Appendix: Government response
[Paragraph 9] We strongly welcome DFID's advocacy
of an increased focus by the Commission on poverty reduction in
low-income countries. The European Council, however, now needs
to make good on the commitments it made in the 2005 Consensus
on Development to prioritise aid to the poorest countries, and
to Africa in particular. We recommend that the Government look
at all options available, including withholding funds, to encourage
the European Union member states to agree parameters for Commission
development activity that allow a dramatic increase in aid going
to those who most need it.
We welcome the observation on DFID's advocacy of
a greater focus by the Commission on poverty reduction in low-income
countries. We are committed to this focus which is reflected in
our departmental target countries. The low-income focus of Commission
aid has increased from 51% in 2002 to its current level of 56%.
There is no scope to increase this level significantly during
the current Financial Perspectives (which runs from 2007-2013).
The 10th European Development Fund (€22.682
billion over 6 years from 2008) represents a substantial increase
in funding for partner countries especially in Africa over the
9th EDF (€13.7 billion over 5 years). As the Committee's
report notes, this fund is more focused on low income countries,
with more than 90% of its disbursements made to least-developed
countries.
We would not wish to withhold our funding in support
of the European Commission's development cooperation. The effectiveness
of the European Commission has increased substantially over the
last six years. We intend to continue to promote a more effective
Commission aid programme through vigorous and constructive engagement.
[Paragraph 10] We recommend that the Government
encourage a long-term review of Commission development structures
in order to streamline staff and institutions and to provide clearer
lines of accountability. In the short term, we believe greater
clarity could be achieved by disaggregating headline figures for
development assistance for low- and middle-income countries from
those for external assistance to neighbouring, candidate or potential
candidate states.
The Government would welcome a dialogue with other
member states and the Commission as to the most logical arrangement
for managing the European Commission's development assistance,
and the Committee's comments on the current arrangement are valid.
It would seem appropriate to have such a substantive dialogue
in the run up to 2009, when a new Commission will be formed, and
European Parliamentary elections will take place. This remains
subject to the outcome of the June European Council, which will
discuss the issue of future institutional reform.
[Paragraph 14] The policy shift on health and
education spending under the European Development Fund away from
programme expenditure towards budget support will need a parallel
shift in the Commission's approach. We welcome DFID's involvement
in developing the Millennium Development Goals (MDG) Contracts
and the clearer links these should offer between spending and
outcomes. We look forward to monitoring the progress of the MDG
Contracts both as a potential framework for the Commission's new
approach to health and education expenditure and, more broadly,
as a possible model for outcome-oriented conditionality for budget
support.
We welcome the proposal from the European Commission
to develop a more predictable budget support instrument, called
an "MDG Contract". Improving the predictability of
aid to governments is a high priority for DFID and we will work
with the European Commission to ensure that this new instrument
is designed to maximise the predictability of aid flows. The European
Commission has been linking budget support payments to results
for some time, and we are keen to work with them to ensure that
the approach has the most beneficial impact possible—and
improves the effectiveness of budget support. We will continue
to work with the European Commission to clarify how they plan
to take the MDG Contract concept forward and to support them in
both design and delivery.
[Paragraph 17] For trade to work as an effective
development tool, we believe that opening markets alone is not
sufficient—significant capacity-building in this area is
also essential. We welcome recognition by the WTO aid for trade
task force and the Government that aid for trade initiatives are
complementary to the Doha Round. We are concerned, however, that
without a successful outcome to the Doha Round the funds available
for aid for trade will be minimal, as both the Round and aid for
trade have developed in tandem. We recommend that the Government
make explicit its commitment to ambitious aid for trade initiatives
irrespective of the outcome of the Doha Round.
HMG has made it very clear that we believe donors'
aid for trade commitments should be delivered urgently, and irrespective
of progress on the Doha Development Agenda (DDA), Economic Partnership
Agreements (EPAs) or other trade negotiations. The UK will deliver
its pledge to increase Aid for Trade (including economic infrastructure,
such as roads, ports, power and telecommunications) by 50% by
2010 to $750 million a year. Developing countries need aid for
trade to benefit fully from the current access which they already
have to developed markets, as well as any additional access which
they secure through new trade agreements. At the meeting of G7
Ministers on 13th April 2007 the Chancellor announced
that the UK will contribute up to 20% or as much as £38 million
over 5 years ($74 million) towards the multilateral fund for the
Enhanced Integrated Framework (EIF) for Trade Related Technical
Assistance to Least Developed countries. The UK is one of the
first countries to make a public pledge to the EIF before its
launch in July 2007 and before a high-level donor meeting in May
2007.
