New UNCTAD report says no-deal Brexit could harm developing countries

Wednesday April 10, 2019 

A new report by the United Nations Conference on Trade and Development (UNCTAD) identifies the potential implications of Brexit for developing countries and the need for the UK Government to ensure that developing countries continue to receive preferential access to UK markets.

Developing country exports to the UK are valued at at least £34 billion each year and the UK represents an important market for many developing countries. Under the current EU trade arrangements, developing countries receive preferential access to the UK market under unilateral preferencing schemes – the Everything But Arms Scheme (EBA) gives Least Developing Countries’ (LDC) duty-free exports into the UK on all goods other than arms and ammunition and the Generalised Scheme of Preferences (GSP or GSP+) either reduces or eliminate tariffs on goods exported to the UK by non-LDC developing countries.

Some developing countries also receive access to the UK market under the more controversial Economic Partnership Agreements (EPA). EPAs are regional free trade agreements that provide developing countries with preferential market access but also require reciprocal economic liberalisation that many countries argue is incompatible with their development agendas.

In June 2017 the UK announced its intention to replicate existing trade arrangements for developing countries to ensure their continued duty-free access to UK markets after Brexit. However, the renegotiation of EPA agreements has been slow and countries that have not signed continuity agreements when the UK leaves the EU risk facing higher tariffs and a preferential margin decline. For example, according to UNCTAD, Honduras, Ghana and Nicaragua will significantly lose out in the case of a no-deal Brexit.

The likelihood of the UK leaving the EU without a deal is increasing by the day and the UK Government recently indicated its intention to lower Most Favoured Nations tariffs (MFN) in the case of a no-deal Brexit. UNCTAD shows that the lowering of UK MFN tariffs could undermine the benefits provided to developing countries under the unilateral preferencing schemes and the EPAs and could result in many developing countries losing competitiveness in the UK market.

UK civil society organisations have made sustained calls for the UK Government to address the risk posed to developing countries by expanding the unilateral preferencing schemes to ensure that all developing countries have continued duty-free access to the UK market after leaving the EU. However, the UK government remains committed to renegotiating the EPA agreements.

Civil society organisations have also highlighted the risk that a reduction in the value of the pound poses to developing countries that are reliant on UK aid and remittances. Conservative estimates suggest a more than £1.9 billion reduction in the value of UK aid and at least a US$1.4 billion reduction in the value of remittances from the UK.