Europe needs to act 'as one' in an increasingly uncertain world

17 May 2009
Alison Evans and Dirk Willem te Velde
Comment
By Alison Evans and Dirk Willem te Velde

The world is facing a quadruple ‘F shock’: the food, fuel, financial and flu crises have made the world a more uncertain place. The challenge of climate change is altering the very nature of development.  It is more apparent now than ever that global issues require global solutions and that Europe needs to be part of this.

European Development Ministers are meeting in Brussels today under the auspices of the European General Affairs and External Relations Council (GAERC) to discuss support to developing countries coping with the effects of the global financial crisis, Economic Partnership Agreements (EPAs) and democratic governance.  Against the backdrop of the global recession and a year that will see a new European Parliament, a new European Commission, a review of the EU budget and the possible ratification of the Lisbon Treaty,  this meeting is a vital  opportunity to move development issues to the top of the European agenda.  The European Commission has already outlined its own ideas  -- now they need to be translated into action.

But why should we be concerned about what gets discussed in Brussels today?  What does and what can Europe do for development?  Does it really matter?

It matters because of the importance of Europe to growth and development in developing countries.  The role of the EU as a trade and development partner is crucial in promoting well-being in developing countries, as highlighted in January at an informal meeting of EU Development Ministers in Prague. A background paper for this meeting stressed that:

  • The EU is the main trading partner for developing countries. In 2007, 20% of exports from developing countries went to the EU. The EU is also a major sourcing market, with 28% of imports coming from African, Caribbean and Pacific (ACP) countries (incl. South Africa).
  • The EU is a major source of remittances for developing countries. Its countries accounted for 30% of all global remittance outflows in 2007.
  • The EU is a major provider of foreign direct investment (FDI) to developing countries. Around 27% of total FDI was destined for developing countries in 2007, and the EU accounted for 57% of FDI outflows in 2007.

It matters because of the importance of Europe as a source of development financing, particularly Official Development Assistance (ODA). The EU is the world’s largest provider of ODA. In 2007 the EU accounted for 53% of net ODA flows disbursed by Development Assistance Committee (DAC) donors. Total net ODA to the Least Developed Countries (LDCs) has nearly doubled in real terms over the last 10 years, reaching $32.5 billion in 2007, representing one-third of total aid, more than half of it provided by the EU. The EU also hosts a number of bilateral and regional development finance institutions, such as the EIB, EBRD, CDC, DEG, FMO,  which, taken together, account for a large share of development finance. The group of European Development Finance Institutions (EDFIs) have more exposure in sub-Saharan Africa than the International Finance Corporation (IFC). EU countries are also shareholders in other development finance institutions such as the IFC.

And it matters because of the importance of the EU as a player ‘beyond aid’. The EU has a unique span of policy instruments capable of supporting development from trade to aid, and from security to neighbourhood and foreign policy. The potential for a coherent European development policy drawing on all of these instruments has yet to be fully realised, and there are complex issues about where the responsibilities of individual member states begin and end in relation to European policy coherence. Nevertheless, the potential is there and the creation of an External Action Service under the Lisbon Treaty should provide, at the very least, the necessary institutional foundation.

However, while it is clear that Europe is important for development, it is battling against charges of irrelevance and strategic confusion. Given the backdrop of the crisis and the potential changes ahead this year, development ministers meeting in Brussels today have a key opportunity (and responsibility) to take the conversation further on the evolution of European development cooperation.

So, what do we want to see coming out of the meeting?  There are two types of issues: those that can be worked on and delivered by the EU itself, and those that the EU needs to take to other high-level fora in the coming months.

In the first case, the agenda is clear. Development ministers need to agree to:  

  1.  Commit and recommit to ODA targets;
  2. Commit to anti-protectionist measures in areas such as trade, migration and finance and commit to support for trade with developing countries through Aid for Trade;
  3. Speed up disbursements of development and development related funds. The crisis will lead to balance of payment shortfalls which need to be addressed now, not next year when it will be too late to cushion the impact of the shock;
  4. Ensure that the European Development Finance Institutions can play a counter cyclical role in the context of reduced private capital flows;
  5. Promote responsible EU business abroad;
  6. Support regional responses to the financial crisis (in developing countries);
  7. Send a clear message on the need for a strong commissioner for development policy in any new EU architecture.

On the second case, Europe has an overwhelming responsibility to ‘act as one’, to develop a common voice on major global issues, whether it is the response to the global financial crisis and the upcoming G20 leader’s follow-up meeting, or the post-Kyoto negotiations in Copenhagen later this year.  The EU does and can play a key role in ensuring the provision of global public goods.  It has a responsibility to engage constructively and in partnership with other global players, whether the International Financial Institutions (IFIs) or the UN, on issues of global importance.  But Europe lacks a clear vision of itself in the world, and development ministers need to help to forge that vision in the interest of developing nations.

At a recent conference on the future of European development cooperation hosted by ODI, participants made the point very clearly that the credibility of Europe as a development actor requires a much stronger vision of Europe’s global agenda. It also needs a clear European strategy for global and regional partnership, and a sense of how Europe sees itself within the evolving global development architecture.  As the financial crisis has revealed, we are entering an era when more, not less, collective action is needed and development ministers have an opportunity to convince us that they are serious about this at today’s meeting.

How do others see the future shape of European development? Comments on this blog are welcome.

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This is an output of the following project: European Development Cooperation Strengthening Programme

Authors

Head of Programme - International Economic Development Group
Dr Dirk Willem te Velde is a Principal Research Fellow and head of the International Economic [...]