Analysis: LDC Graduation: Challenges and opportunities for EU–African trade

The EU can play an important role in easing the transition for countries graduating from LDC status.

Malin Ljungkvist Trade Policy Adviser

An increasing number of African countries are preparing to leave the UN’s category of least developed countries (LDCs). This analysis focuses on how that changes the conditions for trade. New opportunities may arise – both for countries that graduate and for those that remain in the LDC group.

What does it mean when a country graduates from LDC status?

Leaving the UN’s category of least developed countries (LDCs) means that a country no longer meets the criteria of low income, weak human assets, and high economic and environmental vulnerability. It is a sign of progress in development and poverty reduction. But it also entails the loss of benefits such as duty-free access to major markets and certain exemptions in the WTO.

What challenges does this create for African countries?

Graduation can reduce competitiveness in export sectors such as clothing, agricultural products and food, where tariff preferences have so far been crucial for export success. Countries also risk losing access to specific support programs linked to the World Trade Organization (WTO).

What opportunities exist to manage the transition?

When countries graduate from LDC status, they risk losing important tariff preferences, but several options are available. One is to apply for the EU’s GSP+, a system that grants lower tariffs to certain low- and middle-income countries. Other options are to negotiate or expand bilateral and regional trade agreements, such as Economic Partnership Agreements (EPAs), and to make use of the African Continental Free Trade Area (AfCFTA) to strengthen regional trade.

At the same time, countries that remain in the LDC group may gain market shares when others lose preferences. For the EU and other partners, the key is to support a soft landing by facilitating access to preference schemes, providing technical assistance, and maintaining trade-related aid.

What is the National Board of Trade Sweden?

The National Board of Trade is the Swedish government agency for international trade, the EU internal market and trade policy. Our mission is to facilitate free and open trade with transparent rules as well as free movement in the EU internal market. We provide the Swedish Government with independent analyses, reports and policy recommendations and take into account the views of businesses of all sizes in international trade policy-related matters.