Summary
The UK government sees clear commercial benefits in avoiding a disruptive cliff edge in trade relations with Africa, particularly South Africa, the UK’s gateway to Africa. There has been a surge of UK Ministerial visits to Africa. The UK appears diplomatic open to refitting EU EPAs into bilateral deals with the UK. The UK’s Africa focus risks leaving Caribbean and Pacific ACP countries out in the cold. The ACP group collectively will need to capitalize on the UK’s commercial interest in Africa to ensure existing preferential access to the UK is extended for all ACP countries from day 1 of the UK’s departure from the EU. Existing reciprocal arrangements can subsequently be refitted, with appropriate adjustments.
The British government has been dispatching Ministerial delegation to East and West Africa to reassure African governments of the UK’s continued commitment to trade and development cooperation with Africa post-Brexit. This diplomatic offensive, which is taking place under the banner #GlobalBritain, has also seen the UK Chancellor of the Exchequer, Philip Hammond, visit South Africa in December 2016 and South Africa’s Trade and Industry Minister, Rob Davies, visit London in January 2017 to discuss a possible refitting of the existing EPA free trade deal with the EU into a bilateral agreement with the UK (see companion article ‘South Africa looking for predictable EPA based trade arrangement to boost trade with UK’). (1)
Addressing the South African Institute of International Affairs in early March 2017 the departing British High Commissioner, Judith Macgregor, insisted ‘Britain’s relations with Africa…would strengthen, not weaken, after Brexit’. She stressed how ‘the UK would remain just as “outward-looking, globally minded, flexible and dynamic” as now’, with the UK remaining committed to meeting its OECD target of allocating 0.7% of gross national income to financing development cooperation activities. Currently 20% of the UK’s total aid budget is allocated to activities in Africa (£2.5 billion of 12.5 billion). (1)
The High Commissioner stressed how the UK was ‘eager to avoid a Brexit cliff-edge in its trade relations with South Africa, particularly, but also other African countries’. In this context she noted how Brexit had come just after the finalisation of economic partnership agreements with the EU. The High Commissioner indicated that in the case of the South Africa agreement (which included all SACU countries) the UK was looking to ‘effectively transpose the EPA trade arrangements into a bilateral trade deal between the UK and the Southern African countries’. The High Commissioner assumed a similar situation of refitting EPAs would prevail ‘with the EU’s EPAs with other African regions’, but acknowledged discussions were ‘less advanced’ with other regions.
It was recognized this would probably need to involve revisiting and renegotiation in some areas (e.g. on protection of intellectual property rights and liberalisation of financial markets and trade in services). What was highlighted in the press analysis, but left unsaid by the High Commissioner, was these additional areas have proved contentious in long standing negotiations with the USA, and are likely to be equally contentious in negotiations with the UK. Nevertheless it was maintained ‘South Africa would remain Britain’s chief political and economic partner in Africa.’
The High Commissioner also maintained the UK was likely to ‘put more emphasis on the Commonwealth’.
