Summary
During her August tour of 3 African countries Prime Minister May reiterated the UK’s desire to ‘roll-over’ existing EU EPAs into UK-Only trade agreements as a way ensuring continuity of market access. However the joint statement signed in South Africa recognised there are a range of technical issues which still need to be resolved. In reality these range from: how precisely existing duty free access to the UK market is to be maintained from 30th March 2019 onwards; how complex rules of origin issues are to be addressed in ways which enhance export opportunities for ACP exporters and avoid disruption of current UK exports; the precise UK SPS controls to be applied post Brexit and whether this could reduce current non-tariff barriers to ACP exports; whether steps will be taken to eliminate unfair trading practices along ACP-UK supply chains and whether quantitative restrictions will be applied to South African exports to the UK where the UK has no or only limited domestic production interests.
During her August 2018 whistle stop tour of three African countries UK Prime Minister Theresa May highlighted the UK’s commitment to ‘a smooth transition that ensures continuity in our trading relationship’ and a longer term aim of building ‘strong trade and investment ties to create even more opportunities for our businesses and for our consumers’. She expressed the UK’s desire to become the ‘G7’s number one investor in Africa by 2022’ (1).
Efforts to promote a smooth transition in existing trade relations appear to be most advanced in Southern Africa where a joint statement on the UK, SACU and Mozambique EPA confirmed steps were being taken to ‘ensure that our replicated agreement can be in place, if required, immediately upon the UK’s withdrawal from the EU in March 2019, in the event that no agreement is reached between the UK and EU’.
In the joint statement the UK government ‘re-affirmed its commitment to ensuring continuity of the effects of the EU-SADC EPA following the UK’s withdrawal from the EU, in particular maintaining the current market access for SACU and Mozambique into the UK’. However it was also recognised that any future agreement should continue to have ‘strong aspects of reciprocity’ (2).
It was acknowledged ‘some issues have been identified that will require consideration after the UK’s withdrawal from the EU in March 2019’ with officials being directed to ‘prepare a built-in agenda on those outstanding issues for expeditious conclusion’. In this context the joint statement included recognition of the importance attached by SACU and Mozambique to ‘continued cumulation between all the parties in promoting continuity and to avoid disruption in trade’. Both the UK and EU were urged to ‘to recognise the importance of cumulation in the discussions on a post-Brexit EU-UK arrangement’ (2).
Potentially of some significance the joint statement recognised ‘inclusive trade is essential for poverty eradication and sustained growth’ (2). According to Prime Minister May the purpose of the joint statement was to ‘ensure the provisions of the region’s current trade deal with the EU continue after this agreement no longer applies to the United Kingdom’. The Prime Minister argued ‘this important step will provide the strong foundations on which we can build a closer trade and investment partnership in the future that brings even greater benefits for both sides’ (3). In the short term however as Traidcraft has pointed out, African exporters have concerns over the currency instability Brexit could give rise to as well as concerns over the impact of a possible Brexit induced economic downturn in the UK on consumer demand for Africa exports (4).
It is noteworthy that the joint statement issued on the 29th August 2018 was qualified by the proviso that ‘the affirmations set forth in this political understanding are not intended to be legally binding and remain ‘without prejudice’ to the technical discussions currently underway’ (3).
Reports from Kenya during Prime Minister May’s visit that the Kenyan government had inked a Brexit free trade deal with the UK which would secure existing duty free-quota free access would appear premature. While the UK is committed to ‘a smooth transition that ensures continuity in our trading relationship with Kenya, ensuring Kenya retains its duty free-quota access to the UK market’, the precise mechanism by which this is to be achieved is by no means clear (5).
The situation is complicated by Kenya’s membership of the EAC and the reluctance of certain EAC members to sign and ratify an EPA with the EU. This creates a situation where Kenya is not able to implement an EPA without violating EAC trade rules. This needs to be seen in a context where the UK’s existing commitment is to ‘rolling over’ EPAs which are fully in place at the date of the UK’s departure from the EU (see epamonitoring.net articles, ‘Decision time on EAC-EU EPA process’, 13 February 2017 and ‘UK government commits to extending EBA access for LDCs post Brexit’, 30 June 2017).
