The 22 February 2018 ACT Alliance convened a seminar on the Implications of Brexit in the agro-food sector for ACP countries, included an afternoon session on the implications of Brexit for the forthcoming ACP-EU Post-Cotonou negotiations and the possible ramifications for ACP agro-food sectors. This note summarises the main points made in the initial presentation during this session. It is not an exploration of all the issues arising in the context of these forthcoming negotiations but rather provides an introduction to some of the most salient aspects of the impact of the Brexit process on the post-Cotonou negotiations as this impinges on the agro-food sector relationship. It looked at these salient aspects with reference to 3 specific dimensions: trade relations, development cooperation and political relations and seeks to selectively review the implications for different ACP regions.
Introduction
The impact of the UK’s departure from the EU needs to be seen in the context of the evolution of the EU since 2000.
The most dramatic change in the EU since the negotiation of the ACP-EU Cotonou Agreement has been the enlargement of the EU from 15 to 28 member states.
These new EU member states have few historical trade, development and political links to the countries which are part of the African, Caribbean and Pacific (ACP) Group.
The partner body with which the ACP Group has collectively concluded successive comprehensive trade and development cooperation partnership agreements since 1975 is thus now very different form the last round of comprehensive ACP-EU negotiations at the end of the 1990s.
In the preparatory work undertaken in preparation for the launch of the ACP-EU negotiations in response to pressure from ‘new’ EU member states the EC’s approach to the negotiations has been characterized by a stronger assertion of the need to promote EU economic and political interests through any future ACP-EU partnership agreement.
At the political level the UK’s departure from the EU needs to be seen in the context of EC concerns over the loss of EU political influence at the global level within what is seen as an increasingly competitive global political context.
The EU is increasingly concerned to ensure ACP governments increasingly aligned themselves with EU interests in global debates, in the context of often competing and contradictory agendas.
The stronger assertion of EU interests also needs to be seen in the context of mounting EU migration and security concerns. Concerns which carry very real political consequences in Europe in terms of the rise of populist anti-establishment and/or anti-EU movements, with the latter being as posing a serious threat to the European integration project.
At the economic level the impact of the UK’s departure needs to be seen in the context of the EC’s growing emphasis on ensuring EU trade and investment interests in ACP economies are more effectively promoted through the new partnership agreement.
This can be seen as responding to the concerns expressed by EU members with no traditional political, trade or economic ties to ACP countries.
In this context the very real danger exists that this focus on the promotion of EU trade and investment interests could leave little space for accommodating ACP concerns related to how the new relationship with the EU can support the structural economic transformation of ACP agro-food sectors.
This is a particular concern in sub-Saharan Africa where rapidly rising demand for food potentially opens up new opportunities for structural transformation of local African agro-food sectors.
However African aspirations for the structural transformation of their agro-food sectors are in many areas in fundamental contradiction with the growing export focus of EU agro-food sector enterprises and the trade consequences of the deployment of EU agricultural policy tools.
Brexit and Future ACP-EU Political Relations
The departure of the UK from the EU further changes balance of political interest in the EU in regard to future relations with the African, Caribbean and Pacific countries.
This will be particularly acutely felt in the Caribbean and the Pacific and throws up real problems for the Governments of Caribbean and Pacific countries in terms of diversifying their political relations within the EU.
This raises the issue of how best to protect and promote Caribbean and Pacific interests within a future ACP-EU partnership relationship, given the hard reality that Caribbean and Pacific countries are marginal to both EU security and migration concerns and EU global trade and investment interests in the agro-food sector.
Meanwhile in Africa the UK’s departure from the EU shifts the political balance towards francophone Africa in relations with the EU, with this compounding the growing EU focus on West Africa arising from the core EU security and migration concerns which are informing the EC’s approach to the post-Cotonou negotiations.
This could lead to the political marginalization of Southern and Eastern African Anglophone countries within the ACP-EU relationship, with a policy focus increasingly centred on the economic and commercial opportunities Anglophone Africa presents for EU exporters and investors.
