLimits to Sovereignty’, UN-WIDER ResearchPaper 30/2007, p. 11. Available at: http://www.wider.unu.edu/publications/working-papers/ research-papers/2007/en_GB/rp2007-30/(accessed 2 November 2009)Hoefer, A. (2010), ’State Failure and ConictRecurrence’, in Hewitt, J., Wilkenfeld, J. andGurr, T. (eds.) Peace and Conict 2010 –Executive Summary , Maryland: University ofMaryland, 2010, p. 29 3. Ibid .

4. See Smith, D., Vivekananda J. ( 2007), ‘ AClimate of Conict: The Links between ClimateChange, Peace and War’ , London: InternationalAlert, p. 3. 5. This point is also made in the rst EuropeanReport on Development . See: OvercomingFragility in Africa: Forging a New European

Approach (2009), European University Instituteand EC, p. 20. 6. Figures from, EuropeAid (2009), ‘ Better,Faster, More: Implementing EC External Aid2004 – 2009’ , Luxembourg: Ofce for OfcialPublications of the European Communities,p. 7. 7. See: Kaplan, S. D. (2008), Fixing FragileStates: A New Paradigm for Development ,

Westport: Praeger 8. See: http://www.oecd.org/ dataoecd/61/45/38368714.pdf for furtherinformation 9. See: Korski D., Gowan R. (2009), ‘Can theEU rebuild failing states? A review of Europe’scivilian capacities’, European Council onForeign Relations’. Available at: http://ecfr.eu/ content/entry/commentary_korksi_gowan_civilian_crisis, 10. See: http://www.consilium.europa.eu/uedocs/cmsUpload/Civilian_Headline_Goal_2010.pdf


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The European Union (EU) is losing the faculties withwhich until now it has created an integrated tradeand development policy. But these can be re-generated. This chapter explains that the currentfoundations of the EU’s policies are disappearingfast but that fresh ones can be created by the newEuropean Commission (EC). It shows what they are –and why they need to be created if ‘EU development

policy’ is to remain unique and not subside into merelya 28th (albeit large) regime alongsidethose of the Member States. It alsounderlines the aspects of current policythat should be reinforced whilst they stillhave some vigour.

For over three decades, the EC hasintegrated trade and developmentpolicy, most recently with EconomicPartnership Agreements (EPAs) withmany poor and vulnerable states. Thishas created a European developmentpolicy that is distinct from those of theMember States and it has focussedattention on the vital role of trade inachieving the Millennium Development Goals (MDGs),which cannot be met without a major boost to thegains that developing countries are able to derivefrom international trade. But the foundations on whichthis integration has been built are being eroded andcould disappear altogether unless the EC takes actionnow.

The EU’s integration of trade and developmenthas been rooted in its responsibility for policy on mostaspects of trade in goods and substantial, though

shared, responsibility for other aspects of trade policy.Over the years, the EU has used this responsibility toprovide commercial advantages to exporters in manypoor and vulnerable states. But they have been made

possible by the residual import controls maintainedon some very competitive suppliers. 1 As the EUcontinues to liberalise, whether multilaterally throughthe Doha Development Round or via Regional TradeAgreements (RTAs), this preferential treatment willdisappear and so will the commercial advantages ofits web of trade preferences.

Without new tools, rooted in EU-level policies, EU

development policy will lose a fundamental trade link.It can (and should) offer Aid for Trade(AfT) – but so can all the 27 MemberStates’ development policies. Whatcould form the new link to allow theEU institutions to continue projecting aspecically ‘European’ position? Theanswer is to be found in the powers thatthe Members States nd it increasinglynecessary to develop at a Europeanlevel to ensure, for example, a barrier-freeinternal market or to respond to globalchallenges such as those caused byclimate change. This chapter illustratesthe potential by reference to the rst of

these: the internal market.

The erosion of trade preferences

Commercially useful EU trade preferences now applyto only a very small number of products – such as sugar,rice, horticulture and some clothing – exported by fewcountries. This is a positive consequence of Europeanliberalisation. But it also means an end to policies that

have allowed poorer countries to maintain or establishthemselves in the European market without beingthreatened by more competitive producers. This isillustrated by the uneven take-up of EPAs: the 47% of

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African, Caribbean and Pacic (ACP) countries thathave signed include almost all the states that have asignicant export dependence on preferences underthe Cotonou Partnership Agreement and very fewthat do not. 2, 3

Clothing – the only signicant manufacture forwhich preferences are still commercially valuable

– will be the rst to go. By the time the World TradeOrganisation (WTO) approved transitional safeguardson China’s exports expire in 2013, the remaining tariffpreferences may well have been eroded further by aconclusion to Doha or RTAs with India and Mercosur.The next phase of reform to the Common AgriculturalPolicy (CAP) in 2013 could substantially alter thevalue of the remaining agricultural preferences if theyhave not already been eroded by RTAs that increasecompetition on the European market.

