Documents considered by the Committee on 15 December 2010 - European Scrutiny Committee Contents

9 The EU financing instrument for development cooperation (DCI)



Draft Regulation amending Regulation (EC) No 1905/2006 establishing a financing instrument for development cooperation
Legal baseArticle 209(1) TFEU; QMV; ordinary legislative procedure
Document originated27 October 2010
Deposited in Parliament18 November 2010
DepartmentInternational Development
Basis of considerationEM of 9 December 2010
Previous Committee ReportNone; but see (31424) 7709/10 (31427)

7703/10 and (31429) 7717/10: HC 428-i (2010-11), chapter 43 (8 September 2010); and (31431) 7776/10 and (31432) 7780/10: HC 428-i (2010-11), chapter 44 (8 September 2010)

Discussed in Council10 December 2010
Committee's assessmentPolitically important
Committee's decisionNot cleared; further information requested


9.1 Regulation (EC) No 1905/2006 of the European Parliament and of the Council of 18 December 2006 establishing a financing instrument for development cooperation (DCI) replaced the range of geographic and thematic instruments that had been created over time and as needs arose. Its aim is "to improve development cooperation." Under this instrument, the EU finances measures aimed at supporting geographic cooperation with the developing countries included in the list of aid recipients of the Development Assistance Committee of the Organisation for Economic Cooperation and Development (OECD/DAC), which are listed in Annex 1 to the Regulation.[42]

9.2 In chapter 44 of the Report of our meeting on 8 September we discussed two Council Decisions designed to usher in new arrangements between the EU and banana producers generally, which have particular implications for those banana producers with whom the EU has long had a special relationship, namely those from the ACP countries. As explained there, it has been necessary to come to these new arrangements because: since 1995 the EU has been challenged at the World Trade Organisation (WTO) by the US and countries from Latin America over the preferential market access given to ACP countries by the EU; the WTO has repeatedly ruled against the EU; and, as a result, the EU has negotiated the "Geneva Agreement on Trade in Bananas" with Latin American countries and the "Agreement on Trade in Bananas" with the US — which agreements settle all disputes with the US and Latin American countries over bananas.

9.3 In that chapter, we also outlined the steps that the EU had taken to facilitate the adjustment that ACP banana producers would have to make, viz., a package of transitional financial assistance — the Banana Accompanying Measures (BAMs) — worth €190 million (£170 million) over four years, and what the UK was doing in the Caribbean — a $42 million Challenge Fund Programme, implemented in partnership with the Inter-American Development Bank (IDB) and the Canadian International Development Agency (CIDA), in which the Department for International Development (DFID) would contribute $16m (c. £10m), CIDA $16m (c. £10m) and the IDB $9m (c. £6m).[43]

9.4 Against this background, the other related documents we considered on 8 September were:

—  an amendment to the DCI to enable the financing of the BAMs;

—  a Commission Communication outlining the BAMs in greater detail; and

—  a Commission Communication on the Special Framework of Assistance (SFA) for traditional ACP suppliers of bananas, which was created in 1999, expired in 2008 and, under which, some €376 million was provided.

9.5 The SFA is being implemented across twelve ACP countries[44] and was designed either to improve the competitiveness of ACP banana producers or to support diversification into other economic activities.

9.6 In his Explanatory Memorandum of 31 March 2010, the then Minister of State at the Department for International Development (Mr Gareth Thomas) said that evaluation of the SFA and of similar EC measures to support loss of preferences for ACP sugar producers highlighted the need to integrate programmes better, consider using budget support as a delivery mechanism and ensure appropriate stakeholder consultation before and during implementation. Turning to the future, the then Minister said that the BAMs plan to apply the lessons of these earlier programmes with clearer objectives to facilitate clear demonstration of results; BAMs would be implemented through country specific strategies, and where possible be incorporated into wider National Adaptation Strategies. They would also try to address the broader social impacts of restructuring and reducing the banana sector in recipient ACP countries. Budget support would be considered where appropriate. Future trading prospects of ACP exporters within a changing trade environment would be assessed more carefully to ensure any competitiveness measures implemented have a good chance of success. The assistance scheme would be monitored throughout and assessed in 2012."

