27 | JULY 2024

Introduction

by Elena Vallino^[1]

The most recent report on the Sustainable Development Goals (SDGs) states that the improvements of more than 50% of SDG targets are not sufficient, and 30% of them are either stagnating or reversing (United Nations, The Sustainable Development Goals Report, 2023). Moreover, the recent shocks, such as the global pandemic and the armed conflicts, challenged further the improvements in socio-economic standards, the redistributive effects of economic growth and the environmental protection. Consequently, it is important to reflect on the role of the European Union for the policies affecting those dimensions, with particular attention to poverty eradication in developing countries. Moreover, it is significant to understand to what extent, and in which domains, actions delivered by the EU as such can reach goals that would be more costly or challenging for Member States to pursue on their own. Advantages are expected to be in the creation of economies of scale in mobilizing resources, in a more efficient use of resources, and in improved coordination among stakeholders. In this issue of the OEET Newsletter we aim at briefly discussing some of these issues. The content of the Newsletter is inspired by a broad study conducted by the European Parliament Research Service (EPRS), to which the Turin Centre on Emerging Economies partly contributed. The study was requested by the European Parliament's Committee on Development (DEVE). The analysis focuses on three channels along which the EU policies may have impacts on poverty in the Global South: (i) actions for improving resource use in Official Development Assistance and climate finance; (ii) actions for redirecting trade policies toward development and poverty reduction; (iii) actions toward a fairer international economic system. The study focuses on the 46 least-developed countries.^[2] Evidently, most of the challenges about poverty in the Global South encompass a global dimension, beyond the sole role of the EU. Nevertheless, the EU could have a crucial impact through its direct action and through the promotion of an appropriate multilateralism.

In this Newsletter, Cecilia Navarra broadly presents the main research questions and the main findings of the whole EPRS study, posing a particular focus on the added value of the role of the European Union in the above-mentioned areas. Celso Fuinhas focuses on the impacts of the EU global value chain’s policies on poverty and development, mentioning the spaces for policy improvements and presenting a case study on Mozambique. Antonia Stock writes about the EU climate action, in particular in relation to poverty reduction in LCDs, again proposing some policy recommendations and discussing the case of the EU Carbon Border Adjustment Mechanism (CBAM). ^[3]

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by Cecilia Navarra^[1]

The European Union commitment to address poverty in developing countries is in principle twofold. On the one hand, the EU has a development policy whose aims are defined by the European Consensus for Development, framed on the basis of the UN 2030 Agenda for Sustainable Development. On the other hand, the EU is bounded by a commitment stated in the Treaties to the principle of Policy Coherence for Development, which means that every EU policy should take into account development objectives and notably poverty eradication.^[2]

In the light of this broad approach, a recent study conducted by the Research Service of the European Parliament^[3] explores ways for further EU action in several areas that affect poverty reduction in developing countries, identifying twelve main challenges and a broad range of corresponding policy options at the EU level. The analysis aims at identifying the Cost of Non-Europe, that is the potential net benefit of greater coordination at EU level, or, more precisely, the foregone benefit of not taking further coordinated actions. The concept dates back to the 1980s and it was first applied to the completion of the single market^[4], but it has been then applied to several policy areas and the focus has broadened beyond exclusively economic gains.^[5]  The Cost of Non-Europe in poverty reduction considers the potential of EU action to reduce multidimensional poverty in Least Developed Countries (LDCs)^[6]. 

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by Celso Fuinhas^[1]

Hereby we discuss how the participation of the European Union (EU) in global value chains (GVCs) can impact the fight against poverty in Least Developed Countries (LDCs). The analysis of the EU’s participation in GVCs is subdivided into three main areas: i) the implications on the industrial structure, ii) the issue of due diligence, and iii) the limitations imposed on the policy spaces of LDCs. The case of the graphite sector Mozambique is used as an illustration of how these three areas of approach can come together.

The concept of global value chains was initially introduced by Gereffi and Korzeniewicz (1994) as a way of characterizing a new way for firms to organize their international activities that emerged in the 1980s. They consist of a mode of organization in which the productive process (and hence the process of value creation) is dispersed throughout various countries. This differs from conventional trade in which the productive activity is completely within the borders of one country and only after production the international exchange of finished goods takes place. The participation in GVCs can help developing countries alleviate poverty by creating well paid jobs (Shepherd, 2013), and also by upgrading their industrial structure to a state that is compatible with a higher degree of added value (Humphrey, 2004; Ravenhill, 2014). For this reason, the EU’ trade policy could be framed with the objective of maximizing the poverty reducing potential of the incorporation of LDCs in its GVCs. On this point it is important to note that LDCs have, by definition, a low degree of insertion into global value chains. In fact they only account for around 1.15% of all global trade value (WTO) and this is especially true regarding processes with high value added. This means that the participation of LDCs in GVCs is mostly centered around the supply of raw materials to more advanced economies.

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by Antonia Stock^[1]

LDCs are especially affected by climate inequalities between countries, while having contributed least to the total world CO2 emissions from fossil-fuel combustion and industrial processes (Birkmann et al., 2022; UNCTAD, 2022). However, climate change is driving social inequalities within countries at an increasing pace, with marginalized groups being particularly affected. Furthermore, most LDCs are highly vulnerable to the effects of climate change. Actions aimed at reducing inequality, addressing poverty, and promoting proactive adaptation to climate-related shocks would reduce the size of the exposed and vulnerable population, especially if co-benefits with climate mitigation policies are also in place (Byers et al., 2018).

However, climate change and poverty are intertwined, further raising the concern whether both global challenges can be addressed simultaneously, especially in LDCs. Moreover, the effects of climate change would negate the poverty eradication efforts of recent decades in the absence of mitigation, adaptation, and socio-economic measures. Countries in the Global South are poorer today than they would have been in the absence of climate change (Hallegatte et al., 2016). Across all geographical regions, it is evident that climate change is impeding poverty alleviation (Denton et al., 2014). The implementation of responses to climate change is constrained by a number of factors, including worsening living conditions and the threat of food insecurity due to undernutrition, malnutrition, and low opportunities for income generation. Furthermore, the access to basic ecosystem services, such as rainwater, is in danger, creating favorable conditions for the spread of diseases. Additionally, gender inequalities are enhanced by climate impacts (Patt et al., 2009).

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