[Paragraph 20] We welcome the renewed effort the
WTO membership, including the UK, is putting into securing a deal
in the Doha Development Round. Time is, however, short: the likely
window for a deal is now just a few months. The key difference
between July 2006, when the suspension was announced, and now
is greater political will to reach an agreement rather than a
significant change in the 'building blocks' involved in any deal.
Moreover, we believe that it is continued political will that
will be decisive in securing a deal. We encourage the UK, EU and
all negotiators to approach this deal with a determination to
succeed.
[Paragraph 23] We understand that agreement of
a development package, separate from or in addition to an overall
deal, is viewed as controversial by the WTO and some of its members.
We agree with the EU Trade Commissioner that the development package
is not an alternative to an overall deal. We are concerned, however,
that hard-fought for gains for the world's poorest countries should
not be lost because of others' intransigence. We recommend that
the Government give priority to all options available which safeguard
the development outcomes of the negotiations, even if the Round
itself is not concluded successfully.
The UK has been the leading voice calling for an
ambitious, pro-development conclusion to the Doha Development
Round which delivers real benefits for developing countries. The
Prime Minister, the Chancellor and other Ministers have called
on all the key parties in the talks, including the US, the EU,
India and Brazil, to show the political will and flexibility to
secure a good deal. In addition to the Doha Development Round,
the UK has also been a leading proponent of key supporting measures
to enable developing countries to benefit fully from a successful
Doha deal. Under the UK's Presidency in 2005, the G8 committed
to simplifying preferential Rules of Origin and to provide $4
billion a year (by 2010) in aid for trade.
[Paragraph 25] We believe that the involvement
of business leaders in shaping the EU offer, such as encouraging
concessions on agriculture and on other sticking points in order
to secure broader trade benefits, is crucial. We recommend that
the Government intensify its dialogue with business leaders about
the Round and make every effort to facilitate their involvement
in these negotiations.
We agree that it is vital that business speaks out
in favour of a Doha Development Round which is good for both the
EU economy and developing countries. The Government is in regular
contact with business leaders about the Doha Development Agenda
(DDA) and will maintain this contact. The letter to the Financial
Times signed by 82 business leaders on 28 February 2007 calling
for political leaders to give these negotiations the highest priority
demonstrated the importance that business places on a successful
conclusion to these negotiations.
[Paragraph 28] We recognise that a deal involves
compromise. No-one can expect that all aspects of a successful
outcome to the Doha Round will please all WTO members. We do believe,
however, that it is the WTO membership's duty to ensure that a
deal on agriculture does not favour only those who shout loudest.
We understand the rationale behind getting the early agreement
of 'key players' to any deal but we are concerned that there is
a danger that the EU and US could overcome their difficulties
only to find some developing countries, perhaps outside the G5,
rejecting a deal in which they have played little part. We recommend
that the Government encourage the EU to consult broadly during
the closing stages of the negotiations to ensure it draws in the
views of the full range of G110 countries.
All WTO members recognise that a successful Doha
Development Agenda will require the agreement of all WTO members,
including the 110 developing country members. The UK consistently
makes this point in discussions on the DDA with key players. In
addition, the UK is providing direct support to the Least Developed
Country group including help with co-ordination in Geneva and
research and analysis to help them define their trade policy positions
in the negotiations.
[Paragraph 31] We remain concerned that the EU
is abusing its position in the partnership to persuade the African,
Caribbean and Pacific (ACP) countries that the New or Singapore
Issues are essential for development and by implying that there
may be penalties if they reject them. We believe both elements
of the Commissioner's assurance to us—voluntary inclusion
of the issues and a long implementation period—are necessary
in order to prioritise development outcomes for the Economic Partnership
Agreements (EPAs). We would encourage him urgently to ensure that
the Commission as a whole is taking this approach across the board.
The UK's position paper on EPAs, published in 2005,
makes our position clear on these issues. We have welcomed the
fact that a number of regions, such as the Caribbean, have indicated
that they do wish to negotiate on some of these issues, as we
believe that they can bring real development gains if implemented
appropriately. However, we continue to argue that no region should
be required to negotiate on new issues if they do not want to.
We welcome recent indications from the Commission that the priority
in the short term is to complete those elements of the negotiations
needed to ensure that EPAs are WTO-compatible, and that negotiations
on other issues can proceed on a slower timetable.
