Matt Grady is a Trade Policy Adviser for Traidcraft.
It’s hard to recall a time when there was so much enthusiasm and interest in the UK’s trade policies. If the minutiae of trade agreements was once the exclusive domain of backroom policy wonks, there’s now a much wider debate surrounding the government’s priority trading partners and the dynamics of access to the EU common market. Top of most lists are the big hitters – the USA, Canada, Australia – and the emerging markets – Brazil, India and China. Fewer people are talking about the importance of maintaining healthy trade relationships with the least developed countries (LDCs). Yet LDCs, including many Commonwealth partners, are of significant importance to the UK market and consumers. If consumers are to avoid facing increased prices then the Government must act quickly to avoid the trade disruption facing imports from developing countries.
Many may assume that this will require the negotiation of free trade agreements with a host of developing countries, however this is not the case. Fortunately, there is a very pragmatic, efficient and politically appealing solution available to Liam Fox and his ministerial colleagues. The UK could seize this opportunity to prove its internationalist credentials and set the gold standard in open market access by offering duty-free, quota-free access to the UK market for goods from economically vulnerable countries. If it were to offer this on a nonreciprocal basis, based on objective vulnerability criteria, there would be no need for extensive negotiations or government resources. This would also avoid ruffling any WTO feathers as it would comply fully with WTO rules. Similar preference schemes are commonplace: Japan, Australia, Norway, the USA and the EU amongst other developed economies have such schemes in place.
But why stop there when the UK could push the open-market bar even higher in at least two significant ways? First, it could extend the range of goods that developing countries are permitted to export to the UK without attracting duties. Existing EU schemes allow tax free entry across two-thirds of tariff lines, with the remaining third largely reserved as a protectionist measure. The UK could move towards a comprehensive scheme which abolishes duties on the tariff lines most important to economically vulnerable countries, creating the greatest opportunity for economic growth.
Secondly the Government could simplify complex rules of origin to enable regional accumulation and co-operation on production. This would lead to better regional stability and faster development which in turn could create the right conditions for more extensive trade relationships to develop. Existing rules penalise countries for attempting to add value to inputs from neighbouring countries, locking them into low value primary commodities.
If the Government was to pursue this approach it would give developing country producers, whose livelihoods depend on exports, much needed security whilst also providing assurances for the UK businesses and consumers who currently import around £24 billion from developing countries and face the prospect of increased prices and disruption to supply chains.
Many commentators have highlighted the numerous challenges facing Theresa May’s government as it navigates the political and economic maze of withdrawal from the EU. Much has been made of the need to recruit an army of civil servants to staff the new departments responsible for Brexit and international trade to tackle the ever growing list of pending negotiations. The Government could act now to ensure that the poorest countries are not left behind without diverting the capacity of stretched officials.
If the Government committed to an open market arrangement for economically vulnerable countries it would enable consumers in the UK to pay lower prices for imported goods, help to contain inflation and secure the jobs dependent on trade in the UK and in developing countries.