This loss of preferences has come at a bad time

for many preference-dependent Least DevelopedCountries (LDCs) and small, vulnerable states.These nations have been hit more severely than theaverage developing country by the global nancialcrisis, which illustrates both the importance of tradeand how much remains to be done to ensure that itserves development. The nancial crisis will slash GrossDomestic Product (GDP) in most ACP states, by upto 5% in many cases, with trade acting as the mainconveyor belt. 4 The nancial crisis has shown starkly notonly how trade shocks can undermine development,but also that there remain fundamental weaknesses

in many recipients of EU aid – creatingvulnerability even in those that havegrown fast recently on the back of thecommodity boom.

Many ACP countries, for example,are characterised by small market sizesand high transport costs that tend toput them at a relative disadvantagein international trade. Their restricteddomestic markets mean that mostrms are small and medium enterpriseswith limited opportunities for reaping the benetsof economies of scale and investing in researchand development. Some also lack skilled labour oradequate human capital, which limits access toexternal capital and constrains industrial development.One consequence is an undiversied export base (inrelation to both commodities and markets) and adependence on external sources of revenue. The netresult is to retard growth.

Breathing new life into preferencesThe new EC can revitalise existing preferences andcreate new ones in all areas in which Europe does notyet extend free trade to all its partners. The EC can

both make improvements to the existing system andlook to more radical approaches.

Improving the oldMuch of the change needed to improve poorcountries’ gains from trade lies on the supply sideand the EU can help with AfT. But the demand sideis also important. Several EU trade policy changeswould allow a larger number of countries to benetmore substantially from those preferences that remainpotentially useful. The most important of these are tothe Rules of Origin (ROO) which determine whether ornot a country can take advantage in practice of apreference that exists on paper.

The fundamental problem with the EU’s ROO is thatthey do not take account of the radical globalisationof production in recent decades. They still requirepotential recipients to undertake levels of processingthat are no longer commercially viable especially instates with small markets. The EPAs have introduced avery important improvement in this respect to the rules

on clothing but more remains to be done to updatethe EU’s ROO – e.g. to increase exports of processedfoods by allowing the use of more imported inputsfood. 5

From goods to servicesThe scope exists to offer trade preferences on servicesand trade-related policy in all cases in which the EU isnot yet ready to open up to imports from all sources,but is willing to liberalise towards certain developingcountries. It has been possible to meet the secondcondition for goods because the recipients were

either traditional suppliers of otherwisesensitive items or were too small to supplypolitically unacceptable volumes. Overtime, these preferences have beenextended to ever more competitivesuppliers, allowing the EU to control thespeed at which European producershad to adjust to import competition.

Does the same apply to services andother aspects of trade policy? The EPAscertainly provide a framework within

which to nd out. Favourable quotas within EPAs forMode 4 (movement of persons) services exports, forexample, modelled on the idea of multilateral quotasfor LDCs currently circulating, would be helpful.

A more radical way forward: beyondAid for Trade

Alongside the decay in public rules determiningwho exports what to whom has been a surge inrules created by the private sector. These are nowoften the dominant inuence on the gains that poorcountries (and producers) are able to make from

trade. Although they are largely excluded from formalEU trade-related development policy, they neednot be. The Union-level powers associated with theSingle Market provide a new link that would anchor a

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distinctive ‘European’ development policy and couldbe useful to some developing countries.

Focus Aid for Trade on the ‘three C’s’Although the EU institutions are simply a large actorin the efforts of 28 European donors, the existenceof the trade framework created by EPAs, Euro-Medand future of RTAs will facilitate the creation of aninnovative programme. The EPAs provide an excellentopportunity to re-orientate aid. They have focussedattention on the changes that are needed – fromincreasing supply capacity to reducing governments’dependence on trade taxes for revenue – and allowtrade-related support to be provided within thecontext of a country’s overall development process.

EPAs provide a framework to focus AfT on the‘three Cs’ that underpin successful integration intothe world market: competitive production of goods

and services reecting consumer tastes, exportedto countries with buoyant demand. Too much poorcountry production is high cost and/or of traditionalproducts facing dwindling demand exported totraditional markets not to the high-growth countries ofAsia and Latin America. Diversifying bothproducts and markets requires heavyinvestment not only in infrastructure (vitalthough it is) but also directly to rms andin knowledge management.

