EPA Review Annex Documents - DFID

3. Development Cooperation and Finance in the EPAs
Whether the EC had mandate to negotiate within the EPAs is of little value for ACP
countries, since the EU itself could give the EC this mandate. In fact, development
cooperation and finance can be included in trade agreements. One example being the Trade
and Development Cooperation (TDCA) between the EU and South Africa, where there is a
chapter on development cooperation that aims, among other priorities, to support the
integration of the South African economy on the world economy. In order to do so, Article 94
establishes and special financial facility established under the Community budget to support
development cooperation. Therefore, it is possible to have specific financial instruments
under a trade agreement for a signatory of the Cotonou Agreement.
The CARIFORUM EPA and the interim EPAs (IEPA) have different development
cooperation chapters. Each of them develop different priorities, some more specific than
others, however, the main element in common is the lack of binding aid finance agreements.
One important innovation however, is for the case of the Central African region where it has
been agreed to create an EPA regional fund. The issue of regional funds for the EPAs is
currently being considered by the EU and maybe implemented in other EPA regions.
Nevertheless, there is no clear indication whether more financial resources will be available
for this new instrument. On the contrary, the Central African IEPA establishes that the main
source of finance for this facility will be the EDF and contributions by EU members and
potentially other donors. As a result, some advances are happening relating EPAs to aid
finance in terms of instruments, but without binding additional resources.
4. Where are the Financial Resources Coming From?
The Cotonou Agreement clearly establishes the EDF as the main source of development
finance for ACP countries. The EDF draws upon National Indicative Programmes (NIPs) and
Regional Indicative Programmes (RIPs), which set the countries priorities for financing.
Previous EDFs have been analysed in detail in Grynberg and Clarke (2006). They document
several problems related to disbursement of funds in previous EDFs. More importantly is the
fact that according to Silva and Grynmberg (2006) the allocation of funds agreed in the 9 th
EDF NIPs in the trade sector was a mere 0.1% of funds, around €6.2 million, which clearly
shows lack of support to trade related issues in previous EDFs. 164 Most of the resources to
promote trade came from regional instruments, such as the ECOWAS and UEMOA RIPs
Parallel to the EPA negotiations, in an attempt to raise the profile of trade related assistance
in OECD countries, the EC launched the EU Aid for Trade (AfT) strategy. Under the AfT
umbrella the EC pledged to mobilise €2 billion per year for trade related assistance, which
implies a large increase in development finance for trade related issues, some of which
could potentially be used for EPA related issues. At the same time the new EDF 10 th (2008-
2013) has been launched and the EPAs are now considered a separate item within trade
and regional integration. The following table shows the predicted sectoral breakdown of the
10 th EDF based on the NIPs. Clearly, more funds are available for EPA activities; however,
they are still much lower than other sectors such as governance or infrastructure. At the
same time only 19 countries out of 79 have programmed finance in the EPA related areas.
5. But Finance for What…The Needs
The degree to which development cooperation is required depends on ACP countries’
needs. We can classify these needs in two areas. First, there are significant costs of
adjustment for ACP countries when implementing the EPA. A significant amount of tariff
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The sectoral breakdown of the 9th EDF suggests that only Namibia received €2 million for the
trade sector based on the NIPs.
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