July 4, 2016

Post-Brexit free trade helps world’s poorest

Outside the EU the UK can pursue a more equitable trade arrangement that will drive up living standards in the world’s poorest countries, says Peter Lilley.

Trade is crucial if poor countries are to leave poverty behind. Trade Out of Poverty was founded because there had been many campaigns to boost aid and relieve debt, but there was no similar campaign with a focus on trade.   It is both hypocritical and self-defeating for rich countries to give aid to developing countries while simultaneously blocking their trade.

Trade Out of Poverty, being an All Party Parliamentary Group does not take a view on Brexit. But now the UK will set its own trade policy, we will lobby the British Government to make our trade policy as development-friendly as possible.   Ideally that would combine the best of the EU’s Everything But Arms arrangement, and the US’s Africa Growth and Opportunities Act.   If we are successful we would obviously want the EU and other OECD countries to follow that example.

There are five obstacles – from the deliberate to the self-inflicted – that have hindered the poorest countries from trading out of poverty.   They need to be tackled.

First, the rich countries must open their markets to the countries by lowering tariffs, especially on labour intensive goods such as clothing, simple manufactures and food.   Britain could now set an example by doing this.  It is important that rich countries open up their market to the poorest unconditionally – without requiring them to open up their markets to exports from the industrialised world.  The export industries of the poorest countries are small in scale, unsophisticated and often specialised in products which cannot be produced easily or competitively in the developed world.  By no stretch of the imagination are they a ‘threat’ to the industries of the developed world.

Second, we must simplify the complex rules which mean that countries which are in theory entitled to tariff-free access end up paying tariffs or being excluded by bureaucracy.  Even where countries claim to give free access to exports from poor countries – as under the EU’s Everything but Arms agreement – other rules can still penalise or prevent access. The main obstacle to trade once tariffs and quotas have been removed lies in Rules of Origin, which can be unnecessarily complex, restrictive and onerous and can, either by accident or design, act as barriers to genuine exports from countries granted trade preferences. In some cases Rules of Origin are so complex that exporters find it more costly to prove compliance than pay the full tariffs.

Third, we must end rich countries’ export and domestic subsidies – particularly on agricultural products, which skew the market against poor countries’ goods.  Most rich countries are in temperate climates and their agricultural subsidies are mostly designed to protect domestic agriculture from imports from other temperate countries.  Most Low Income Countries are in tropical or subtropical climates and invariably produce products least suitable for production in temperate climes.  Therefore, those subsidies that most impede imports of products which the Low Income Countries could otherwise supply are the ones that most need to be identified.  It is important that the EU, USA, Japan etc. review their agricultural support to identify and phase out subsidies on specific products which could be imported from Low Income Countries.

Fourth, the highest tariffs which poor countries face are invariably those imposed by their equally poor neighbours.  These tariffs repress trade and boost corruption.   We must help them replace customs duties by supporting governance reforms that boost other sources of revenue. One reason governments of the poorest countries impose such high tariffs is that they are a relatively simple source of revenue to collect. It is ultimately up to developing countries themselves to decide whether to move away from reliance on levying high tariffs particularly at their borders with their neighbours.  However, donor countries can and should encourage them to do so by offering technical assistance in building up alternative domestic sources of tax revenue, by offering aid to make good lost revenues while this transition is being made, and by not insisting that the reduction or elimination of tariffs on imports from neighbouring countries is matched by any similar reductions in tariffs on imports from the first world.

Fifth, we need a fresh emphasis on funding infrastructure – roads, ports and administration.  The more first world countries implement the four steps spelt out above the greater the opportunities that will be opened up to Low Income Countries to trade out of poverty.  But they will only be able to take advantage of those opportunities if they have the capacity to export.  They will need the physical capacity to get goods to market – roads, rail and ports.  Equally essential are the professional skills and administrative structures.  Help in establishing these is essential to make all the changes spelt out above work.

Earlier this year, Trade Out of Poverty launched an inquiry into the UK’s Africa Free Trade Initiative, which was launched by the Government five years ago. The Initiative was started to help African countries into the global world trade system, using trade as an instrument for economic growth and poverty alleviation. It has brought together regional trade initiatives from across the Department for International Development, the Department for Business, Innovation and Skills, and the Foreign and Commonwealth Office. Inquiry hearings took place in Parliament in April, and the Secretariat have been compiling evidence for many months. They are currently drafting a report on what the AFTi has achieved over the last five years, what lessons can be taken from it, and how it can be carried forward. I look forward to the publication of their report later this year.

 

 

5.00 avg. rating (97% score) - 4 votes
  • Shadow Warrior

    Hammond is continuity Brown. He is a hand-wringing lefty looking for clever wheezes to raise more tax in ways that people don’t immediately notice.