In this context there is a high risk of marginalisation of Anglophone African agro-food sector structural development concerns, which in certain respects are in fundamental contradiction to EU agro-food sector concerns, which in major sub-sectors are heavily focussed on the expansion of EU sales to rapidly growing African ACP markets.
Brexit and Future ACP-EU Trade Relations
- The Reduced Value of the Core Trade Relationship for Many ACP Countries
For some ACP countries the removal of the UK market from the existing ACP-EU trade relationship which has been established as part of the Cotonou Agreement will fundamentally transform the nature of their trade relationship with the EU.
In some instances, without the UK market, their trade relationship with the EU is marginal.
There is no escaping the fact that on the basis of current patterns of exports the departure of the UK will reduce the significance of the trade relationship with the EU for a range of ACP countries:
- for Belize and St Lucia the departure of the UK will reduce their exports to the EU by around three quarters;
- for South Africa, Fiji, Seychelles, Guyana, Jamaica and the Gambia it will reduce their trade with the EU by almost a third
- for Kenya, and Mauritius, it will reduce their trade with the EU by between a fifth and a quarter (see table).
The hard reality is that once the UK leaves the EU this trade into the UK market will no longer fall under the terms and conditions of trade agreements concluded with the EU.
ACP Countries: % of total exports to the EU destined for the UK market (2015-17)
| Exceptionally High Dependence
(+ 55% dependence on UK market) |
High Dependence
( 30% to 55% dependence on UK market) |
Above Average Dependence
(18% & 30% dependence on UK market) |
||||||||||
| 2015 | 2016 | 2017 | 2015 | 2016 | 2017 | 2015 | 2016 | 2017 | ||||
| St Lucia | 77.9% | 76.0% | 60.5% | Fiji | 44.9% | 45.6% | 31.9% | Kenya | 27.7% | 29.1% | 28.0% | |
| Belize | 73.8% | 50.9% | 42.0% | South Africa | 26.6% | 38.1% | 31.7% | Mauritius | 21.5% | 22.1% | 21.5% | |
| Seychelles | 33.5% | 27.2% | 23.9% | Dom Rep. | 21.9% | 21.7% | 17.2% | |||||
| Guyana | 34.3% | 16.4% | 25.1% | Dominica | 28.7% | 3.8% | 18.6% | |||||
| Jamaica | 33.0% | 26.6% | 28.2% | Swaziland | 10.4% | 28.3% | 11.0% | |||||
| Gambia | 29.9% | 31.1% | 26.5% | Solomon Islands | 26.4% | 19.9% | 5.5% | |||||
| PNG | 18.9% | 17.6% | 13.4% | |||||||||
This issue is even more pronounced and affects even more ACP countries if the focus is solely on the impact of the UK’s departure from the EU on trade in agro-food products where current tariff preferences are significant to existing trade flows (i.e. excluding products which are zero-rated under all tariff regimes likely to be applied).
- Impact of Brexit on the Functioning of EU27 Markets
In addition the UK’s departure from the EU undermines the value of existing preferential access to EU27 markets.
This is a result of the removal of UK import demand in the context of the EU’s ongoing market access obligations for non-ACP preferential suppliers. This is an issue which has so far received little attention, despite it primarily affecting high profile products such as banana and sugar.
- Danger of Enhanced Exports to ACP Markets
A further area of impact of the UK’s withdrawal from the EU which has been neglected is the possible impact of a ‘hard’ Brexit in terms a trade displacement.
This could see a sudden rapid increase of EU27 and UK agro-food exports to ACP markets, if standard MFN duties and 3rd country import controls were applied on mutual EU27/UK trade in agro-food products.
This is a an issue which has so far been a neglected area of analysis of the impact of the UK’s withdrawal from the EU, yet this dimension could have important implications for the implementation of EU-ACP reciprocal trade agreements which have been concluded in the context of the Cotonou Agreement.
