DfID 2.0: UK development policy post-Brexit

The UK’s departure from the European Union (EU), henceforth shortened to ‘Brexit’, is by far the biggest change to the UK’s foreign relations since World War II. Although the exact nature of our relationship with the EU is still to be determined, huge swathes of power will return to the UK, reversing decades of integration.

The UK will leave the European External Action Service with full diplomatic policy and representation returning to the Foreign and Commonwealth Office (FCO). The UK will regain an independent trade and commercial policy, including the right to sign trade deals and bilateral investment treaties. The UK will also regain full control over development expenditure, currently part of UK’s contribution to the European Commission, and by leaving the common agricultural policy, will regain another area of policy with significant impact for developing countries. 

Such mass return of responsibility and policy autonomy will have large implications for our relations with the rest of the world. Amongst the many implications are an exciting opportunity to develop a tailored approach to trade and development policy.

Such changes are helped by the genuine international credibility the Department for International Development (DfID) has acquired over the past 20 years, which has seen it become a UK success story. DfID’s international credibility and reach into emerging markets makes it a major UK asset post-Brexit, rather than the burden it is sometimes depicted. This is ironic given the regular overlap with ‘Brexiteers’ and UK aid critics.

DfID can play a major role in:

1.       Challenging the isolationist narrative surrounding Brexit, and demonstrating a UK positively engaging with the world with a development budget far more generous than comparable countries, and more effective than most comparable agencies.

2.       Formulating a progressive trade policy with regards to developing countries, a trade policy which can support developing countries in growing their export base as well as UK consumers in terms of access to cheaper products.

 

The UK’s strong development record and openness to developing country exports makes the UK well-placed to develop creative synergies between development and trade policy. This includes developing bespoke and advanced economic partnership agreements with developing countries, magnifying mutual benefits to both parties. The UK can go far beyond the EU’s attempted economic partnership agreements, with looser rules of origin and greater access to agricultural imports and processed products.

The integration of trade and development policy will change the relationship between the UK and developing countries from ‘donor-recipient’ to that of ‘partner’. Such a change should be formalised by DfID being re-launched post-Brexit as the Department for International Partnerships (DfIP).

The approach from the new DfIP should be one of partnership with developing countries, with a strong focus on the commonwealth. In addition to expanding trade opportunities between the UK and developing countries, such partnerships would include UK technical assistance to support the conditions for growth in developing countries. Provision of technical assistance has been a vital part of DfID’s success, and a major comparative advantage for the UK in the development sector.

The need for developing countries to develop finance and insurance markets and conduct economic and government reform dovetails with the UK’s first-class services and consultancy sector. The new Department for International Partnerships should significantly expand its use of such services in partner countries, reducing less effective forms of support such as budget support and funding through multilateral institutions. Such UK-funded technical assistance will support developing countries to overcome obstacles to development whilst providing a subtle and strategic approach to supporting UK service exports.

The ‘raison d’etre’ of DFIP should be to facilitate connections between the needs of developing countries for access to finance, insurance and technical assistance and the needs for UK service industries for overseas markets to expand. This can be done directly via DfIP funded technical assistance, directly contracting UK expertise to support overseas development, as well as indirectly from tailored trade deals covering service access, in return for goods and agricultural products.

The concept of partnerships can be extended to partnerships between DfIP and the private sector. Their interest in investing in, exporting to and importing from emerging markets dovetails with development objectives, as well as UK economic interests.  The new DfIP should be the epicentre of such public-private partnerships for development, initiating a new and exciting epoch in the UK’s trade and development agenda.

London possesses a greater nexus of international consultancy firms and international investors than any other city. This is a nexus which DfIP should capitalise upon to maximise the effectiveness of UK development support.

Large scale poverty reduction will occur through transformational economic growth, which partly depends on barriers to investment being removed. There are many profitably investment opportunities in developing countries, but investment is held back due to a combination of political instability, and regulatory and other risks, obstacles which UK technical assistance can help overcome. The new DfIP should actively work with UK private companies with interests in developing countries, including City investors, food and clothes importers and others to remove barriers to mutually beneficial trade and investment.

Given the need to reinvigorate the commonwealth, the new DfIP should form a much closer working relationship with the Commonwealth Secretariat. This could include utilising the Commonwealth as an institution to coordinate, finance and manage trade and development partnerships between commonwealth members.

20 years after the creation of DfID, this is an exciting time for UK development policy as it has the opportunities afforded to it by leaving the customs union, the common agricultural policy and EU development programmes.

A short book at just over 14,000 words, DfID 2.0: UK development policy post-Brexit sets out a creative agenda for the UK to integrate trade and development policy after Brexit.

It is available at Amazon for US$3.99 at this link.

Steve Macey

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