Over the past year, both the global community and Africa in particular have faced a substantial wave of economic instability, leading to a significant depreciation of African currencies against the US dollar. This economic downturn has had devastating consequences, pushing an estimated 15 million individuals into extreme poverty across the continent, as reported by the African Development Bank in 2023.
Recognizing the critical role of trade in addressing this challenge and fostering growth and development in Africa, the United Kingdom has recently launched a groundbreaking initiative called the Developing Countries Trading Scheme (DCTS). Designed to facilitate trade between the UK and 65 developing countries worldwide, including 37 African nations, the DCTS aims to provide these countries, many of which are among the world’s poorest, with improved access to the UK market—a key driver of economic prosperity.
The unveiling of this innovative trading scheme took place during a visit to Ethiopia’s largest industrial business park, Bole Lemi, by the UK’s Minister for International Trade, Nigel Huddleston. Ethiopia, already engaged in trade with the UK valued at £838 million annually, currently enjoys zero tariffs on all its exported goods to the UK. However, under the newly introduced DCTS, Ethiopia, alongside 46 other countries, will now have the opportunity to establish regional supply chains, enabling them to produce goods utilizing components from a wider array of countries. This expansion of trade partnerships promises to add even greater value to their exports, consequently generating more jobs and enhancing prosperity. Remarkably, the DCTS surpasses the market access offered by the previous European Union scheme, of which the UK was formerly a member, illustrating the UK’s commitment to supporting developing nations.
Furthermore, this initiative not only benefits African nations but also yields substantial advantages for UK businesses. By eliminating or reducing tariffs on imports valued at over £9 billion annually, the DCTS saves UK enterprises a staggering £770 million each year. This reduction in costs not only broadens consumer choice within the UK but also has the potential to lower prices on a wide range of goods, including clothing, food, and children’s toys. Moreover, the DCTS creates significant opportunities for UK businesses to expand their operations internationally, thus contributing to the growth of the UK economy.
So, how exactly will the DCTS support African nations? Firstly, 33 African countries falling under the Least Developed Countries (LDCs) Framework will continue to benefit from duty-free trade on all goods except arms. Additionally, four other African countries will gain advantages from the Enhanced Preferences Framework, entitling them to duty-free trade on up to 92% of their goods. Notably, Nigeria, Algeria, and Congo will automatically enjoy duty-free trade on 3,000 new products, resulting in an average savings of 7% in duty tariffs as they transition to the Enhanced Preferences Framework.
Moreover, the DCTS aims to remove tariffs on more than 150 additional African products that hold strategic significance for developing countries. This removal of tariffs on essential goods further contributes to fostering economic growth and prosperity across the continent. Furthermore, the new rules of origin established under the DCTS simplify the process for African countries to manufacture goods using components from multiple countries without forfeiting their duty-free status.
In addition to the DCTS, the UK has entered into six Economic Partnership Agreements (EPAs) with 15 African countries. These agreements grant duty-free trade privileges for exports from all beneficiary nations, resulting in annual savings of approximately £215 million in duties for partner countries. With the newly implemented rules of origin provisions, the DCTS now enables cumulation with all 95 countries in Africa and Asia covered by both the DCTS and EPAs, thereby promoting a more extensive network of trade partnerships.
The implementation of the DCTS, along with the Economic Partnership Agreements, exemplifies the UK’s unwavering commitment to promoting free and fair trade as a catalyst for sustainable development and prosperity. In order to empower countries to fully capitalize on the generous market access offered by the UK, the government is also investing in development programs aimed at addressing trade barriers such as standards, export promotion, and trade facilitation. An excellent example of this is the establishment and joint funding of TradeMark Africa by the UK, which has significantly reduced the time and cost involved in transporting goods between countries. Notably, their efforts have resulted in a notable decrease in the average duration to move containers from Mombasa port to Rwanda, now taking 11 days compared to 27 days a decade ago.