The EU should also build this in to its owndecisions. One way to prepare countries

for the erosion of trade preferences is totake this into account when the EU makesits own tariff-cutting commitments. Therehave been proposals, for example, tobackload cuts on developmentallysensitive sectors and use the revenues generated duringthe phase-in to provide predictable compensation forpreference erosion. The harmonisation of EU standardsneeded to remove internal trade barriers also createsan opportunity to do so in a way that provides helpto poor country exporters. The new rules, for example,should be framed so as to recognise supply realities inthese countries.

Help the private sector to move up the valuechainIt is private rather than public rules that are now thedominant inuence on what Europe imports fromdeveloping countries and how much producers gainfrom the trade. Private voluntary standards, such asthe Global Partnership for Good Agricultural Practice(GlobalGAP), include standards that go beyondthe EU’s harmonised mandatory market accessrequirements. Most large fresh fruit and vegetableretailers do not even consider buying from producers

who do not adhere to the private code on ‘goodagricultural practices’.

What is wrong with that? Setting appropriatesafety, labour or environmental standards must be

good for consumers and for workers. The problem isthat compliance costs usually falls on the producers.This reduces trade gains for developing countries andexcludes small operators unable to meet the highxed costs. 6 What is needed is a framework of publicregulation that encourages pro-development privaterules (e.g. by making clear when labels that appear tosupport development actually risk the opposite).

This provides the opportunity for the new EC to useits powers over internal market regulation to benetdevelopment. Particularly when combined withAfT (perhaps within an EPA framework), it offers adistinctive EU approach to trade and developmentthat also provides a unique solution to the issue ofpreference erosion. It may also have positive spilloversas ACP suppliers are better able to export to otherhigh standard markets.

Using the Lisbon Treaty to improve policycoherence and coordinationWidening the scope of pro-development tradepolicies in this way reinforces the need to improvecoherence and coordination – bringing in the new

institutions created by the Lisbon Treaty,notably the High Representative forForeign Affairs and Security Policy. It is achallenging task. Each body has its ownwell-embedded mode of operation.Ensuring consistency at the EU level – asthe Lisbon Treaty demands – will require

that all EC directorates and relevantstakeholders concerned be consultedat an early stage and involved in thediscussions.

The EU’s different initiatives to promoteregional integration will also need to be made moreconsistent, particularly in Africa where EU policiesdistinguish between North and sub-Saharan Africaand, in the latter, often cut across African initiatives.The EU approach towards regional arrangements mayneed to be rethought to become more supportiveof endogenous integration efforts, including thosebetween regions. This will require an adjustment to theprocedures and instruments that are associated withcurrent European policies.

With the Lisbon Treaty, the EC can engage moreactively and systematically with Member States onexternal relations, notably to muster the political andtechnical support needed to address the linkagesbetween trade and development. One step is tobuild on existing forums that bring together trade anddevelopment specialists from the Member States andthe EC such as the informal trade and developmentexperts group of the Article 133 Committee. But thesediscussions must also feed into the formal arena.

The new European External Action Service(EEAS) has a major role to play in achieving a fully

joined-up approach between the EC and MemberStates. By working more concretely at the level of

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implementation, it can help feed into the Europeanpolicy processes the perspectives of partners. Thismay contribute to the task of ensuring that trade andregional integration are given adequate importancein both the Union’s policies and in its delegations’operations, and that both are supportive of localinitiatives.

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1. This is a major reason why the policy hasbeen controversial.

2. Either because, as LDCs, they benet fromthe EU’s Duty Free Quota Free (DFQF) regimeunder the Everything But Arms (EBA) initiativeor because they export goods on whichpreferences are weak. 3. Stevens, C. (2009), ’EPAs: the symbol versusthe reality’, in Jones, E. and Marti, D. (eds),Updating Economic Partnership Agreements toToday’s Global Challenges , Brussels: GermanMarshall Fund

4. Stevens, C., Calí, M., and Kennan, J. (2009), ‘WTO’s Role in the EconomicRecovery, Growth and Development: anACP perspective’, London: CommonwealthSecretariat. Available at: http://www.thecommonwealth.org/les/216701/FileName/ THT65AnACPPersepectiveoftheWTO%E2%80%99sroleintheeconomicrecovery,growthanddevelopment.pdf

5. Stevens, C. Meyn, M. and Kennan, J.(2008), ’EU duty- and quota-free marketaccess – what is it worth for ACP countries in2008 and beyond?’, report prepared for DFID.