  • captainslugwash

    I predict the Budget will attempt to show the Left how caring the Tories are, and it will be funded by screwing over the working man.
    If Corp Tax comes down, I bet Divi tax will be going up.
    I would love to be wrong.

  • skynine

    We really need to look at tax credits, in particular in work tax credits that encourage people to work part time to preserve the benefits. 45% of women work part time and I would hazard a guess that tax credits are the main cause. This leads to low pay, low skill work in supermarkets and the retail sector including coffee shops. The government needs to get back to the employer paying people to do a job for economic reasons rather than to get onto the tax credit ladder. Like all government benefits it distorts the market and diverts government expenditure into non productive areas.
    The refrain that the government has cut expenditure is not true, it increases every year as more and more goes into welfare.

  • MrVeryAngry

    fat chance

  • MrSauce

    So, when wouldn’t we want a ‘budget for growth’?

  • Rob

    I note that the UK Government has just slapped on a 25% tax charge for anyone moving abroad and wishing to move out their private pension from the UK.

  • SonofBoudica

    The Remoaners will do their utmost to sabotage the Government’s negotiating position. They do not want a successful outcome; they want a failure. They want to be able to scream “Told you so!” from the rooftops.

  • EnglandLaments

    Thank goodness for Andrew Neil, the one media hack who scares the pants off the established politicians. He was spot on with Heidi Allen!

  • joshuafalken

    I had a very long, hard, studied and considered look at the hope, care and aspirations of all Europeans, before I voted to get the UK out of the toxic grasp of Brussels.

    The European Union and it’s charge of “ever closer union” has borrowed and spent its way to oblivion, whilst enslaving the working and middle classes in debt.

    The central control mantra of the unaccountable Brussels ruling elite, delivered through a mixture of socialism, globalism and corporatism is entirely responsible for the populist revolt by the millions of “Just About Managings” across Europe.

    We must remember the ultimate goal of socialists, globalists and corporatists is control, not prosperity. see https://mises.org/blog/goal-socialists-socialism-—-not-prosperity.

    Social equality and economic growth always fail under central control and fighting against the Brussels doctrine on behalf of all Europeans is why I voted for Brexit.

    Britain has a long history of helping Europeans depose tyrants and Brussels is just the latest incarnation.

    Britain is the most racially advanced and accepting society on the planet. We welcome those in need and those that can help us with open arms and a smile; that will not change.

    We are also one of the most innovative, talented and open societies in the world, which why everyone wants to live here. However, we cannot fit everyone in, so we have to have clear, balanced and fair immigration policy which is where the arguments start between the monetarists and humanists will never be reconciled.

    I thought long and hard before coming to the conclusion that leaving the EU was in the best interest of all Europeans, as Brussels is toxic and cannot be reformed from within.

    Also, I find it insulting that people who voted Remain have insufficient faith in British ingenuity, compassion and skill to get a good deal for us and see the Europe that we love get a better deal from Brussels and the reform that European people deserve. https://mishtalk.com/2017/03/29/bad-brexit-deal-better-than-no-deal-mathematical-idiocy-odds-of-no-deal/ and https://www.worldheadlines.info/2017/03/after-brexit-9-reasons-to-be-bullish-on-great-britain/

    The politics of left verses right are dead because neither have delivered the promised economic growth and social mobility for anyone, but themselves. The populists are not selfish per-se, they just want to take back control of their own destiny that left/right politicians have freely given away and/or exploited for their own ends. In my constituency, the local residents group are taking over the councils as politicians ignore voters, so Westminster should beware of the well-organised, local resident independents at the next election. This is a peoples revolution which should be shouted from the rooftops, but liberals remained deafened by the socialist, globalist and corporatist “vested interests” that have spectacularly failed us and are obediently crying foul and fake.

    There will be an initial unpalatable inflationary cost to fighting globalism and rolling back central control that few appear to have factored in, but dismantling failed left/right vested interests should eventually free libertarian socially-conservative capitalism from the shackles of TBTF corporatism to feed economic growth and social mobility.

  • agdpa

    The EU usually makes the wrong decision – on immigration, on freedom of movement, on the euro, on the Ukraine, etc. etc. Little hope it will get Brexit right.

  • brownowl

    Eh? Reference please!

  • Neil2

    Sod caring. Screw the spongers and breeders. Kill HS2. Stop all “green” subsidies. Slash “foreign aid” and walk away from the EUSSR with immediate effect.

  • Rob
  • John C

    What a confused article. It conflates surveillance by the security services with poor defences against fraud.

  • John C

    Err, it’s the UK that’s leaving the EU, not vice versa.

  • John C

    Me, now. ‘Growth’ is a manic obsession.

  • La Face Nord

    Mr Redwood – are you aware of the Biased BBC website? It’s been exposing their agenda for a long time, but I imagine you’ve been well aware of the BBC’s agenda for quite some time…

  • Contact Rvtech

    The post is great

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