Fix It or Scrap It: Reforming European Foreign Aid

Fix It or Scrap It: Reforming European Foreign Aid

Should European Union (EU) member states “re-nationalise” foreign aid? Considering the dismal record of the aid managed by the European Commission, this is a legitimate question that European leaders nevertheless seem unwilling to address seriously. The reform of external relations is a critical dimension of the newly launched Convention on the Future of Europe. Yet, the heated discussions tend to focus exclusively on issues related to enlargement, foreign and security policy. They only tangentially address the no less crucial reform of foreign aid policy. As Europe embarks on yet another attempt to define its purpose in the world, the uncertain future of European foreign aid has received scant attention. Renewed criticism, both within and outside the bureaucratic circles of the EU, renders the reform of European Community (EC) aid all the more urgent.

The debate is obscured by the impossibility of most outside observers to comprehend how EU foreign aid works. EC aid policies applicable to any given sector or geographical region encompass a thicket of regulations, resolutions, declarations and communications, which often lack an overarching purpose or a strategic objective. It is becoming almost impossible to navigate the complex labyrinth of the Commission bureaucracy and its foreign aid apparatus whose Kafkaesque structures and procedures are beyond comprehension, in particular by those developing countries the EC seeks to assist. Why, then, have EU countries repeatedly failed to harness the aid managed by the Commission?

The reform of EC foreign aid is at the centre of the current overhaul of EU governance initiated after the resignation of the Commission en masse in 1999 amid allegations of mismanagement. In 1998, the European Court of Justice criticised the Commission for the lack clarity of purpose and coherence as well as the insufficient legal basis of the aid it provides. Two subsequent reports of the European Court of Auditors in 2000 sharply criticised the management practices of the Commission, forcing it to suspend and review its programmes to promote democracy and good governance abroad.

The 2000 White Paper on Reforming the Commission and the 2001 White Paper on European Governance provide critical assessments of the root causes of the EC crisis of legitimacy and credibility. With the adoption in May 2000 of the Communication on the Reform of the Management of External Assistance, the Commission embarked on what it then proclaimed to be a radical overhaul of its aid programmes with the objective of increasing the coherence and effectiveness of the aid it provides. Thus far, the “historic” reform of EC aid has produced disappointing results. Only in late 2000 did the EU adopt a policy statement on development policy, the first such statement in decades. An autonomous implementing agency, the European Aid Co-operation Office, was created to enhance the effectiveness of aid in the context of increasing the role of delegations in the field.

Since the adoption of the Maastricht Treaty in 1992, foreign aid has become a “community” policy, managed by the Commission under the guidance and supervision of the Council of Ministers, where EU countries are represented. EU member states have thus delegated to the Commission responsibility for managing a substantial portion of their development assistance to developing countries. However, they have kept alongside EC aid their own bilateral aid programmes. EU member states have “locked in” their commitment to further European integration by bounding themselves by treaty to develop a common development policy. However, European development aid remains strongly compartmentalised across geographic lines, along four main regions – Africa, the Caribbean and the Pacific (ACP), Asian and Latin America (ALA), the Mediterranean countries (MED), and East and Central Euro pe and the Commonwealth of Independent States (CIS). The co-operation with each one of these regions is governed by its own set of agreements. The aid apparatus of the Commission is divided between three directorate generals and one implementing agency within the purview of the Commission. This structure has created insurmountable inertia that makes it particularly difficult to reform it and define sectoral strategies across regions.

The generosity of Europe is uncontested and undisputed. In 2000, Europe (EU and member states) provided $25 billion of the world’s $54 billion of development assistance (representing 46% total official development assistance), most of it in form of grants. The EC alone provided $5 billion (8.5% of total foreign aid), representing a 13% increase from 1999, making the EC the fourth largest provider of aid in volume in 2000. By comparison, the United States provided US$10 billion in aid in 2000. EC aid has continued to grow over an extended period, both in relative and absolute terms, at a time when many other programmes have declined. Over the past decade, EC aid has grown faster than other OECD countries precisely because EU member states have agreed to channel a growing share of their aid budgets through the EC (7% in 1970, 13% in 1990, and 17% in 1997). Furthermore, at the recent European Council meeting in Barcelona on 15-16 March 2002, the EU member states agreed to increase their aid commitments so that collectively their national averages would increase from 0.32 to 0.39% of GDP by 2006 (compared to the pale 0.1% of the United States in 2000). These trends reflect EU countries’ continuing commitment to an “ever closer union” as well as Europe’s commitment to alleviating poverty in developing countries. However, giving the widespread criticism regarding the ineffectiveness and mismanagement of EC aid, why have they continued to delegate further responsibilities and transferred increasing resources to the EC – often imposing new demands?