London: Overseas Development Institute.Available at: http://www.odi.org.uk/resources/ download/3157.pdf 6. For a review of the impact of de facto mandatory standards for agricultural producersin poor countries see: Ellis, K., Keane, J. (2008),’A Review of Ethical Standards and Labels:Is there a gap in the market for a new Goodfor Development label?’, ODI Working Paper 297, London: Overseas Development Institute.Available at: http://www.odi.org.uk/resources/ download/2457.pdf


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Europe is home to around a third of the world’slargest and most successful businesses, spanningthe oil and gas, nancial services, manufacturing,telecommunications, retail and consumer industries. 1 It is not difcult to envisage the enormous possibilitieswere the economic power and dynamism of suchbusinesses to be harnessed fully for development.Inclusive business models revolutionise the ways in

which development and business is done: they aregood for business and also have clear developmentimpact. Specically, inclusive business engageslow-income communities across the value chain –through direct employment, the expansion of supply,distribution and service opportunities for low-incomecommunities, or through the innovative provision ofaffordable goods and services directed to meet theneeds of low-income communities. 2

The Millennium Development Goals (MDGs)cannot be achieved without business playing a moresignicant role. The economic growth and wealthcreation that is essential for their achievement willcome predominantly from private enterprise, whetherthrough large multinational corporations, nationalbusinesses, small and medium rms, or entrepreneursin developing countries. 3

UN population projections indicate an urgentneed for employment and new livelihoods over thenext forty years. In developing countries, an increasein the working age population of 1.2 billion by 2050will necessitate the creation of 30 million new jobs ayear. 4 Coupled with the global economic downturn,this is an enormous challenge. The InternationalLabour Organisation (ILO) estimates that after the

global crisis, the working poor – the number of peopleunable to earn enough to lift themselves and theirfamilies above the US$2 per day poverty line – is likelyto rise to 1.4 billion or 45% of the world’s employed. 5

The private sector plays a primary role in job creation(and in consequent skills and technology transfer,capacity-building etc.), with regular employment asthe key route out of poverty. Inclusive business modelsexplicitly include the poor as consumers, employees,entrepreneurs, suppliers, distributors, retailers, orsources of innovation in economically viable ways.

As Figure 14 illustrates, the case for corporate

engagement in development is reasonablystraightforward – although it is not without trade-offs. First, it makes commercial sense to invest in asound environment in which to do business; in doingso, a corporate can manage the direct costs andrisks of doing business and guarantee the long-termsustainability of supply chains, for example. Second, itoften offers the opportunity for corporates to harness

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new markets and create new customers, as well assuppliers. It has been estimated, for example, that thepoorest two-thirds of the world’s population has someUS$5 trillion in purchasing power. 6 Third, engaging indevelopment is good public relations for big businesses:it is now applauded by shareholders, helps to securea ‘licence to operate’ in local environments, and isgood for staff morale, recruitment and retention. 7

Moving corporates up the ladder ofengagement

The potential of business engagement in developmentcan be conceptualised as a ladder of four rungs. 8 Therst rung – corporate philanthropy – is now widespread.It is no longer acceptable for businesses to notsupport good causes, often through the donation of

a small proportion of their prots. The French retailer,Carrefour, for example, supports a number of localnon-governmental organisations (NGOs) in Thailand.British Airways has partnered with the United NationsChildren’s Fund (UNICEF) for the past 15 years, raisingfunds. However, these projects are typically small-scaleand, moreover, the budgets for such initiatives arecoming under increasing pressure during a downturnwhich has seen corporate giving drop by 40% over2008- 2009.

The second rung on the ladder relates to thecorporate social responsibility (CSR) agenda and

the drive to minimise the negative effects of doingbusiness in developing countries. Minimum standardagreements that commit businesses to betterbehaviour, such as the UN Global Compact 9 , orvoluntary self-regulation frameworks such as theEthical Trading Initiative (ETI) 10, have become thenorm. CSR efforts are important; the Global Compact,for example, has signicant scale, with over 4,300businesses in 120 countries having signed up to a setof universal principles within their sphere of inuencein the areas of human rights, labour standards andprotecting the environment. There is evidence that theETI, for example, has gone some way towards raisingseveral essential dimensions of labour standards indeveloping countries. 11

However, CSR activities are often insufcientlymainstreamed into everyday business operations. Focusis therefore currently on the third rung – a core businessapproach – which attempts to move corporates“beyond minimum standards, beyond philanthropy,beyond corporate social responsibility, into makingthem long-term partners in development”. 12 Manylarge companies are beginning to develop waysin which they could do business differently in orderto have maximum impact in developing countries –

reworking supply chains, forging different partnerships,introducing new products, sourcing more fairly,reconguring distribution networks – yet, crucially, stillall on commercial terms.

