Chris Everett argues the international development budget should be used to develop a series of proposals to support emerging markets trade with the UK.
Liam Fox’s trade brief is perhaps the most exciting of any current minister. Tasked with securing the faith, investment, and openness of markets from America to Australia, the good doctor will shape both British economic and foreign policy for years to come.
The majority of Fox’s remit will be to secure free trade agreements beyond the WTO’s “Most Favoured Nation” rule, and to plant the seed of British influence within trading blocs such as ASEAN and Mercosur. Yet with such a variety of states and regional groups to cut deals with, Fox’s options need to take on a more diverse form than simply reciprocal trade agreements.
One example of going beyond free trade is combining elements of Priti Patel’s considerable foreign aid budget (~£12.2 billion) with a policy to bolster markets for British goods and, more particularly, services. UK law restricts foreign aid only to be used for the purpose of reducing poverty – though thankfully the Department of International Development keeps this definition strikingly broad. Causes of poverty (such as lack of education, underdeveloped infrastructure, and appalling medical conditions) are also within the remit of the foreign aid budget.
It would not be an illogical leap for Fox and his supporters to argue that a lack of free trade – or worst, a glut of regulation – can also cause poverty and harm development. Certainly organisations such as the IMF and WTO would argue this was the cause.
With this argument in mind, Fox should develop a series of proposals to support emerging markets to develop and trade with the UK. In particular Fox should look at tackling the “credit gap” for smaller companies within these markets. Closing this gap – caused by companies in poorer countries unable to access significant credit – means more business for Britain at each stage. It means more lending and investment for British banks, trusts, and funds; more companies able to afford Britain’s hi-tech goods; more diverse suppliers for British retailers to choose from.
Take Africa. Many of the poorer countries on the continent lack sufficient credit checking bureaus, which has an effect on slowing local private investment. I propose that Fox establish a pan-African credit risk assessor, designed for use by British and local banks, using DfID’s considerable resources to support a more enhanced, uniform system of checks that can also incorporate relationship banking where credit histories are totally unavailable (a common problem for SME owners in Africa’s less developed states).
This approach lacks the unwelcome market intervention of a government run bank (which could further harm Africa’s nascent financial sector) while providing an information hub for British and local businesses to help them with their investment decisions. In the spirit of Brexit, it will even allow smaller firms to make international lending decisions without costly risk consultancies, while ensuring a degree of uniform (and ideally limited) financial regulation across the continent.
Fox and Patel, two veteran right-wing free marketers, should grasp the opportunity in front of them to simultaneously generate trade and alleviate poverty, all while steering clear of costly investment decisions. In post-Brexit British development policy, there is no reason aid cannot equal trade.