Brexit advocates have long heralded the move as one that will open up trade around the world, especially to those places currently outside of the various agreements in place with the EU. Alas, this is a vision that a new analysis from the UK Trade Policy Observatory (UKTPO), the Overseas Development Institute (ODI), and the Center for Global Development (CGD) suggests is unlikely to see the world’s poorest nations gain new access to UK markets.
The paper highlights how the UK has revealed plans to reduce tariffs for wealthier nations, but the authors worry that those for developing countries are set to remain prohibitively high, which would cause significant economic harm to them.
“At the moment the poorest countries are exempted from tariffs on exports to the UK, which gives them a competitive advantage relative to other countries,” the authors say. “Lowering the tariffs which these other countries face reduces this advantage and so reduces the poorest nations’ exports.”
Missing out
The study suggests that Brexit is quite likely to see a rise in exports from high and middle-income countries, but that lower-income countries are probably going to see their exports fall. The scale of this fall is significant, with the authors suggesting that the 41 poorest countries win the world would see their exports to the UK fall by over $3 million a year, with those lower-income countries included in Economic Partnership Agreements with the EU, but not the UK, seeing a fall by around $19 million.
This compares to the improving fortunes of higher- and middle-income countries, who are likely to see their exports rise by around $1.9 billion.
“The UK government has tailored its new tariff to try to avoid harming lower income countries’ exports, but it cannot achieve this perfectly if it wants to lower tariffs in general,” the researchers say. “Countries that pay no tariffs at present have nothing to gain from tariff reforms, so to help them you need to look at other dimensions.”
“Trade is crucial to development, as China and South Korea have shown to the benefit of UK consumers,” they continue. “Despite the UK Government’s three-year-old pledge to improve trade access for the poorest countries post-Brexit, those countries will instead face additional challenges from January. The UK is not keeping its promise.”
The authors urge tariffs to be lowered on goods that aren’t supplied by the poorest countries, as there are currently such tariffs in place on around 10% of products, including tuna and pineapple. This could be done without affecting UK producers, or indeed the UK’s negotiating position in any future trade deals.
They also believe longer-term reforms should be undertaken to simplify trade with the poorest nations so that the playing field is leveled. This is likely to involve reductions in support for domestic agriculture, so it remains to be seen just how willing the government is for such a politically sensitive act.