The fourth rung on the ladder is only just beginningto emerge. At this level, corporates are becominginvolved in global public policy. Unilever, for example,is working with local rms on frameworks for managingwater shortage. 13 Biofuels are another example, whereenergy producers and users are working together onsecond, third and fourth generation technologies, andon how to change tariffs that block low-cost suppliersfrom access to markets. There are other examples,such as the agriculture and food partnerships of theWorld Economic Forum. It is essential that businessestake an increasingly serious view of this aspect of theircontribution to development.

Success stories

Many success stories are beginning to emerge of

new forms of engagement between business anddevelopment, and some of the most notable havebeen driven by European businesses. Examplesinclude Cadbury’s, whose announcement that theirbest-selling UK brand was to become 100% Fairtrade(thereby tripling the amount of Fairtrade cocoasourced from Ghana) was hailed as ground-breakingin early 2009. Vodafone has developed technology totransfer money via mobile phones. Ericsson is partneringwith the African operator, Zain, on the implementationof a mobile network across Africa to transmit accurateweather information to farming communities and to

enable rural communities to access health services.Unilever collaborates with small and medium-sizedenterprises in Africa, Asia and Latin America todistribute products. Diageo is working with some10,000 small-scale sorghum farmers across Africa whosupply their drinks business, to overcome some of theissues the farmers face in raising crops, and offeringthem their marketing expertise. EDF is investing inpublic-private partnership projects to increase accessto energy in developing countries. These are just a fewexamples; Figure 15 illustrates other emerging waysof doing business, whereby rms are using their corecompetencies or assets for developmental gain.

While these success stories represent a considerablestep forward, it is clearly not always as simple as whatis good for development is good for the bottom line,or vice versa. There is an inherent tension betweenthe short-term commercial interests of business andlong-term development processes in developingcountries. Scaling-up is also a major challenge. Manyof the success stories outlined here are small in scalecompared to the rest of the business’ operations.Access to nance, particularly for small to medium-sized businesses or entrepreneurs in developingcountries, is another part of the challenge. This

can be a question of organisational learning andtransformation, but also in many cases a result ofmarket failure. 14 This is where government or donorsupport plays a vital role.

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The EU and the private sector

The European Consensus on Development isremarkably silent on the private sector. It offers nodenition of the private sector, nor does it ascribe toit any real role (the rst mention of the private sectorappears under section 4.3 on the participation of civil

society). The European Commission (EC) recognisesthat, “private sector companies contribute toeconomic growth by creating new jobs and providingincome for employees and their families, and helpthe empowerment of the poor people by providingthem with services and consumer products, improvingconsumer choice, and reducing the prices of productsoffered.” 15

The EC states that support in favour of the privatesector in Africa, Caribbean and Pacic (ACP) regioncountries is also provided through Country andRegional Strategy Papers. For example, documentsprepared by the EC say that, “in many developingcountries, the expansion of the private sector […] is apowerful engine of economic growth” and “economicgrowth generates wealth and thus is an importantprecondition to the eradication of poverty”. 16 The EChas been active for a relatively long time in assistingdeveloping countries to create an enabling domesticbusiness environment, with a particular focus onsmall and medium enterprises (SMEs). It has a largenumber of programmes in place 17 over a wide rangeof support areas such as reducing administrative andregulatory barriers for business, building capacities inrelevant domestic ministries, and reviewing existing

legislation and policies.18

A signicant proportion ofEC support tends to be at the micro level through theCentre for the Development of Enterprise and throughaccess to credit. The European Investment Bank (EIB)

also plays a role in providing technical assistance andnance (see also Chapter 11).

Practical programmes include the EU’s PrivateSector Enabling Environment Facility of the BusinessEnvironment (PSEEF) or BizClim, 19 although the sumscommitted remain small (€20 million for ve years).PROINVEST20 is another example, with €110 million forseven years for the promotion of investment and inter-

enterprise co-operation activities. The EU is alreadyplaying a role through a number of instruments, suchas the ACP-EU Micronance Framework Programmewith €15 million for six years, in collaboration with theConsultative Group to Assist the Poor programme(CGAP). The EIB also has an important role to playin the facilitation of investment nancing and thedevelopment of nancial markets.

Recommendations

It is clear that much more could be achieved withgreater vision and leadership.

Develop a more comprehensive and far-sighted engagement strategyThe EU should develop a more comprehensive andfar-sighted engagement strategy on the role of theprivate sector in development, which should have aplace in the European Consensus on Development.This strategy would recognise the importanceof continuing to build a strong private sector indeveloping countries and would add a vision forthe role of inclusive business. To do so, the EU could

look to the UN, for example, which has recentlylaunched a new framework for its collaboration withbusiness, which promotes a more progressive form ofengagement. 21

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Create EU Challenge FundsAn effective method of kick-starting private sectorinnovation could be the creation of EU ChallengeFunds. For example, as part of its private sectorstrategy, 22 the UK Department for InternationalDevelopment (DFID) makes available £2 million forpartnership grants that bring UK retailers and Africanfarmers together, through its Food Retail IndustryChallenge Fund (FRICF). 23 Through this, it aims to pilotnovel buying-schemes with poor producers, andcommunicate information to consumers, via partners,about how their purchases can help poor farmers.DFID has successfully supported a number of Fairtradeproducer groups, including South African Fairtradewinemaker, Thandi, and the horticultural business,Gambia is Good.

