Post-Brexit trade: why ‘no deal’ is a bad deal for farmers and workers in developing countries

Post-Brexit trade: why ‘no deal’ is a bad deal for farmers and workers in developing countries

By Alice Lucas

To say 2020 has been a challenging year is an understatement. The Covid-19 pandemic’s devastating impact on health, employment, education and the economy has been widely documented and debated since the coronavirus outbreak began nearly a year ago. What has received much less attention, however, has been the widespread disruption the pandemic has played on the international supply chains that we depend on for putting food on our tables.

Throughout the crisis, the Fairtrade Foundation has continued to highlight the harmful consequences of Covid-19 on the farmers and workers in developing countries who are behind many of the UK’s favourite products, including bananas, coffee, cocoa and fresh cut flowers.

Find out how the pandemic has exposed the fragility of global supply chains

Now, to make matters worse, these farmers and workers in the global South could face yet another threat to their livelihoods: the impacts of a no-deal Brexit. Without a deal governing the terms of our withdrawal from the EU, Brexit could cause serious damage to producers and workers overseas who are already suffering the harmful effects of Covid-19 and struggling to escape endemic poverty.

This is because many of the commodities that Fairtrade farmers and workers produce – such as cocoa, coffee, sugar and flowers – move between the EU and the UK markets, where they get processed or packaged: so-called ‘triangular supply chains’. We don’t yet know if a Brexit deal will be agreed before the end of the year. Without a deal in place, these products could be subject to large tariff increases, seriously challenging the viability of these markets and threatening the women and men at the heart of the supply chains in countries like Ghana and Kenya.

If imported products like bananas and coffee are hit with higher tariffs, it’s likely to be vulnerable people in the Global South who get burdened with the increased costs of trading with the UK. These are people who can ill-afford it, and for whom every penny counts when it comes to increasing their chances of thriving and flourishing. Closer to home, a no-deal Brexit could be harmful to many businesses in the UK, including some that work with Fairtrade, and could even result in higher price tags and less availability for UK shoppers.

The Fairtrade Foundation believes the UK government needs to have a contingency plan in place for these pressing risks now, as the end of transition period looms. Here are some of the areas of particular concern:

COCOA

Without a Brexit deal, the cocoa supply chain could face huge disruptions, with serious consequences for communities in Côte d’Ivoire – one of the biggest suppliers of cocoa. Cocoa beans and value-added cocoa products (such as cocoa paste and cocoa butter) are hugely important for the country, and account for 67% of total Ivorian exports to the EU. When they reach the EU, they undergo further processing by EU-based companies who then trade them onwards to the UK. In a no-deal scenario, the onward trade of value-added cocoa products by EU companies to the UK would be subject to higher tariffs. The Fairtrade Foundation is deeply concerned that these additional costs would be passed down to low-paid cocoa producers in Côte d’Ivoire.

FLOWERS

Nearly two fifths (38%) of the EU’s cut-flower imports, both Fairtrade and non-Fairtrade, come from Kenya. Most UK flowers transit via flower auctions in the Netherlands, so could attract the new global tariff of 8%. (UK direct imports account for only 12% of Kenyan’s total exports to the EU of fresh cut roses, for example.) Flowers moving between the EU and UK are also likely to be affected by increased customs and border administration, potential delays at UK ports and new certification requirements. Kenyan flower farmers have already been severely hit by Covid-19, with widespread job losses and workplace closures. Any hikes in tariffs and the costs of meeting new regulatory requirements could make it even harder for them to recover.  

SUGAR

A ‘no-deal’ scenario could also threaten raw cane sugar farmers, many of whom live in countries with widespread poverty, such as Malawi. Raw cane sugar imported from developing countries is processed into refined sugar in both the EU and the UK. So without a deal, trade in processed sugar – back and forth between the EU and UK – will be subject to tariff increases. Again, this is likely to fall on developing country producers.

What’s more, without an agreement, developing countries may lose out on the advantage granted to them under existing tariff preferences. The UK currently gives preferential rates to certain developing countries, but these rates (low or no tariffs on imports) only apply to goods that originate from a specified set of countries. Without a Brexit deal, the criteria used to establish the origin of imported goods (known as the Rules of Origin) will be complicated to apply. This will make it much more challenging to decide whether sugar has, for instance, come from Fiji or Finland.

UK START UPS

Closer to home, smaller UK businesses who import processed tea, coffee and cocoa (and who aren’t in a position to process themselves), will be hit with the default tariff of 6-8% from the UK government. Many of these smaller businesses include innovative social enterprises and start-ups that invest in Fairtrade markets. Any extra tariff costs will threaten their viability at a time when many businesses are already struggling from economic impacts of Covid-19.  At the same time, businesses exporting processed Fairtrade products to the continent will need to pay a new tariff of at least 6% (from the EU). These costs are likely to be passed onto consumers or farmers and workers in developing countries, making it even harder for very poor people to earn a living.


Negotiations continue, and we hope a deal will be agreed in time. But the UK government needs to take action and put a contingency plan in place. As negotiations continue, Fairtrade Foundation is urging the government to confirm that it will unilaterally suspend any tariffs on products made by farmers and producers in developing countries that travel between the UK and EU, or which have been processed from developing country products like cotton or cocoa.

At a time when the Covid-19 pandemic continues to put tremendous strain on the livelihoods and prospects of people both here and overseas, the UK must act decisively to ensure developing country producers can continue to secure a livelihood for themselves and their families.

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