While during Prime Minister May’s visit the UK Minister of State for Africa, Harriet Baldwin boldly declared ‘there is scope for UK consumers and African exporters to benefit from the UK’s decision to leave the European Union’ (6), it needs to be recognised this will require the UK to address a range of nuts and bolts issues, some of which have a direct bearing on future agro-food sector trade relations between the UK and the EU. It is unclear whether the UK government is in a position to get to grips with these nuts and bolts issues given the scale of the human resource constraints facing various concerned UK government departments in the post-Brexit period.
Shortly after Prime Minister May’s whistle stop tour of Africa DFID announced ‘a further US$71.11mn to support AgDevCo’s mission to create jobs, improve food security and boost prosperity in Africa’. AgDevCo is a specialist investor focussed on investing in ‘responsible and sustainable agribusinesses’ which deliver ‘benefits for smallholder farmers’. Investments have reportedly been made in ‘55 early-stage farming and agro-processing companies to date, in the process supporting some 7,500 jobs and linking over 425,000 smallholder farmers to reliable markets’ (6).
These initiatives include the East Africa Fruits in Tanzania, ‘which sells horticulture products into regional markets’ and Jacoma Estates in Malawi, ‘which is pioneering a world-class macadamia export industry incorporating commercial and smallholder farmers’. The chairman and founder of AgDevCo, Keith Palmer, maintained ‘responsible commercial agriculture has a major role to play in creating more jobs, increasing trade and reducing poverty in Africa’ (6).
UK efforts to ‘roll-over’ the existing EU EPAs, particularly in South Africa, need to be seen in the context of the launch in August 2018 of ambitious UK government plans for an expansion of overseas sales of UK food products (7). In this context Traidcraft has highlighted the need for ‘robust regulation of supply chain practices and resources for effective labour rights enforcement’ to minimise exploitative practices along agro-food sector supply chains (4). More broadly as part of the Brexit induced redefinition of the UK’s trade relations with Africa Traidcraft has called for:
- UK officials to work with African governments to ‘devise simple solutions that will continue to provide all African countries with market access, but in ways that support regional cooperation and which respect countries’ industrialisation strategies’;
- ‘Take the necessary steps to ensure that UK investment is always responsible and contributes to building national skills and capacity’;
- Direct aid towards the small-scale private sector, farmer-led businesses and the informal sector;
- Make sure that development assistance and trade policy do not contradict each other, but work hand in hand’ (4).
| Comment and Analysis While Prime Minister May has described the ‘rolling over’ of the existing EU EPAs into ‘UK-Only’ reciprocal trade agreements as an important step in building future relations which ‘brings even greater benefits for both sides’, it needs to be recognised a multiplicity of ‘nuts and bolts’ issues will need to be addressed if such agreements are to bring benefits to ACP partners. However the problem arises that in a range of trade and trade relate areas the UK government faces serious human resource constraints on its ability to effectively engage with all partners on all issues of concern at the same time. In this context it needs to be recognised that once the UK has secured a ‘rolling over’ of preferential access for UK exporters on the same terms and conditions applied to EU27 exporters under current trade agreements, the UK government is unlikely to revisit these ‘cut and paste’ deals for the next decade. It is therefore essential that ACP governments ensure longer term issues in future trade relations with the UK arising from the Brexit process are addressed as an integral part of the ‘rolling-over’ of UK preferential access to ACP markets secured under existing EU economic partnership agreements. In this regard the commitments in the joint UK, SACU Mozambique statement to preparing a ‘built-in’ agenda to expeditiously address outstanding issues provides only limited reassurances. In the UK, SACU Mozambique joint statement a focus on ‘cumulation’ alongside wider rules of origin issues is highly pertinent. These rules of origin issues are currently a major issue of concern to UK exporters given the close integration of the UK in EU27 supply chains. For example only around 40% of inputs into cars assembled in the UK originate in the UK. In the absence of ‘cumulation’ arrangement with current EU27 suppliers, UK car exports would no longer benefit from the tariff preferences under ‘rolled over’ EU free trade agreements with third countries since under the existing rules of origin they would no longer ‘originate’ in the UK. This is also a substantive issue in the EU agro-food sector (see companion epamonitoring.net article ‘UK Food Exporters Warn of Dangers of a Rules of Origin Based “Hidden” Hard Brexit’, 16 July 2018). While the UK government previously appeared to believe this ‘cumulation’ issue could be addressed bilaterally between the UK and the EU, the joint statement issued in South Africa suggest a growing