9.7 The then Minister also explained that the BAMs would be financed by the use of margins and redeployment within EC expenditure allocated under "The EU as a Global Player". The choice of financing in this way was, he said, due to under-utilisation and absorption constraints. Disbursements would take place through the DCI and under a specific budget line, entitled BAMs.

9.8 The then Minister went on to say that the EU commitment to provide the BAMs to the ACP had been essential to the conclusion of the banana dispute by reassuring ACP countries they would have support to adjust or diversify. He again expressed his belief that it was right to open up the EU market to other developing countries at an appropriate pace, to ensure non-discrimination between countries of similar levels of development, and that it is also important to comply with WTO rulings.

9.9 He noted that, although many ACP banana producers have been undergoing structural adaptation activities, the reduced tariff reduction on Latin American banana exporters will require further and more rapid adjustment. He expressed his belief that the BAMs would be an improvement on previous EC support to banana producers: but the Commission would, he said, need to follow up proactively to ensure that lessons learnt previously were acted upon. He undertook to continue to lobby the EC to do this, and noted that the UK would, where possible, monitor the implementation of EC aid at the local level and feedback wider systemic lessons that need to be addressed at headquarters, and engage with the Commission in Brussels to ensure that BAMS applies the lessons learned from earlier programmes of support for both bananas and sugar.

Our assessment

9.10 We recalled that the previous Committee had noted that the SFA was not the Commission's shining hour, and noted that this continued to be borne out in what the Minister had to say: programmes lacking focus or proper monitoring and evaluation systems; many small investments with limited potential for real, measurable impact; difficulty in evaluating full impact, given only half of SFA funds had been disbursed; evaluation of similar EC measures to support loss of preferences for ACP sugar producers also highlighting the need to integrate programmes better; consider using budget support as a delivery mechanism; and ensure appropriate stakeholder consultation before and during implementation.

9.11 Against this background, we felt that the BAM could not but be an improvement. But that would be down to the Commission in the first instance. As the then Minister noted, the Commission would need to follow up proactively to ensure that lessons learnt previously were acted upon. Its record under the SFA had not been impressive. And, with a much reduced presence in the Caribbean, it was not clear how the then Minister's Department was going to be able to keep the Commission under pressure.

9.12 Noting that the BAM scheme was to be assessed in 2012, we asked the then Minister's successor to write to us by the end of 2011 with information about, and views on, its impact, and on the effectiveness of the Commission in fulfilling its brief; and with similar information and views on what further had happened under the SFA by then.

9.13 In the meantime, we cleared the documents.[45]

The draft Council Regulation

9.14 The document contains amendments tabled by the European Parliament (EP) to the Commission's proposal for the Banana Accompanying Measures (BAMs).

9.15 In his Explanatory Memorandum of 9 December 2010, the Parliamentary Under-Secretary at the Department for International Development (Stephen O'Brien) explains that the Commission proposal modifies and replaces several articles and annexes of the DCI Regulation, as follows:

    "Article 4 (Implementation of Union Assistance) is replaced; Article 17a (Main ACP banana supplying countries) is inserted; Article 21 (Adoption of strategy papers and Multi-Annual Indicative Programmes) is replaced; Article 29(1) (Budget Commitments) paragraph is replaced; Article 31(1) (Public procurement procedures, grants award procedures, rules of origin) subparagraph is replaced; Article 38 (1) and (2) (Financial provisions) are replaced; Annex IIIa is inserted; and Annex IV is replaced."

9.16 He also notes that the EP encourages the Commission to carry out an impact assessment of the BAMs and asks the Commission to coordinate this programme with the regional and national indicative programmes operating in the beneficiary countries; to prevent the exploitation of local workers in the banana industry; to include the EP and the Council opinions when adopting annual action programmes; and to make sure that Union assistance is not, in principle, used to pay taxes, duties or charges in beneficiary countries.

