Summary
Misleading information posted on pro-Brexit websites on EU tariffs on African cocoa product exports is distracting attention away from real issues which need to be addressed under a no-deal Brexit scenario if the current strong trend in growth in African exports of value added cocoa products is not to be halted and ever reversed. This includes the importance of the UK government taking urgent steps to avert any disruption of commercial relations arising from the threat of a possible loss of existing duty free access for value added cocoa products to the UK market as a result of the ongoing messy Brexit process. This requires a clear UK government policy commitment to taking whatever steps necessary to ensure continued DFQF access for African value added cocoa product exports. It also requires a clear policy commitment form the UK to: maintaining in place existing MFN tariffs on imports of value added cocoa products; ensuring full pan-African cumulation under the rules of origin applied under any future UK-only trade agreements; the establishment of investment support instruments to facilitate continued movement up the cocoa value chain in Africa to serve the UK.
Press reports have highlighted how the politicization of trade issues within the Brexit discussions is leading to a preponderance of misinformation on the issues and policy choices facing the UK government in the cocoa sector in the short and medium term (1).
At the beginning of September confectionerynews.com carried an article highlighting how World for Brexit (W4B) has been misrepresenting the current trade treatment accorded cocoa imports into the UK as a result of EU trade policies. W4B argues Brexit will allow the UK to strike out in a new more pro-development direction by escaping the 30% tariff the EU imposes on African cocoa and granting duty free access to the UK market for cocoa products (1).
However this alleged benefit is illusory since the major African cocoa bean and cocoa product exporters already enjoy full duty free-quota free (DFQF) access to the EU market, including to the UK market (2).
The EU tariff schedule under all trade regimes grants duty free access to the EU market for cocoa beans, with imports from Africa in 2018 valued at €3,546 million. In addition since 2008 full duty free quota free access has been granted from countries which have concluded economic partnership agreements with the EU for cocoa paste, cocoa butter, cocoa powder and chocolate, with an export trade to the EU valued at €629.4 million, €691.5 million €80.5 million and €114.2 million respectively (3).
EU tariffs for cocoa beans and value added cocoa products
| Country | Beans (1801) | Paste (1803) | Butter (1804) | Powder (1805) | Chocolate (1806) |
| – MFN Tariff | 0 | 9.6% | 7.7% | 8% + sugar levies | 8% +€252/t |
| – GSP Tariff | 0 | 6.1 | 4.2% | 2.8 | 2.8% +€252/t |
| – GSP+ | 0 | 0 | 0 | 0 | 0% +€252/t |
Source: EC Market Access Data Base
This has seen a strong increase in EU imports of these products from Ghana, Ivory Coast and Cameroon.
Between 2007 and 2018 the value of Ghanaian exports of cocoa paste increase more than 5-fold, EU imports from Ivory Coast more than doubled, while those from Cameroon almost doubled.
EU imports of cocoa butter showed a similar strong growth with Ghanaian exports to the EU increasing 4½- fold, while EU imports from Ivory Coast more than doubled while those from Cameroon increased more than 9-fold.
In contrast imports from Nigeria of cocoa paste and cocoa butter increased only 58% and 67% respectively, since Nigeria continued to faced GSP tariffs on value added cocoa products rather than enjoying the benefits of duty free-quota free access.
EU imports of cocoa powder have shown a similar strong growth from Ivory Coast and Ghana, with the value of imports from Ghana increasing from €33,544 to €37,839,836 and the value of imports from Ivory Coast increasing from €22,898,225 to €42,651,072.
In contrast while imports of cocoa powder from Nigeria have also grown impressively since 2007 in % terms the overall growth in the value of exports remains limited, with earnings equivalent to only 0.05% of earnings from cocoa bean exports
Ivory Coast has even been able to expand the value of its chocolate exports to the EU, with the value increasing from €32,152,193 in 2007 to €113,232,582 in 2018.
Overall the total landed value of exports to the EU of value added cocoa products between 2007 and 2018 increased from
- €439 million in 2007 to €939 million for Ivory Coast;
- €22.3 million to €102.5 million for Cameroon;
- €95.4 million in 2017 to €503.5 million for Ghana.
This expansion in the value of export was most dramatic for Ghana with revenues from value added cocoa product exports to the EU increasing from a level equivalent to 15.6% of revenues from cocoa bean sales in 2007 to a value equivalent to 71.8% cocoa bean revenues in 2018. A similar, though less dramatic change took place for Cameroon with revenues from value added cocoa product exports to the EU increasing from the equivalent of 12.1% of revenues from cocoa bean sales in 2007 to a value equivalent to 28.2% cocoa bean revenues in 2018.
The corresponding increase for Nigeria, where GSP tariffs were applied on imports of value added cocoa products, was from €37.8 million to €62.2 million, a far lower rate of increase.
