How can Brexit do better than a zero tariff?

London4Europe Committee member and former HM Treasury senior civil servant Michael Romberg looks at Leavers’ claims that Brexit would allow poor countries to export more freely to the UK. It would be hard to better the EU’s terms for poor countries, even if we believed that Brexiters actually wish to.

What Leavers say

The money-collecting website of the American friends of Nigel Farage claims that "The EU puts a 30% tariff on cocoa from Africa. That doesn’t help fair trade or the UK.". They misquote an article that wrongly claims that there are high tariffs on processed cocoa products. I have pointed that out to them, so we will see whether they correct their statement. Also, Full Fact have debunked the claim.

James Cleverly MP speaking in April 2016 claimed that “the EU imposes trade tariffs on processed coffee” and – but note that sly “up to” – “The EU charges a range of tariffs of up to 30 per cent for processed cocoa products like chocolate bars or cocoa powder, and up to 60 per cent for some other refined cocoa products.”

Michael Gove speaking on 19 April 2016, said “At the moment the EU maintains a common external tariff on goods of up to 183%.That means produce from Africa or Asia’s poorer nations costs far more to import than it should. By maintaining such a punitive level of tariffs on imports the EU holds developing nations back. An independent Britain could choose to strike free trade agreements with emerging economies and lower tariffs, extending new opportunities to developing nations and in the process, allowing prices in Britain to become cheaper. Leaving the EU would thus help the poorest nations in the world to advance and it would help the poorest people in this country to make ends meet. This is just one of a number of ways in which leaving the European Union allows us to advance more progressive policies ”.

Note how one “up to” and one “could” morph into two “would”s. Hmmm. But then, this is the speech that includes “The day after we vote to leave we hold all the cards” and a string of other misleading claims.

A 16 May 2018 article on Brexit Central accepts that the EU has zero tariffs for the poorer countries but points out that these may not be willing to meet rules of origin, labour protection and human rights requirements to claim them. The article also points out that the EU’s refusal to import GM products means that African farmers are unable to use such crops if they wish to export to the EU.

It’s hard to take most Leavers’ concern for poor countries too seriously. Many of them wish to cut the aid budget. Some say that is because they wish poor countries to trade their way forward. But it is hard to escape the thought that it is just another version of the £350m – let’s turn our back on the world and spend the money on ourselves.

The EU’s system of trade preferences for poor countries

This list of over 70 countries benefit from some form of WTO-permitted generalised scheme of preferences (GSP) set up by the EU:

• Everything but Arms allows the poorest countries duty-free and quota-free access to the EU;
• Standard GSP provides lower income countries access with duty-free or lower duty tariffs on about two thirds of their exports to the EU;
• GSP+ cuts these tariffs to 0% for vulnerable low and lower-middle income countries that implement 27 international conventions related to human rights, labour rights, protection of the environment and good governance.

In addition, the EU has (28 countries) or is negotiating (23 countries) a number of economic partnership agreements (EPAs) with various poorer countries in Africa, Pacific and the Carribean (APC). There is little overlap between the EPA and GSP lists – so there are over 100 beneficiaries in total.

EPAs open up EU markets fully with quota-free and tariff-free access, but allow ACP countries long transition periods as they open up partially to EU imports while providing protection for sensitive sectors. EPAs offer more latitude on rules of origin to make it easier for countries to import components without losing EU trade benefits. For example, a textile product may enter the EU duty-free if at least one stage in its production – such as weaving or knitting – took place in an EPA country; so they promote regional value chains. EPAs ban EU subsidies on exports of agricultural products to ACP countries.

What would Brexit mean

In March 2017, Traidcraft and the Fairtrade Foundation worried about the effect of Brexit on poor countries:  “They benefit from some EU trade policies – such as tax-free, preferential market access for the poorest countries – but it is as yet unclear whether the UK plans to continue similar arrangements.” Amongst other measures they called on the government to continue these benefits. Their case studies include one on Tanzanian coffee which makes clear that roasted and decaffeinated coffee attract zero tariffs at present.

No doubt the UK/ EU could do more

It is not just that Brexit could mean the UK imposing worse terms on countries. It is also that the UK could no longer argue within the EU for making further improvements. It is obviously better to get the whole EU28 to do something good than only Britain to do it. The maths means that even if the EU scheme was not quite as good as Britain’s would have been, it would still be more beneficial because the EU is so much bigger.

Conclusion

The EU has a good record of abolishing tariffs on imports from poor countries or keeping them low; and on reducing barriers to imports. Leavers who claim that Brexit will do better should be challenged to explain exactly what they think the EU’s rules are and how the UK would change them.

The London4Europe blogs page is edited by Nick Hopkinson, Vice-Chair. Articles on this page reflect the views of the author and not necessarily of London4Europe.