9.17 The Minister also notes that:

    "EP amendments also suggest interpreting Geographic Strategy Papers, Multi-Annual Indicative Programmes and Strategy Papers for thematic programmes as 'delegated acts', over which the EP has increased powers of scrutiny."

The Government's view

9.18 The Minister then goes on to comment as follows:

    "HMG welcomes some of the EP amendments, especially those that support the main ACP banana-exporting countries. We agree that BAMs should not engender deterioration in labour and environmental standards. We are also of the view that BAMs initiatives should focus on competitiveness enhancing measures or restructuring where necessary.

    "However, in line with the position set out in EM 15028/10 we do not agree with the EP's interpretation that Geographic Strategy Papers, Multi-Annual Indicative Programmes and Strategy Papers for thematic programmes constitute 'delegated acts'. The definition of 'delegated acts' is intended to cover only the Commission's legislative proposals. Strategy and Multi-Annual Papers simply implement the relevant Instruments, rather than amending them: we therefore do not consider them to be legislative proposals.

    "Under the Lisbon Treaty, Article 291 sets out the powers conferred on the EP in terms of scrutinising documents which implement existing Financial Instruments. Article 290 sets out the powers conferred on the EP in terms of scrutinising delegated acts which amend existing Instruments.

    "The EP's attempt to interpret Strategy and Multi-Annual Papers as delegated acts which fall under Article 290 would give it increased powers of scrutiny and risk considerably delaying the programming of EU aid, reversing recent progress in speeding up aid disbursement. We do not accept the EP's interpretation of 'delegated acts' in this context, which in our view would constitute 'competency creep' by the Parliament.

    "Council agreement is required before any amendments can be made to the BAMs. The UK's position on this is unanimously supported by other Member States and the Commission. The Council will reject the EP's tabled amendments and resist any attempt to increase its powers of scrutiny on this issue."

9.19 The Minister also notes that "the EP is pursuing a similar strategy in relation to a number of EU Financial Instruments and HMG is taking a strong and coordinated line on this issue."

9.20 Finally, on the Timetable, the Minister says that the EP's first reading debate took place on 20 October 2010; the plenary voted on 21 October 2010 and adopted 24 amendments in the DCI Regulation; the text has now been sent back to the Council for consideration; and "at Coreper [46]on 8 December, Member States will discuss the Council's agreed position ahead of the EP's second reading [,which] agreed position will reject the EP's attempts to increase its powers of scrutiny on this issue."


9.21 We now understand that, subsequent to the Coreper meeting to which the Minister refers, the agreed position that the Minister outlines was adopted by the Council, without discussion, on 10 December; and that, the matter still being under scrutiny, the Minister abstained from voting.

9.22 We endorse the Government's position, and look forward to hearing about the outcome. Once the European Parliament responds, the Council will need to adopt a further agreed position; in which case we shall expect a further Explanatory Memorandum from the Minister, outlining the nature of the European Parliament response and the Government's views thereon.

9.23 In the meantime we shall retain the document under scrutiny.

42   For full information on the DCI, see Back

43   See headnote: (31431) 7776/10 and (31432) 7780/10: HC 428-i (2010-11), chapter 44 (8 September 2010). Back

44   Belize, Jamaica, Dominica, St Lucia, St Vincent, Grenada, Suriname, Cameroon, Ivory Coast, Somalia, Cape Verde and Madagascar. Back

45   See headnote: (31424) 7709/10 (31427), 7703/10 and (31429) 7717/10: HC 428-i (2010-11), chapter 43 (8 September 2010). Back

46   The Permanent Representatives Committee or "Coreper" (from the French, Comité des représentants permanents) is responsible for preparing the work of the Council of the European Union. It consists of the Member States' ambassadors to the European Union ("Permanent Representatives") and is chaired by the Member State which holds the Council Presidency. Coreper occupies a pivotal position in the Community decision-making system, in which it is both a forum for dialogue (among the Permanent Representatives and between them and their respective national capitals) and a means of political control (guidance and supervision of the work of the expert groups). See for further information.


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