The Overseas Development Institute (ODI) and the UK Trade Policy Observatory warned in their recently published reports that the world’s developing countries could lose €378 million year if the existing trade deals that they have with the EU will no longer apply to the UK after the country leaves the block. Both think tanks believe that many of the poorest economies in Africa, the Caribbean and the Pacific (ACP) could lose up to €203 million annually in the event of Brexit, as they would lose the preferential access to the British market through the EU’s trade policy.
The world’s poorest economies pay very little or no duty on their exports to Europe under the EU’s generalized scheme of preferences (GSP). Moreover, the ‘Everything But Arms’ deal gives these countries duty- and quota-free access to all products except for weapons and ammunitions. According to Leonard Winters, Director of the UK Trade Policy Observatory, the failure by London to protect these preferential deals could have negative repercussions for both trade and foreign policy. “A number of developing countries – take Kenya, for example – have got serious export industries who sell to the UK,” he said and added that “If suddenly they ended up with some tax bill of an extra €2.4 million in order to sell their current amount in the UK, they’d search out [sales] to other markets.”
Developing countries have already been hit hard by the falling pound in form of remittances. The World Bank estimates the loss at €8.3 billion last year – the remittances sent to developing countries are now worth much less than before the British poll to leave the EU. Some economists also estimate that a weak UK economy and the pound will result in developing countries struggling to manage, as “they have fewer instruments at their disposal to cushion some of these shocks”.