Establish a business and development teamwithin DG DevelopmentThe creation of a business and development teamwithin DG Development should be considered. Themonitoring and promotion of corporate best practicein developing countries is important; the EC couldplay a signicant role in ensuring a more joined-up,Europe-wide approach to inclusive business practices.

There could be a role for the EC in encouragingcomplementarity and coherence amongst businessactors in development.

Encourage greater vision and leadershipfrom European business leadersGreater vision and leadership from business leadersthemselves could be encouraged by bringing theminto the development process as genuine partners.The EU-Africa Business Forum, for example, establishedin 2006, is an important opportunity for businessto contribute to policy positions on development.The Forum should be encouraged to becomemore pro-active in the Joint Africa-EU Strategy(JAES), emphasising results-orientation and impactmeasurement, 24 and this type of forum opportunitycould be expanded.

The EU is uniquely positioned to take a lead on

innovative new forms of engagement of business indevelopment. Inclusive business is an exciting force forchange. With the right vision and partnerships, Europecan play a pivotal role in promoting the genuineengagement of business in transformative economicand social change.

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1. According to the Global Fortune 500 (2009),European businesses account for 164 of the top500. See: http://money.cnn.com/magazines/ fortune/global500/2009/index.html 2. See: http://www.inclusivebusiness.org/ exploring.html 3. Nelson, J. and Prescott, D. (2008), ‘Businessand the Millennium Development Goals:A framework for action’, IBLF and UNDP.Available at: http://www.iblf.org/docs/BMDG_nal_w.pdf

4. Maxwell, S. (2009), ‘Reections onthe Harnessing the power of business fordevelopment impact event series’. Available athttp://businessghtspoverty.ning.com/proles/ blogs/simon-maxwell-odi-harnessing

5. International Labour Organisation (2009),‘Global Employment Trends’, Geneva: ILO.Available at: http://www.ilo.org/wcmsp5/ groups/public/---dgreports/--dcomm/ documents/publication/wcms_101461.pdf 6. Nelson, J. and Prescott, D. (2008), ‘Businessand the Millennium Development Goals:A framework for action’, IBLF and UNDP.Available at: http://www.iblf.org/docs/BMDG_nal_w.pdf 7. Maxwell S., (2009), ‘Reections onthe Harnessing the power of business fordevelopment impact event series ’. Available at:http://businessghtspoverty.ning.com/proles/ blogs/simon-maxwell-odi-harnessing.

8. Maxwell, S. (2008), ‘Stepping up the ladder:

how business can help achieve the MDGs’,ODI Opinion Paper 99, London: OverseasDevelopment Institute. Available at http://www.odi.org.uk/resources/download/1392.pdf 9. See: http://www.unglobalcompact.org/ 10. See: http://www.ethicaltrade.org/ 11. Barrientos, S. and Smith, S. (2006), ‘TheETI Code of Labour Practice: Do WorkersReally Benet?’, Sussex: IDS. Available athttp://www.ethicaltrade.org/sites/default/les/ resources/Impact%20assessment%20summary.pdf 12. Vadera, S, (2007), speech at launchof Doing Business Report, 2007. Availableat: http://www.dd.gov.uk/Media-Room/ Speeches-and-articles/2007-to-do/ Full-speech-including-references-given-by-International-Development-Minister-Shriti-Vadera-at-the-launch-of-the-Doing-Business-Report-2008-12-October-2007/ 13. See: http://www.unilever.com/ sustainability/casestudies/water/ indiaconservingwateratkhamgaonsoapfactory.aspx 14. Maxwell, S. (2009), ‘Reections onthe Harnessing the power of business fordevelopment impact event series’. Available at:http://businessghtspoverty.ning.com/proles/ blogs/simon-maxwell-odi-harnessing

15. See: http://ec.europa.eu/development/ policies/9interventionareas/trade/private_sector_en.cfm

16. Ibid . 17. Kurokawa K., Tembo F., and te VeldeD. (2008), ‘Donor Support to PrivateSector Development in sub-SaharanAfrica: Understanding the Japanese OVOPProgramme’, ODI Working Paper 290,London: Overseas Development Institute.Available at: http://www.odi.org.uk/resources/ download/1116.pdf

