Global Courant
Trade has always served as a fundamental driver of economic growth, whether a country is developed or developing. Not only does it promote economic interdependence, it also promotes diplomatic relations between these countries. And we have witnessed nations coming together to promote inclusive economic growth around the world.
Last Monday, June 19, 2023, the United Kingdom launched the Trade regime for developing countries (DCTS) which simplifies trade rules and reduces tariffs on products entering the UK from 65 developing countries, including African countries. The trading scheme is a replacement for the British Generalized Scheme of Preferences (GSP).
Simplifying trade rules would remove barriers that previously prevented African countries from trading with the UK. Also, the lower tariffs would translate into more competitiveness and profitability for African goods in the UK market. This, in turn, encourages greater production and export from Africa, leading to job creation and income generation.
According to the UK government, the scheme aims to help integrate developing countries into the global economy, create stronger trade and investment partners for the future and strengthen supply chains. Under the new scheme, African countries will be able to participate in global value chains involving raw materials from 95 countries to export their final products duty-free to the UK.
However, it is important to note that all of these benefits are contingent on meeting specific requirements.
The UK government says the DCTS will promote free and fair trade, human rights and good governance. Preservation of DCTS preferences is based on respect for human and labor rights and compliance with relevant international conventions, including those on civil and political rights, anti-corruption, climate change and the environment. In essence, the DCTS not only aims to improve trade relations, but also emphasizes the importance of upholding fundamental values and international standards.
The commendable approach of the United Kingdom’s Developing Country Trading System (DCTS) has similarities to the African Growth and Opportunity Act (AGOA) introduced by the United States. Established in 2000, the AGOA aimed to provide eligible sub-Saharan African countries with duty-free access to the U.S. market. However, some African countriesincluding Burkina Faso, Cameroon, Mali, Guinea and Ethiopia, were suspended for reasons bordering on unconstitutional change of governmentAnd gross violations of internationally recognized human rights.
The implementation of the DCTS now offers these affected African countries a lifeline and renewed prospects for trade and economic growth. For example, Ethiopia, the fifth-largest exporting country under the law, exports more than 90% of its textile products to the United States through AGOA, making up only 6% of its total foreign exchange earnings. In 2020, Ethiopia earned approx $245 million in export earnings to the United States. Unfortunately, the AGOA ban halted these crucial export revenues.
Not only will this reduction in trade barriers and excise duties benefit African countries, but UK businesses are also expected to save more than £770m annually by cutting or eliminating import duties worth more than £9bn, including items such as clothing , food and children’s toys. .
From weathering high rates of inflation and managing robust debt profiles to navigating the far-reaching impacts of the COVID-19 pandemic and ongoing conflicts such as the Russo-Ukrainian War, African nations have faced a series of economic obstacles. hence the implementation of the Developing Countries Trade Scheme (DCTS) represents an important and timely opportunity for the African continent.
