The Diplomatic Impacts of Most Favoured Nation Tariff Changes by Major Economies

Abstract

Developed countries have long given non-reciprocal (unilateral) trade preferences to the various developing countries. Preference erosion (i.e. the trade losses arising from liberalisation in other countries) is a major problem for many developing countries, often leading to appeals by their diplomats and trade negotiators. Before setting new international trade arrangements and eliminating tariffs on imported goods (i.e. following Brexit), the UK should assess the impact on developing countries. Many developing countries (particularly non-LDCs) covered by current trade agreements will find that market access to the UK will be restricted after Brexit (i.e. leading to possible complaints and diplomatic disputes). Although the UK may have (diplomatic and economic) interest in re-negotiating current free trade agreements (FTAs), many developing countries will not be on the priority list of partners to be negotiated with. UK's post-Brexit transitional provisions will need to depend more on diplomacy to avoid challenges for other World Trade Organisation (WTO) members.