Post-Brexit development friendly trade policies
31 August 2016
If you had a blank sheet of paper and you were asked by the government to provide advice on development friendly trade policies what would you propose? You probably wouldn’t suggest that Liam Fox conducts a quick tour of developing countries to negotiate free trade agreements.
The government doesn’t have the necessary capacity and vulnerable economies are not well placed to face competition from UK producers. Free trade agreements invariably restrict the policy space of developing countries; hindering their ability to create the right environment for development.
Given the uncertainty around the UK’s future relationship with the EU, and the knock-on effect on the farmers and workers in developing countries who rely on exports for their livelihoods, you might propose that the government moves quickly to ensure those producers don’t face damaging trade disruption.
Today's system fosters development
As a member of the EU, the UK provides duty-free, quota-free access to developing economies via the generalised scheme of preferences (GSP). Initiatives like this were introduced as a result of evidence that World Trade Organisation (WTO) rules were not benefiting developing countries, and their share of trade was reducing.
The UK currently imports around £24bn worth of goods from developing countries with a significant proportion of this trade via duty-free and quota-free routes. Allowing these goods to enter the UK without imposing import taxes enables developing countries to increase their share of global trade and contribute to their economic development.
Building on the experience of participation in these schemes
The UK government could now establish the gold standard in development friendly, non-reciprocal open market access. This should incorporate a range of developing countries (both least developed countries (LDCs) and selected non-LDCS), based on objective criteria regarding economic vulnerability or development classification. Simple and flexible rules of origin should be incorporated to enable high levels of regional cooperation. This will enable countries to continue to enjoy market access as they develop capacity for value-added production. To ensure stability for commercial relationships and investment decisions, this should be offered for an initial period of at least 10 years. An approach like this would be politically pragmatic. It doesn’t require extensive negotiations or government resources and would ensure continuity for developing country exporters and UK consumers. It also enables the government to contribute to the Sustainable Development Goals ambition to increase the share of trade for developing countries.
Looking forward, minimizing negative impacts
As government ministers progress towards conducting negotiations with developed and fast growing economies they must conduct robust impact assessments to ensure that they minimise the negative impacts on developing countries. There is a significant danger that agreements with large agricultural or mineral commodity exporting countries will have implications for competing developing country partners whose exporters, famers and workers depend on international trade for their livelihoods.
Traidcraft has been engaging in wide ranging research and consultation to enable us to make proposals for post Brexit UK trade policies that support human rights, sustainable development and environmental commitments. It’s clear that there is institutional interest in some sort of open market access arrangement. Over the coming months we will continue to fill in some of the blanks on that sheet of paper. If you would like to find out more or contribute to our thinking then get in touch with Matt Grady [email protected] for more information.