Immediately after the EU referendum result we highlighted the uncertainty and potential challenges Traidcraft could face in all parts of the organisation, alongside our continuing commitment to fair and just trade.
Now, two months on from the vote, some things are becoming clearer. Three particular challenges linked to Britain’s planned exit from the EU could directly impact Traidcraft and our work with poor producers in developing countries:
- The fall in value of sterling and the impact on the wider economy
- The end of access to EU funding for our work
- Changes in trading terms for the poorest countries post-Brexit
For our trading activities, the most significant challenge is the fall in the value of the pound. Due to contingency planning, this hasn’t had an immediate impact on our trading. But over the coming months inevitably the reduced value of sterling will increase the cost of purchasing products from our suppliers around the world.
The falling pound also affects our overseas programmes: each pound we raise buys less now than it did earlier this year. At the moment, we are absorbing this loss and project activities are not currently affected, but there could be a longer term impact.
We have also had significant funding for our programme and policy work from the EU in the past – and we don’t know how much longer we will be eligible for this, or what plans the UK Department for International Development may have to support the work of organisations like us in the future.
The final challenge for our charity Traidcraft Exchange is whether currency devaluation and any economic downturn might impact other streams of funding from individual giving and corporate or foundation support. So far it is too early to tell, but we're looking at how we can increase and diversify our funding.
For developing countries more generally, our major concern is that they could face significant disruption to their vital exports as a result of Britain leaving the EU.
Most of the very poorest ‘least developed countries’ currently benefit from special market access schemes to the European market. This means that a significant proportion of the £24 billion-worth of goods that the UK imports from developing countries are traded without import taxes. This has allowed developing countries to increase their share of global trade and contributed to their economic development.
This preferential market access could come to an end when we leave the EU. Along with the fall in sterling, it means that products from developing countries could be more expensive, leading to reduced demand, reduced profit margins in supply chains and an even greater squeeze on those at the bottom of the chain.
Our Policy Unit has been talking to partners in developing countries, other development organisations, academics and legal experts to enable us to develop a proposal to limit the amount of trade disruption developing countries will face.
We are encouraging the government to ensure that a similar non-reciprocal open market access arrangement is in place in time for the UK withdrawal from the EU. Allowing imports from the most economically vulnerable countries to enter the UK market without imposing import taxes ensures continuity and certainty for the farmers and producers whose livelihoods rely on exports.
There are clearly a number of significant challenges for the government to address including some complex trade negotiations. One of the advantages of this scheme is that it could be introduced without the need for extensive negotiations or government resources and would provide much needed reassurance for trading partners.
We’ve been busy building support for this scheme, meeting with civil servants, contributing to parliamentary inquiries and, alongside other Fairtrade companies, we’ve written to government ministers to raise our concerns. It’s clear that there is interest in our proposals, it’s also clear that we will need to continue pushing to ensure the needs of developing countries are considered as the government considers its trade policies.
As we wrote back in June, we will continue to work for trade that is just and fair with all our time, energy and resources. Your support is what makes this possible.
Watch this space for further updates.