18. See: http://ec.europa.eu/europeaid/what/ economic-support/private-sector/private_sector_en.htm 19. See: http://ec.europa.eu/development/ policies/9interventionareas/trade/private_sector_en.cfm) 20. See: http://www.proinvest-eu.org/ 21. See: http://www.un.org/ millenniumgoals/2008highlevel/pdf/ background/UN_Business%20Framework.pdf 22. See: http://www.dd.gov.uk/Documents/ publications/Private-Sector-development-strategy.pdf 23. See: http://www.dd.gov.uk/Working-with-DFID/Funding-Schemes/Funding-for-the-private-sector/FRICF/ 24. See: http://ec.europa.eu/development/ icenter/repository/EU-Africa Partnership_business_forum_declaration_en.pdf


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M igration is an inevitable product ofglobalisation. The complexity of the issue,with differing levels of legal status, 1 as wellas its high political prole, has led to a heated publicdiscourse in the European Union (EU) (Figure 16).This sometimes-xenophobic debate is dominatedby discussion of the arrival of boats of refugees onthe Southern borders of Europe, human trafcking,

integration problems, and competition for low-skilled jobs. There is little rational discussion of other pertinentaspects of migration, such as economic questionswith regard to skills gaps in the labour markets, thesustainability of EU social systems in an ageing society,and the impact on developing countries.

Internally, the EU seems to promote the freemovement of its citizens, yet externally it has beenperceived as aiming to build a ‘Fortress Europe’,characterised by restrictive immigration and labourmigration policies as well as less than exemplaryconduct in terms of integration, refugee and asylumissues in EU Member States. Illegal immigration 2 fell inthe rst half of 2009 and is to decrease further because

of the impact of the economic crisis on the demandfor labour. 3 Nevertheless, it remains a predominantpreoccupation in national politics, which is reectedin the debates at the October 2009 meeting of theEuropean Council. 4 The defensive attitude of the EUtowards migration is often criticised as not benecialfor the EU’s economy in the context of decreasingrelative competitiveness, an ageing population, anda skills gap, as well as not being in line with the EU’sglobal advocacy for free markets and human rights.

The development and implementation of migrationpolicy cut across a number of administrative areasat national and EU level: interior, justice, economicsand foreign affairs (Box 8). It is regulated under verydifferent legal frameworks at national, at EU and atUnited Nations (UN) level. Regulatory frameworksacross Member States differ in terms of entry, mobility,long-term residency, migrant rights, and the integrationof migrants into the host communities.

In recent years, the EU has developed an ambitiousprogramme, the ‘Global Approach’, to address theexternal dimensions of its migration policy as well asto increase Policy Coherence for Development (PCD)in this area. The EU’s approach has three dimensions:the management of legal migration, the ght against

illegal migration, and migration and development. Inthis way, the EU is also acting on its commitment inthe 2005 EU Consensus on Development to includemigration issues in the political dialogue, mainstream

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EU Member States

Non-EU Europe

Asia

America

Africa

Oceania

Other

40%

14%

16%

15%

13%

2%

1%


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migration into development cooperation and createsynergies between migration and developmentpolicy.

Migration and development:Recognising the development

benets from the movement ofpeople and ideas

Over the last decade, insights from research on theimpact of migration on countries of origin have addeda development dimension to the policy discourse.Remittances that create demand in the localeconomy and often cover otherwise unaffordableeducation and health expenses of families remainingin developing countries, far exceed OfcialDevelopment Assistance (ODA), and often alsoForeign Direct Investment (FDI). 7 Such private cash

transfers are counter-cyclical, as opposed to ODAand FDI, quickly respond to crisis situations and alsoprovide much needed hard currency for the treasury.Countries of origin also benet from ‘brain gain’,the knowledge and technology transfers throughreturning migrants, new ideas and attitudes towardswork, such as an awareness of the need for qualitystandards for export.

Migrants also can create new demand forgovernance reform and stimulate social and politicalchange. In the past, migrants have successfullypushed for improvements in the business environmentin their home countries, as governments recognisethe potential of investment from the diaspora. ‘Co-development’ describes the process by which thediaspora invest in their home communities throughODA or government subsidies to multiply thesebenets.

Tackling migration and development together willrequire lessening the negative effects of migration,such as ‘brain drain’, especially from the health sectors.It also means overcoming obstacles to exploiting thefull potential of migration for development, such asa low standard of migrants’ rights and poor workingconditions or ‘brain waste’ – many highly skilled

migrants work as taxi drivers or dish washers in Westerncountries.

