The European Commission proposed policy of ‘differentiation’ aims to recalibrate aid and development cooperation in middle-income countries. The policy responds directly to recent changes in global poverty and wealth patterns, economic flows and geopolitical realities. In an increasingly heterogeneous development landscape, the EU has initiated a multifaceted approach in an effort to ‘differentiate’ between the diverging needs and capacities of developing countries.

Differentiation is a key feature of the EU’s new development strategy, An Agenda for Change, and will shape the future of EU development cooperation over its multi-year budget period that will run from 2014 to 2020 (European Commission, 2011a). The policy will determine the allocation of EU development aid to developing countries, shape decisions on the type of modalities used and the sector focus in middle-income countries, and will ultimately change the EU’s relations with these countries.

Sian Herbert provides an overview of the state of play of negotiations on differentiation, with a focus on the Development Cooperation Instrument and the European Development Fund.