Value of EU Cocoa Products Imported from Selected African Countries (€) – 2007 & 2018
| Country | Cocoa Beans | Cocoa Paste | Cocoa Butter | Cocoa Powder | Chocolate |
| Ivory Coast | |||||
| – 2007 | 691,346,537 | 203,547,812 | 180,474,512 | 22,898,225 | 32,152,193 |
| – 2018 | 2,031,131,898 | 424,633,333 | 359,104,438 | 42,651,072 | 113,232,582 |
| Ghana | |||||
| – 2007 | 604,177,421 | 37,924,213 | 57,467,241 | 33,544 | 13,330 |
| – 2018 | 700,951,911 | 204,706,955 | 260,675,616 | 37,839,836 | 339,693 |
| Cameroon | |||||
| – 2007 | 184,305,033 | 14,537,530 | 7,838,770 | 1,397 | 0 |
| – 2018 | 264,031,161 | 30,756,838 | 71,687,151 | 2,532 | 10,852 |
| Nigeria | |||||
| – 2007 | 267,912,633 | 4,776,733 | 33,021,887 | 7,906 | 2,143 |
| – 2018 | 414,562,059 | 7,645,510 | 54,424,394 | 211,424 | 33,493 |
Source: EC Market Access Data Base
Thus the granting of duty free-quota free access under EU trade agreements since 2008 has seen a dramatic expansion in the value of West African and Central African exports of value added cocoa products from those countries benefitting from such preferential access.
These developments are completely ignored and misrepresented in the World for Brexit (W4B) analysis of the EU tariff schedule in the cocoa sector.
| Comment and Analysis
The misrepresentation of the reality in UK-Africa trade under existing EU trade agreements allows two immediate issues of concern to be side stepped, namely: · the importance of ensuring continued duty free-quota free access to the UK market to this movement up the cocoa value chain which is underway in leading African cocoa producing countries as a result of the current preferential access enjoyed; · the importance of addressing the issue of the future UK MFN tariff schedule for cocoa products, which needs to be seen against the background of a situation where the majority of UK imports of value added cocoa products still come from EU27 member states. This needs to be seen in a context where facilitating movement up the value chain in cocoa producing countries prior to export is seen as a vital vehicle for addressing the extreme poverty which exists among cocoa producers (see companion epamonitoring.net article ‘Can Movement Up the Cocoa Value Chain be the Key to Poverty Elimination in the Cocoa Sector?’ 7th October 2019). Against this background the question arises: what policy should the UK government pursue if it wants to make Brexit work for the African cocoa sector? The first and most immediate issue to be addressed is the importance of rolling over existing duty free-quota free access for value added cocoa products, in a context where the negotiation of UK-only Continuity Agreements with Ghana, Cote d’Ivoire and, to a lesser extent Cameroon, are far from straight forward, given the incomplete nature of the EU regional EPA processes in both West Africa and Central Africa. If the negotiation of existing commercial supply agreements for the export of value added cocoa products to the UK market in 2020 is not to be greatly complicated then the UK government needs to urgently make a public commitment to taking whatever steps are necessary to ensure continued duty free quota free access for exports to the UK market on the same terms and conditions as currently prevailing, throughout 2020 and beyond. If such a statement is not forthcoming, given Brexit related uncertainties in regard to the future treatment to be accorded imports of value added cocoa products from West and Central African countries, and then the current trend towards expanded exports of value added cocoa products could be halted and even reversed. The second issue relates to the future MFN tariffs to be applied by the UK to value added cocoa products. This issue needs to be seen light of the UK’s temporary no-deal Brexit tariff schedule which extends the existing standard MFN duties on value added cocoa products. Under a no-deal Brexit outcome in which the UK leaves the EU customs union this would see these standard MFN tariffs charged on UK value added cocoa product imports from the EU27 member states, on a trade valued in excess of $420 million. If African value added cocoa product exporters were to continue to enjoy duty free quota free access to the UK market, the application of MFN tariffs to imports from the EU27 cocoa processors could open up substantial new opportunities on the UK market for the direct export of value added cocoa products to the UK market from African countries. There is already a basis for this expanded direct trade to the UK, given existing exports of value added cocoa products to the UK valued at €123.6 million from Ghana, Ivory Coast and Cameroon in 2018. The application of MFN duties to imports from EU27 cocoa processors would create tremendous scope for an expansion of direct African exports to replace EU27 sources of supply under a no-deal Brexit outcome to the current negotiations. If the UK were subsequently to conclude regionally sensitive trade agreements with Ghana, Ivory Coast and Cameroon which allowed full pan-African cumulation under the rules of origin to be applied and complemented this with investment support for the development of the cocoa value chains in the these 3 African countries, then this would further increase the scope for a rapid expansion of this trade. Thus while there are potential benefits to be derived by West African cocoa producers from a no-deal Brexit this will depend crucially how the UK enhances the new UK-only trade agreement to be concluded with the main African cocoa exporting countries. This will require a detailed review of the relevant provisions of the existing EU EPAs with these countries prior to their rolling over into UK-only agreements. Unfortunately there is little evidence the UK government is willing to engage on these issues given the over-riding policy preoccupation with protecting and promoting the interests of UK exporters in trade with African countries, to mitigate some of the worst effects of a no-deal Brexit on domestic UK producers (e.g. Northern Ireland poultry producers). |
Sources:
(1) Confectionerynews.com, ‘Fact checking site counters pro-Brexit claims on cocoa tariffs’, 4 September 2019
https://www.confectionerynews.com/Article/2019/09/04/Fact-checking-site-counters-pro-Brexit-claim-on-cocoa-tariffs
(2) EC, Market Access Data Base
https://madb.europa.eu/madb/euTariffs.htm
(3) EC, Market Access Data Base
https://madb.europa.eu/madb/statistical_form.htm