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18 July 2017

The EU is making poor countries poorer

by Joseph Hackett

Originally published by CapX.

The EU likes to present itself as a global force for good, fostering aid and development in the world’s poorest societies. It boasts of its £12 billion aid programme, and calls itself “the most generous donor in the world”. It truly believes itself to be a kindlier world power than the United States, Russia, or China.

As ever with the EU, the truth is much uglier. Eurosceptics have long known of the EU’s practice of dumping subsidised agricultural products on developing countries, especially Africa. In a rare case of progress, the EU now spends considerably less on these, and WTO members – including the EU – finally agreed to end export subsidies in 2015.

There are, however, many other ways in which the EU stunts the development of poorer countries. Take its tariff regime, which sets higher tariffs for more processed products. Raw coffee beans, for instance, can be exported to the EU tariff-free, while roasted coffee is subject to a 7.5 per cent tariff. If the coffee is also decaffeinated, the tariff rises to 9 per cent. The same goes for chocolate – cacao beans have no tariff, but chocolate bars are subject to a 30 per cent tariff.

This is no accident. It is designed to stop countries such as Ethiopia and Ghana processing their produce and then exporting it, which EU leaders fear would threaten the lucrative food industry in Europe. Producers are instead encouraged to export the raw produce and the “generous” EU ensures developing countries take only a fraction of the potential profit from their own produce, preserving the spoils for itself. In fact, in 2014, Germany earned more from coffee exports than all of Africa combined.

Across various different types of agricultural produce, this has the effect of stifling the industrialisation of developing countries. The tariff regimes encourage them to remain agrarian economies, rather than fully exploit their considerable natural resources. Dropping these tariffs would be a simple way to boost developing economies, but the EU refuses to do it, instead using aid payments as a fig leaf to hide behind.

The EU also harms local fishing industries. Having instituted rigorous fishing quotas in Europe, the EU makes deals with various West African countries to allow its large trawlers to fish on a massive scale in those countries’ waters. Mauritania, for instance, has allowed the EU to fish in its waters for over 25 years, in return for around £1 billion. Senegalese fishermen, however, objected to a deal their country struck with the EU in 2014, allowing EU trawlers extensive access to their waters.

The EU does now include “support” for local fisheries in these deals, and loudly trumpets its efforts to stop illegal fishing by European trawlers in waters reserved for locals. West African countries protect their waters from illegal foreign fishing less effectively than wealthy countries such as Norway, which is fining EU vessels. These efforts do not, however, change the fundamental problem. Local fishermen are crowded out, struggle to industrialise their operations, and find stocks dwindling in the long-term if – as groups such as Greenpeace allege – the EU’s quotas in West African waters are too high to be sustainable.

Small wonder hundreds of thousands of Africans every year are embarking on long and often dangerous journeys in an attempt to make it to Europe. All the while, the EU salves its conscience with foreign aid spending, attempting to fool the world into thinking it genuinely cares about the growth of poorer countries.

When we get Britain out of the EU, we will have the chance to have nothing to do with these practices. Outside the Customs Union, we will no longer have to set tariffs according to the special interests of 27 other EU Member States. We will be free to drop tariffs on processed food imports from the developing world, encouraging countries such as Ethiopia to process their own products and sell them to Britain – where they will be cheaper than those currently on our shelves. In addition, we can either conclude our own, fair fisheries agreements with West African countries, or refrain from such deals altogether.

Abandoning the EU’s unscrupulous approach to trade with the developing world could go a long way towards helping those countries. It would also entrench our reputation as one of the most committed nations in the world for international development. Liberal Remainers should take note – the EU is no friend to poorer countries, and Brexit will allow us to take a much fairer approach.

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