If a ‘hard’ Brexit occurs in the agro-food sector and standard MFN duties and 3rd country import controls are applied on mutual EU27/UK trade, then this could profoundly disrupt current EU27/UK trade in a range of agro-food products, where ACP counties are also potential markets.
This could lead to both EU27 and UK exporters seeking out alternative markets across the globe for a range of agro-food products, which can no longer be traded competitively between the EU27 and the UK.
In this context growing African markets could be targeted for a range of displaced EU27 or UK exports, with these ranging from frozen poultry parts and-frozen beef to onions and dairy products (e.g. expanded skimmed milk powder and fat filled milk powder production which would increase as a consequence of a disruption of EU27/UK trade in a range of higher value dairy products).
This needs to be recognised and taken on-board in the implementation of ACP economic partnership agreements with the EU, given these agreements seek to eliminate not only tariffs on EU exports but also non- tariff barriers to EU exports.
This will requires a clear and unequivocal commitment from the EU Council of Ministers to the flexible and responsible interpretation and application of EPA commitments, with this needing to be enshrined in a legally binding post-Cotonou ACP-EU agreement.
- New Issues To be Addressed
Also in regard to the trade dimension of the post Cotonou ACP-EU agreement new issues will need to be addressed.
This would include the better design and application EU SPS controls to make them more development friendly and less structurally -biased against small scale producers and small scale exporting countries.
It will also need to address the issue of the elimination of current Unfair Trading Practices (UTPs) along ACP-EU supply chains, the burden of which falls particularly heavily on small scale farmers.
These types of new issues should form an integral part of any legally binding ACP-EU partnership agreement.
Future Development Cooperation Relations
- Overview
The development cooperation dimension of ACP-EU partnership will also be affected by the UK’s departure from the EU, given the UK currently provides around 15% of the financing for ACP-EU development cooperation activities.
This funding will simply not be available under any future ACP-EU partnership agreement, given by 2020 the UK will have formally left the EU and no longer be a party to the agreement.
Yet despite this reduction in future funding the EU’s ambitions for the future ACP-EU partnership have been widened to include a greater focus on security and migration issues, issue which the EU wishes to see comprehensively addressed.
- Issue of EPA Related Adjustment Support
Under a range of EU EPAs the provision of EPA related trade adjustment support has been an integral part of these trade and development agreements.
Thus we find in West Africa an integral part of the EU-West Africa economic partnership agreement is the PAPED (EPA Development Programme) which commits the EU to delivering €6.5 billion in EPA related support to assist in building a competitive and harmonious regional economy, with:
- €3 billion coming from EU institutions (to which the UK would contribute 15% as an EU member);
- €2 billion from EU Member States (within which UK funding would be counted);
- €1.5 billion from the European Investment Bank (to which the UK would contribute as an EU member).
While these commitments have already been made as part of the provisional EU-West Africa agreement reached in the course of 2014 and on which all EU members signed off by December 2014, the implementation of these commitments is likely to straddle the pre-Brexit and post Brexit periods.
Against this background, with the UK attempting to roll-over the existing preferential arrangements established under EU trade agreements into ‘UK-only’ trade agreements the question arises: will the UK also commit to providing trade adjustment support?
If not EU member states governments are likely to respond badly to the UK ‘rolling-over’ EU agreements as bilateral ‘UK-only’ trade deals while becoming a ‘free-rider’ in terms of the financing of EPA related trade adjustment support programmes in ACP countries.
How this issue is resolved could have important implications for the level of trade related adjustment support extended to ACP countries in the context of the future ACP-EU partnership agreement in support of EPA implementation.
While this issue will need to be taken up between the EU27 and the UK, as well as by ACP governments in ‘refitting’ their existing EU trade agreements into ‘UK-only’ trade agreements, it will also need to be addressed as part of the post-Cotonou ACP-EU negotiations.