[Paragraph 33] We recommend that the Government
examine EU-ACP communication channels and look for opportunities
to facilitate or improve that communication in this critical phase
of the negotiations. The Government should ensure that the EPA
review which is underway allows the concerns of ACP states to
be aired fully and addressed. The Government should also encourage
the Trade Commissioner to meet ACP Ambassadors personally to discuss
progress in the negotiations.
Good communication is central to both sides of the
negotiations to ensure a genuine understanding of the other's
position. The Cotonou Agreement provides for formal communication
structures and the EC has built on these to engage with the ACP
during the negotiations. The German Presidency has done an excellent
job of increasing the contact at political level between the EU
and the ACP, for example by inviting ACP Ministers to the annual
EU Informal Development Ministers' meeting which took place in
Bonn in March of this year. We have supported this initiative.
UK Ministers and officials take every opportunity
to meet representatives of the ACP. In the last six months alone:
- Hilary Benn and Alistair Darling
met ACP Ministers and their chief negotiators;
- Hilary Benn attended a meeting of EU Development
Ministers and ACP Ministers and UK officials attended the Joint
Ministerial Trade Committee meeting between the EU and the ACP;
- Gareth Thomas met with African farmers' representatives
in October;
- Ian McCartney and Gareth Thomas met with a delegation
of Pacific Ministers and negotiators in January; and
- Ian McCartney and Gareth Thomas meet with UK
NGOs and Members of the European Parliament in order to listen
to any concerns they are hearing from their networks in the ACP.
In addition, our overseas posts regularly engage
with their host governments to get their views and Whitehall officials
regularly engage with the European Commission to press for EPAs
to reflect the UK position.
The UK has put much emphasis on the importance of
the review. Our view of its outcome will be guided, in part,
by how it is received by the ACP. The recommendations of the review
will be formally adopted at the EU-ACP Council meeting in May.
[Paragraph 35] We recognise that some brinkmanship
may be involved in negotiations and that the period for negotiating
Economic Partnership Agreements (EPAs) has been substantial. We
believe, however, that the EU should now undertake thorough contingency
planning so as to be in a position to request a WTO waiver, as
the US has done, should the EPA negotiations not conclude by the
deadline.
All ACP regions have agreed their commitment to working
towards meeting the deadline. Negotiations are now focussing
on those elements which are required for WTO—compatibility—i.e.
trade in goods. This is a very welcome development.
The UK maintains that an extension of the WTO waiver
will be very difficult to achieve. While the US has applied for
a waiver for its African Growth and Opportunity Act, it is currently
being blocked by some WTO Members.
[Paragraph 37] We recognise the argument that
the Economic Partnership Agreements (EPAs) offer greater potential
to grow regional markets than the Everything but Arms (EBA) arrangements.
We believe that regional groupings themselves will best be able
to assess their capacity to integrate and the pace at which this
should take place. We continue to believe that the EBA should
be a real option, in particular for least-developed ACP countries
who should not have to offer reciprocal market access to the EU
until they have graduated from least-developed country status.
We were pleased to see that the Government broadly agreed with
our view but we are disappointed that the EU negotiating position
does not reflect this flexibility more explicitly.
The UK and the EU are firmly committed to the development
benefits of regional integration. The respective ACP regions have
their own regional integration plans. The EPAs should build on
these.
However, EPAs do require reciprocity. Least-developed
countries (LDCs) could decide that they do not yet want to sign
an EPA and want to continue with EBA, which gives them duty free
quota free market access to the EU, although with more restrictive
rules of origin than are available under Cotonou.
[Paragraph 39] We endorse the flexible approach
to market access and asymmetrical liberalisation present in the
Commission's current position on the Southern African Development
Community Economic Partnership Agreement (EPA). We look forward
to the successful conclusion of the EPA on that basis.
We welcome the increased flexibility which has been
shown by the Commission in recent weeks, particularly in the EU's
market access offer and its signals on ACP implementation periods.
We continue to work with the Commission to ensure they act flexibly
in all of the regional negotiations.
[Paragraph 41] The essential building blocks needed
to secure fair and effective deals are clear. Political will is
now needed to put those blocks in place. As the WTO and EPA negotiations
enter their final phases, we believe that progress will be made
if they are conducted between equal partners who are willing to
make compromises, conscious of what is at stake and, above all,
committed to making trade work for the benefit of the poor.
We agree.
Department for International Development
21 May 2007
| 
