Brian Monteith: Opening up UK market would give poor nations a chance

A man picking coffee beans, in a coffee and cocoa plantation, in Divo. Picture: Getty

It is conventional to believe that through some authoritative and yet conciliatory speeches Theresa May has bought her new government time to reach agreement on the optimal negotiating approach to take, but behind the scenes the Treasury is fighting a bullish rearguard action to halt Brexit by demanding the UK stays in the EU’s Customs Union. As the most influential department of government it can be expected to exert considerable influence, but anyone that cares about the plight of developing nations and their peoples should be hoping that on this occasion the Treasury view is consigned to the office shredder.

As will be shown by a new report to be published tomorrow by the think-tank Global Britain the combination of the EU’s obscene Common Agricultural Policy and its punitive Customs Union that is designed to protect it, the poorest of nations are forced into a cycle of dependency on foreign aid.

The CAP provides subsidies and support to protect inefficient continental farmers that leads to surpluses of produce that are stored at great expense and then dumped on world markets with catastrophic results. To protect these same farmers from price competition aggressive tariffs are erected by the EU Customs Union to provide insurmountable obstacles to trade. Worse, these tariffs are skewed so that raw food products face a tariff of 9.9 per cent whereas processed foods face a tariff almost double at 19.4 per cent, ensuring that developing nations will never develop the industries that spread prosperity. The EU also discriminates between sectors and places a higher tariff on agricultural imports (ranging between 18 per cent and 28 per cent) than on manufactured goods, which averages around 3 per cent. This again puts developing nations at a disadvantage.

Thus we have the shameful position that despite not growing a single bean Germany is able to make greater profit from processing coffee than all the African nations put together can from growing it. Likewise, Ghanaian tomato farmers were put out of business by the dumping of subsidised tinned Italian tomatoes, leading perversely to Ghanaian farm workers becoming illegal immigrants in Italy for the harvesting of the very tomatoes that were causing their impoverishment.

The EU and individual countries then provide international aid to help relieve the economic distress they have in the main caused. Whether it is neo-colonial European guilt or altruism does not matter, the CAP subsidies and Customs Union tariffs feed the need for European taxpayer handouts.

Worse still, those EU aid schemes are badly administered through heavy administrative costs and are often targeted at some of the most abusive, corrupt and undemocratic regimes noted for endorsing slavery, routine torture and persecution of minorities.

The UK gives 17 per cent of its EU contributions to EU aid and on top of this compulsory funding pledged to give the EU another £3.5bn for its 11th European Development Fund between 2014-2020. With administration costs of 5 per cent for the EDF and 5.4 per cent for the European Commission, compared to only 1.57 per cent for the UK’s Department of International Development (DFID) in 2013 an efficiency saving equivalent to £132m could have been achieved if the UK’s contribution to the EDF had been dispersed through DFID directly.

The EU spends its aid money very differently from the UK, using a large proportion for direct budget support, meaning the propping up of regimes in Burkina Faso, Central African Republic, Cote d’Ivoire, Guinea Bissau, Kyrgyzstan and Mauritania, by the transfer of funds to be spent at will. By contrast the UK government decided in November 2015 to stop general budget support altogether.

It must be a goal of the UK to remove all support to the EU aid programme so that it can administer the funds more efficiently through DFID.

Given that Theresa May has given Liam Fox and his new department the job of pulling together a trade policy that will deliver the international deals required to provide sustainable economic growth, one might think that she has already made up her mind that the UK will leave the Customs Union. Surely Fox’s department has not been set up to fail? A Treasury victory would not only be a serious political embarrassment for the Prime Minister it would be a catastrophe for the developing nations who are investing in the hope that Britain will at last become the first significant European partner to trade with them on a fair basis.

By rejecting the economic recidivism of the Treasury and leaving the EU’s Customs Union the UK can strike individual trade deals with countries like Ghana - on of the first to declare its interest in doing so - and other developing nations who are keen to see the benefits of globalisation shared rather than be kept for the West.

The reality is slowly dawning on the Conservative government that for “Brexit to mean Brexit” leave has to mean leave. It is not so much a “Hard Brexit” that is required as a “Robust Brexit” that should be its goal. Taking a resolute position on exiting the single market and customs union will win the UK negotiators the advantage of being able to then bargain from strength to reduce the EU’s Custom Unions tariffs we shall face to next to nothing, something that will benefit them and their workers.

Meanwhile we can have ready the individual trade deals with countries like India that are currently illegal while inside the EU and would remain impossible if the UK left the EU single market but then stayed inside its Customs Union. Such deals could see the abolition of India’s 150 per cent tariff on whisky imports - a particular prize the EU has come nowhere close to achieving - and give hope to the poorest of the poor that their goods would find a place in the British market

l Brian Monteith is a director of  Global Britain