Promoting Labour Market Integration of Refugees with Trade Preferences: Beyond the EU-Jordan Compact

Heliodoro Temprano Arroyo

EUI Working Papers, RSCAS 2018/42, European University Institute, Robert Schuman Centre for Advanced Studies, Migration Policy Centre


A new approach to refugee protection is gaining ground, which advocates for a shift from humanitarian assistance in camps towards a developmental model that encourages economic self-reliance and integration of refugees in countries of first asylum. This approach is often linked to proposals to employ refugees in special economic development zones with financial support from donors and private investment, in some cases backed by special trade preferences for products manufactured in them. For example, as part of the EU-Jordan Compact, the EU agreed to increase its financial assistance to Jordan and ease the rules of origin that it applies to Jordanian exports in exchange for commitments by Jordan to facilitate the access of Syrian refugees to formal employment and its educational system. This paper assesses the trade policy component of the EU-Jordan Compact and discusses the potential for using trade preferences to promote the economic integration of refugees in developing countries.

The initial results of the EU-Jordan Compact have been disappointing, with limited job creation for Syrian refugees. This contrasts with the relative success of the Qualifying Industrial Zones (QIZs) initiative launched by the United States for Jordan and Egypt, and the African Growth and Opportunity Act (AGOA) adopted by the United States for Sub-Saharan African countries. These initiatives demonstrate that trade preferences can have powerful export and employment-generating effects.  However, the actual scope for using trade preferences is not large because many of the top refugee-hosting countries already enjoy a high degree of preferential access to developed countries and because improving their preferential access will inevitably erode the value of the preferences already granted to other vulnerable countries also deserving protection. The main lessons learned are:

  • Trade concessions are only effective if they create sufficiently attractive preferential margins and if those margins are not eroded over time through subsequent changes in trade policy benefiting key competitor countries.
  • Rules of origin are essential for the effectiveness of trade preferences.
  • Beneficiary companies must be sufficiently competitive and have the necessary marketing networks.
  • Refugees must have the appropriate skills to work in the sectors targeted by them.
  • Donor countries should overcome the resistance of their national lobbies to extend trade preferences to sensitive products where refugees have relevant experience and can be easily employed.
  • Refugees must have appropriate incentives to work in zones or sectors targeted by the trade preferences, in terms of pay, transport costs, cultural attitudes and working conditions.
  • While clustering and economies of scale tend to support the idea of special economic development zones, these advantages might be counteracted by the constraints that they entail.
  • It is important to ensure that efforts to stimulate refugee employment do not result in a deterioration of working conditions.
  • Host countries should remove regulations (e.g. sectoral quotas or work permit restrictions) that hinder the participation of refugees in labor markets, particularly in sectors targeted by trade concessions.
  • Trade preferences schemes should be adopted for a sufficiently long period of time.

The author concludes that “while trade preferences have their limits, if they are carefully calibrated and are part of a wider strategy, they can help underpin a new approach to refugee protection based on the creation of real livelihood opportunities, economic autonomy and dignity for refugees.”



European Union | Jordan