The reform of aid will be a the centre of the discussions of the upcoming meeting of the industrialised countries of the G7 in Kananaskis, Canada, on 25-26 June, with a special focus on sub-Saharan Africa. At this meeting, African leaders will formally submit their proposals for a New Partnership for Africa’s Development (NEPAD), an initiative launched by African countries in 2001, whose price tag has recently been put at $64 billion a year in aid and investments. The G8 is expected to give its qualified blessing to the African-led plan, although doubts have arisen regarding Africa’s genuine commitment to democratic governance and the rule of law, following the controversies surrounding Africa’s response to the crisis in Zimbabwe.

So, where does the EU stand? Regrettably, mostly unprepared, as the EU continues to debate how EC aid should be managed. EC aid to developing countries remains largely concentrated on middle-income countries, despite the renewed calls from EU member states to focus efforts on poor countries. During the decade of the 1990s, an increasing share of EC aid has been redirected towards Central and Eastern Europe and the Mediterranean basin.

Indeed, the strategic objectives of the EU’s nascent foreign policy appear to be overriding Europe’s traditional commitment to the alleviation of poverty in developing countries. The gradual overtaking of development aid by foreign policy is illustrated by the latest proposal of the EU Chief for Common Foreign and Security Policy, Javier Solana, who wants to scrap the autonomy of EC aid policy altogether. At the European Council meeting in Seville, Spain, on 20-21 June, Solana is to propose that, as part of a broader effort to cut down on the number of EU Council meetings, the work of the Development Council be either integrated into the General Affairs Council or incorporated into a new EU External Relations Council. This reform would also entail restructuring the Commission itself and the European Parliament’s Developmen t Committee, thus undermining an important mechanism for accountability. The expected dissolution of the Development Directorate General, with the integration of its functions within Europe Aid, will result in the transformation of foreign aid into an essentially technical activity.

Development policy would thus cease to be an autonomous policy, fully integrated into the EU’s foreign policy. However, the contours of European foreign policy remain highly contentious, marred in a fierce rivalry between the Commission and the Council. On the positive side, this reform will significantly strengthen the political thrust of EC foreign aid in a period when the EU has reiterated its commitment to promote democracy, good governance and the rule of law abroad. There are however inherent tensions between foreign policy and development aid. The short time-span of diplomacy and the long-term objectives of development co-operation are not always compatible. Hidden behind a fog of countless policy documents, these proposals reflect a desire by EU member states to re-nationalise the management of EC aid. The abysmal record of the Commission is the other reason.

Solana’s proposal also reflects a deep-seated rivalry between the different bureaucratic departments in charge of external relations, both between the Commission and the Council and within the Commission itself. Within the Commission, the current institutional setting is clearly unsatisfactory. Yet, recent reforms have tended to “de-politicise” foreign aid by converting it essentially into a technical issue managed by a non-political implementing agency. Past reforms have left the Development Directorate General essentially in charge of the co-operation with 77 countries in Africa, the Caribbean and the Pacific, while the External Affairs Directorate General supervises EC relations with the rest of the world. A specific directorate general handles enlargement.

Furthermore, the External Affairs Directorate General has always been in competition with the EU Chief for Common Foreign and Security Policy, which represents the interests of member states. EC external relations and development aid often conflicts with the foreign policy objectives of EU member states and the Council’s own foreign policy. Foreign policy remains an inter-governmental affair that member states are unwilling to delegate to the Commission. Solana’s proposals should thus be seen in the context of the member states’ desire to shift power back to the Council of Ministers, instead of delegating further foreign policy responsibilities to the Commission.

For its part, the Commission has launched a bold initiative to secure greater independence in the conduct of foreign policy for itself. In May 2002, Romano Prodi, President of the European Commission, unveiled his own proposal for a common foreign policy, which would entail further delegation of powers to the Commission. A single “high representative” for European foreign policy would be based in the Commission, not the Council. In his audacious proposals of 18 June to reform EC decision-making and streamline the Commission’s management structures before enlargement, Prodi suggests a single “super vice presidency” to oversee all foreign policy areas, including international trade, external relations, development aid and humanitarian assistance. These controversies and rivalries leave European foreign aid vulnerable and fighting for its own relevance. No wonder the foreign aid bureaucracy spends all its energies defending its right to exist.

An alternative option would be to end EC foreign aid and transfer the funds from the EC to other multilateral development institutions. However, as these organisations are themselves in dire need of reform, this seems highly unlikely. Moreover, since the United States dominates the agenda of the Bretton Woods institutions, European countries will not agree to this solution. Few options thus remain: either “re-nationalise” development aid, or reform it by integrating it more explicitly in the EU’s external relations apparatus. In any event, the EU should unequivocably decide whether it wants to maintain EC foreign aid as an autonomous policy field or as an instrument of foreign policy.

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