The Global Development Institute Lecture Series

#GDILecture@GlobalDevInst @BMEcSussex

The UK’s Post-Brexit Trade Policy: What about

development?

L Alan WintersUniversity of Sussex

Outline• Brexit context - EU and WTO are critical• Principles for new circumstances• Unilateral Preferences (GSP)• Reciprocal Preferences• Trade Facilitation• Services• Aid for Trade• Investment

Brexit: trade negotiations

• EU-27 – soft vs. hard• WTO – establishing UK’s new status

(schedules of concessions, agricultural commitments, TiSA)

• EU FTAs (implemented, completed, underway)• GSP (30 countries), GSP + (13 countries), EBA• Additional countries (Australia, New Zealand,

Russia, China, ASEAN members)

Principles• Developing countries are

heterogeneous – But one can’t have a different policy for

each one• The UK will no longer influence EU

policy– But can still lead globally

• The UK will lose direct influence with partners– Conditionality weak; discrimination

likely• Trade policy should be simple and

pragmatic

The Context for Developing Countries: (I) The EU

• Leave the CU– Own trade policy – Rules of Origin → border controls, admin

costs– Trans-shipment; value-chains;

• The Single Market–Neither the CU nor an FTA; but

regulatory union– Certification – costs, maybe bans –More likely: SM equivalence in some

sectors

The Context for Developing Countries:

(II) The WTO• Normal (‘Most Favoured Nation’)

tariffs– Adopt EU schedules - rectification– Complications of agriculture, RoOs

impair rights• Rules on preferential trade– GATT Article XXIV; GATS Article V– Influence what the UK can do with

developing countries

Generalised System of Preferences I

• Unilateral; EU scheme currently covers:– 30 countries under standard terms; – 13 countries under GSP+ terms; and – 49 LDC under the terms of EBA

• Reduced tariffs but not all zero• Competitiveness provisions 17.5%;

14.5% textiles

Generalised System of Preferences II

• Effects on exports not massive – RoOs are major problem – 9% in Latin America– Addictive; influence economic structure – Largely zero-sum game between dev co.s

• At donor discretion– But discrimination must be ‘justifiable’

• Offer same for 4 yrs– Early announcement, then renegotiate

Rules of Origin (RoOs)EU Imports from LDCs and Utilization Rates:

Non-Agricultural Products excluding Fuels

Reciprocal Preferences (EPAs)

• Huge effort, virtually no return; – Costly and slow to negotiate – regional blocs– Very little liberalisation, even in principle– Any further liberalisation for UK will be

discriminatory• Maybe grandfather existing market access

and then review– Consider reverting to unilateral or bilateral

• Viability of ACP grouping post-Brexit?

Trade Facilitation• In the UK• Costs of customs high, even if quite

quick• De minimis for customs duty (€150

is low)– But VAT threshold too - €22– Efficient level is €80

• Exempt LDC imports from VAT? – at least B2C

Services• Critical to productivity (dev co regimes)– But FTA achieve little; need unilateral reform– Governance and regulation key to success

• Services Waiver– Capacity constraints reduce value

• Mode 4 – or temporary migration regimes– But need to improve visa regulations to be useful.

• UK not the most liberal market in Europe• Need to join TiSA talks – not automatic

Services – EU restrictiveness

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Finlan

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United

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Figure 2: World Bank STRI for EU member states

Overall Finance Telecoms Retail Transport Prof. services

Aid for Trade• Potential benefit – facilities,

regulations, policy• UK is small player here, but data are

unreliable• Developing Country government needs

to consult private sector• Strictly not affected by Brexit • Link with trade agreements?

Investment Treaties • Recently became EU competence,

but still largely national in fact; • UK BITs generally not very

development friendly– Chance to re-design – but takes time

• BITs: ambiguous boost to investment • ISDS – will need to decide policy

Thank you

http://www.sussex.ac.uk/bmec/research/uktpo

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