Charities vow to fight for end to ‘tied aid’

Date: 23/09/1999

By Gareth Harding

FORTY of Europe's largest charities are threatening to take EU governments to court for insisting that development aid to some of the world's poorest countries can only be used to buy products from companies in donor states.

Development groups claim the practice, known as tied aid, is illegal under EU law and have written to European Commission President Romano Prodi claiming that it breaks EU rules on state aid, public procurement and the free movement of goods and services.

The claim appears to be backed up by a reply to a parliamentary question by former Trade Commissioner Sir Leon Brittan in 1991, in which he admitted that tied aid could "distort competition and affect trade in the EU". The charities say that despite this, the Commission has "failed to take any effective action to address member states' practices in this area".

At present, more than half the €25-billion aid given to developing countries by EU member states is tied. Action Aid, which is coordinating the Europe-wide campaign, says that as well as being illegal, the practice gives third-world recipients poor value for money, forces them to rely on unsuitable advice or outdated technology, and prevents bids from local companies which often have the know-how required.

"Tied aid is a scandal that the EU has chosen to ignore. But Commission officials remain silent while member states' firms rope in the money," said Action Aid's chief executive Salil Shetty.

The charity is calling on the Commission to investigate the practice of tying aid urgently and has warned that it will take legal action against governments if little progress is made.

However, it faces an uphill task in trying to persuade the Commission and member states of its case. One official said that tied aid did not break EU rules and that bilateral assistance was a matter for national governments anyway.

Forty of Europe's largest charities are threatening to take EU governments to court for insisting that development aid to some of the world's poorest countries can only be used to buy products from companies in donor states.