Tariff-free trade with developing countries is good – but we can do better to open up
Some of the world’s poorest countries will get one of the biggest trade boosts to export goods to the UK. Last week, the Department for International Trade announced plans to up the ante on existing EU rules, which already allow for less economically developed countries to export goods into the EU and the UK without tariffs. The products which now fall under the tariff free remit were extended to include hundreds of other goods. It means 99 per cent of exports from Africa will be free of duties when they make it to our shores.
Now, this sounds like a relatively niche part of our trade regime. But it also liberalises some of the complex rules and regulations around trade. For example, rules of origin – which essentially state what proportion of a product must be made in a certain country – are now much more flexible. This will help to reduce costs for businesses exporting from less developed countries.
This is all great stuff. Free trade has lifted people out of poverty on a scale that is unprecedented in human history. There are tens of millions of people alive today thanks to their leaders opening up their economies and embracing free trade.
It’s also good news for people in the UK. Tariffs are paid by businesses and the cost is often passed on to consumers in the form of higher prices. At the best of times, it’s undesirable. And these are not the best of times. While these cuts might not dramatically slash prices in shops, every little bit really does help.
However, as encouraging as the new scheme is, it could be even better. For example, the scheme does not allow the rules of origin requirements to extend to countries the UK has – or is in the process of negotiating – free trade deals with. This means, less developed nations won’t be able to source cheaper goods from around the world to make their products. In Africa, for example, many goods come from places like Egypt and Morocco.
Reforming this will make it even easier for developing countries to trade with the UK, lift themselves out of poverty, and provide a better life for themselves and their families.
We must continue to see trade as essential to development. It is right that the UK helps the poorest people around the world, and we arguably should increase the international development budget. But no country became wealthy just by receiving aid – they do it through trade. Currently, the Department for International Trade still exists outside of the orbit of the Foreign, Commonwealth and Development Office. At a push, these two should be merged. Short of that, there must be significant cross-ministerial work to develop the infrastructure to invest in developing nations with both aid money and trade deals.
Further liberalisation of our trade regime will help British consumers. And there is much more to be done on it. It is encouraging that some seasonable tariffs are being removed so goods such as cucumbers – which can’t be grown in the UK in the winter – will be tariff free for this period. Why stop here? The government should slash and abolish tariffs on agricultural goods – especially on things not produced in the UK – in order to benefit British businesses which import goods and also shoppers.
Much of the conversation has rightly focused on direct support to households. But a broader plan to improve the ease with which we import products from around the world must also be front and centre. It helps us at home and it helps those trying to build up their economies.