UK government awareness that this issue will need to be negotiated with 3rd country partners. This potentially provides an opportunity to review the rules of origin applied to ACP exports under future ‘UK-Only’ trade agreements concluded with ACP EPA signatories. This includes rules of origin issues related to ACP value added agro food products and fisheries products. In the agro-food sector rules of origin issues can be a constraint on movement up the value chain prior to export, for example where the cost of imported packaging materials leads to a loss of ‘originating’ status and hence tariff preferences. In the fisheries sector, given the absence of any UK long distance fishing fleet, there would appear to be no justification for the UK to continue to insist the nationality of the vessel involved in capturing particular fish should be a factor in determining the origin of fish caught. Potentially the UK could concede to the long standing ACP demand that any fish caught in the exclusive economic zone (EEZ) of an ACP state should be granted originating status. This could be particularly relevant for Pacific ACP countries given the potential importance of the fisheries sector in their trade with the UK. The recognition in the UK, SACU/Mozambique joint statement that ‘inclusive trade is essential for poverty eradication and sustained growth’ could potentially open up space for a revision of the design and application of UK SPS control requirements in a context where the evolution of EU SPS controls systems have introduced systemic discrimination against small holder farmers (particularly those producing on communally held land). The basis for addressing these type of issues will need to be laid in the ‘rolled over’ EPA based ‘cut and paste’ UK-only trade agreements, even though the implementation of any revised SPS requirements will need to await the finalisation of the UK’s policy on the future alignment of UK SPS control systems with those of the EU27. Turning to discussions in Kenya, from a Kenyan perspective the emphasis placed on building ties which create more opportunities needs to focus on how, once freed from EU rules and regulations, the UK government can proactively engage with efforts to minimize non-tariff barriers to Kenyan exports to the UK, particularly exports from small holder farmers. This will require integrating the need to ensure how UK SPS and food safety controls are designed and implemented in a development friendly manner, into the review of the UK’s SPS and food safety control regime. This review will be aimed at adjusting existing arrangements to UK agronomic conditions in ways which reduce costs and simplify processes. The problem faced however will be the major human resource constraints which the UK administration will face in meeting the huge increase in demand for SPS related services in trade with the EU in a context where new UK rules for EU workers are likely to reduce the number of qualified staff available to carry out these tasks (particularly vets). In this context the SPS related concerns of ACP agro-food exporters such as Kenya could very easily be lost sight of. Overall a host of ‘nuts and bolts’ issues will need to be addressed if African exporters are to benefit from Brexit. These include: · ensuring an early and binding commitment to continuity in current terms and conditions of access to the UK market, regardless of the outcome of UK/EU negotiations, so current commercial contract negotiations between UK importers and ACP exporters are not disrupted; · addressing the administrative requirements to avoid any disruption of ACP · extending the scope of the Groceries Code Adjudicator to allow a special focus on · providing clarity on the UK’s position on the future application of the EU’s new Plant · providing clarity on the future basis for UK SPS controls in product specific plant · addressing rules of origin issues which currently inhibit movement up the value · specifically in regard to South Africa, identifying areas where current quota |
Source:
(1) gov.Uk, ‘Prime Minister’s press statement in Nairobi’, 30 August 2018
https://www.gov.uk/government/speeches/prime-ministers-press-statement-in-nairobi-30-august-2018
(2) Department for International Trade ‘Joint statement on UK SACU and Mozambique EPA’, 29 August 2018
https://www.gov.uk/government/news/joint-statement-on-uk-sacu-and-mozambique-epa
(3) gov.uk, ‘PM press statement in South Africa’, 28 August 2018
https://www.gov.uk/government/speeches/pm-press-statement-in-south-africa-28-august-2018
(4) Traidcraft, ‘Some thoughts on Theresa May’s first visit to Africa’, 29 August 2018
https://www.traidcraft.org.uk/traidcraft-in-depth/2018/8/29/some-thoughts-on-theresa-mays-first-visit-to-africa
(5) businessdailyafrica.com, ‘Kenya inks Brexit free trade deal with British PM’, 31 August 2018
http://www.freshplaza.com/article/200566/Kenya-inks-Brexit-free-trade-deal-with-British-PM
(6) africanfarming.net, ‘UK aid helps African farmers to increase business prospects’, 3 September 2018
http://www.africanfarming.net/crops/agriculture/uk-aid-helps-african-farmers-to-increase-business-prospects
(7) foodnavigator.com, ‘UK pushes for export growth in new Brexit strategy’, 21 August 2018
https://www.foodnavigator.com/Article/2018/08/21/UK-pushes-for-export-growth-in-new-Brexit-strategy