In terms of policy, creating opportunities forlegal migration and upholding migrants’ rights are

clearly conditions for exploiting the full developmentpotential of migration. In addition, research has shownthat temporary labour migration is a win-win strategyfor sending and receiving countries. For receivingcountries, which most of the time want to deter low-skilled migrants, temporary migration schemes canbe much more effective in ghting illegal migration

than both security-driven measures and developmentcooperation aiming at ghting the root causes ofmigration.

First, the assumption that more development willlead to less immigration is generally not correct. 8 The poorest tend to migrate less whereas increasingprosperity leads to more migration. Migration owsonly decrease after a long period of sustained growthand decreasing wage gaps between the immigrants’home countries and those to which they migrate.Refugee ows are an exception to this rule; however,the root causes of persecution and conict are not

easily addressed by ODA alone (see Chapter 6).Second, circular mobility schemes that allow re-entryand facilitate or even subsidise the retention of socialbenets and the transfer of cash, encourage migrantsto return back home.

In the context of a widening global agenda fordevelopment policy and more political EU externalaction, migration will be one of the core areas in whichthe EU must prove its capacity and willingness to worktogether. It will also need to develop a progressivepolicy-mix whilst at the same time ensuring policycoherence.

EU policy on migration in 2010

Here, we focus on initiatives under the three areasof the Global Approach that are regarded as mostrelevant for creating synergies between migrationand development (Table 4).

Legal migration• The EU has negotiated the temporary movement

of workers within its bilateral trade agreements,in addition to the multilateral commitments it hasmade within the framework of the World Trade

Organisation’s (WTO) General Agreement onTrade in Services (GATS). Most notably, the recentEconomic Partnership Agreement (EPA) with theCaribbean Forum of African, Caribbean and

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Pacic States (CARIFORUM) countries providednew opportunities for movement in some high- andmedium-skilled professions, as well as containingcommitments to negotiate ‘mutual recognitionagreements’ for professional qualications.Similar provisions might still be reached in otherACP regions, while trade negotiations betweenthe EU and India could also lead to signicantcommitments. Nevertheless, the EU has beencriticised for a lack of ambition in this area,compared with more traditional forms of marketaccess in goods and investment.

• The negotiation of mobility partnerships (Table 5)with countries in Eastern Europe and Africa, whosecitizens frequently enter the EU, was agreed by theEuropean Council in 2007 as a way to integratelegal migration opportunities into the EU’s externalpolicies and to facilitate circular and temporarymigration adapted to Member States’ labourmarket needs. The EU denes circular migrationas ‘a form of migration that is managed in a way

allowing some degree of legal mobility back andforth between two countries’. 12

• Member States have not been able to agree ona clearer denition, as some are rather critical

of the concept, fearing that it would promotebrain drain or could attract more unwantedmigrants. A number of Member States interpretcircular migration narrowly, and see it as a one-off temporary migration. However, recent CouncilConclusions 13 conrm the value of the instrumentin addressing all three dimensions of the GlobalApproach. 14 So far, the EU has only been ableto develop three partnerships, with Moldova,Cape Verde and Georgia. To be eligible for amobility partnership, countries had to be willingto cooperate on re-admission and the ghtagainst illegal migration and in return receivedvisa facilitation, access to the labour marketand the provision of capacity-building fromthe EU. However, the partnerships risk lumpingtogether existing programmes rather than beingof additional value, 15 and the EU’s strong interestin ghting illegal migration is a difcult base onwhich to build a partnership.

• The ‘Blue Card’ directive, adopted in May 2009,

regulates the admission of highly skilled migrants.Out of four 16 directives envisaged in the EC’s2005 ‘Policy Plan on Legal Migration’, only theone focusing on high-skilled migration had been

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adopted by 2009. However, the blue card schemeis voluntary 17 and many Member States remain toset their individual quotas for blue cards, whichare likely to be shaped by national politics. TheEU still lacks mutual recognition standards forprofessional qualications from third countries,which contradicts its free movement principle.

Illegal migrationIllegal migration is at the top of the political agendaof (particularly southern) Member States, but currentdiscussions about, for example, the revision of theDublin Regulation on Asylum, 18 also engage northernEuropean Member States. Some Member States arecriticised for linking aid to re-admission agreements.Through bilateral agreements on border and coastcontrol, such as the much-criticised one between Italyand Libya signed in 2009, some Member States in factcircumvent the Geneva Convention. 19 The EU hasbeen criticised for allocating funds to the ‘receptioncapacity’ of North African countries and negotiating

framework agreements on re-admission with thesecountries, whose migration systems do not meet EUhuman rights standards. The EC has also considereddelegating the processing of asylum requests to the

UN Refugee Agency (UNHCR) ofce in Libya, which,could b