A meeting between South Africa’s Minister of Trade and industry, Rob Davies and Lord Price the UK Minister of State for Trade Policy on the fringes of the Commonwealth Trade Ministers meeting in March 2017 ‘confirmed the commitment of both parties to ensure that there is no interruption in trade between South Africa and the UK as a result of Brexit‘. It also committed the two departments to working closely together to ‘safeguard the continuity and strengthening of the trade relationship between South Africa and the UK‘.(2)
Meanwhile press report carried in Fiji, cite the Fijian High Commissioner to London reporting assurances have been received that ‘the British Government intends to continue providing duty free-quota free access for Fijian-Made goods, after the UK formally exits from the European Union.’ These assurances are held to provide ‘a lot of certainty to the Fijian exporters‘. (3)
However the UK government’s reassurances need to be seen in the context of its aspirations to ‘proudly carry the standard of free and open trade as a badge of honour‘ once the UK leaves the European Union. In his speech to Commonwealth Trade Ministers, Liam Fox, the UK Secretary of State for International Trade, placed considerable emphasis on the UK’s long standing commitment and interests in free trade. He highlighted in particular the huge growth potential in the Commonwealths’ youthful population of over 1 billion under the age of 25 (out of a total Commonwealth population of 2.4 billion), stressing how free trade has the potential to lift millions out of poverty. In particularly he noted how Mozambique, Ghana and Sierra Leone were among those countries ‘whose imports of goods and services are likely to grow fastest over the next 5 years’. (4)
Against this background he committed the UK government to ‘seeking to achieve continuity in our trade and investment relationships with third world countries, including those covered by EU FTAs or other EU preferential arrangements.’ (4)
Sources:
(1) issafrica, ‘May’s government insists the UK will continue to support a stable, prosperous and transformed Africa.’ 09 MAR 2017
https://issafrica.org/iss-today/brexit-europe-not-brexit-africa
(2) DTI (SA), ‘The Outcomes of the Inaugural Commonwealth Trade Ministers Meeting in London’, 14 March 2017
http://mype.co.za/new/the-outcomes-of-the-inaugural-commonwealth-trade-ministers-meeting-in-london/84617/2017/03
(3) Fiji Times, ‘Export opportunity’, March 17, 2017
http://www.fijitimes.com/story.aspx?id=393108
(4) UK Department for International Trade, ‘Commonwealth trade ministers meeting: towards a free trading future’, 9 March 2017
https://www.gov.uk/government/speeches/commonwealth-trade-ministers-meeting-towards-a-free-trading-future
| Comment and Analysis The UK’s commercial interest in South Africa and other expanding African markets is very real. While reference was made by the British High Commissioner to the recently concluded SADC-EU EPA, of far greater importance is the long standing South Africa-EU Trade Development and Cooperation Agreement, implementation of which commenced in 2000 and was fully in place by 2012. This has extended to EU exporters trade preferences not extended to other third country exporters to South Africa.While this saw the overall value of EU exports to South Africa between 2002 and 2015 double (+101.4%), in the agro-food sector, where the new tariff preferences were most significant, the value of EU agro-food exports more than quadrupled (+341%). While the UK’s overall trade performance was weaker, with only an 18% growth in the overall value of UK exports to South Africa between 2002 and 2015, in the agro-food sector the value of UK exports more than doubled (+121.4%).Loss of preferential access for UK exporters to the South African market, once the existing EPA lapses following the UK’s departure from the EU, will be likely to result in intensified competition for UK exporters from their counterparts in the EU27, who will continue to enjoy preferential access to the South African market. This is likely to result in a loss of market share in South Africa for UK exporters. This is likely to be particularly acute for undifferentiated UK agro-food exporters in those product categories where export growth has been strongest since 2002. Among ACP countries, this importance of pre-existing preferences to UK exporters, is unique to South Africa. Under other EPAs, even the Caribbean-EU EPA signed in 2008, processes of tariff reductions are not yet underway. No existing preferential tariff advantages for UK exporters will be lost under these agreements, which have not yet enter into effect in terms of their reciprocal tariff elimination commitments. In this context, the challenge for the ACP group is to capitalize on the UK’s keen interest in the South African and other growing African markets to ensure existing preferential access to the UK market is extended from day 1 of the UK’s departure from the EU, while the pre-existing EPAs are refitted into bilateral agreements with the UK. The importance of the UK establishing unilateral transitional arrangements which maintain current terms and conditions of access for ACP exporters from day 1 of the UK’s departure from the EU, needs to be seen in the context of the difficulties which are likely to be faced in ‘grandfathering’ in existing preferences based on EU agreements and the very real negotiating capacity constraints the UK will face in establishing new bilateral free trade agreements (see companion article ‘Capacity constraints and complexities of ‘grandfathering’ highlighted by Parliament Report’). This is particularly important for Caribbean and Pacific ACP countries, recent assurances based on the UK’s commitment to replicating existing free trade area agreements notwithstanding. There is a real danger that when negotiating capacity constraints begin to bite in the UK, smaller ACP economies could begin to disappear off the radar screens of UK policy makers as different negotiating processes have to be prioritised. It is in guarding against this marginalisation of smaller ACP economies, where the ACP Secretariat could potentially play an important role by establishing a structured dialogue with the UK Department of International Trade, which keeps the focus on protecting current ACP market access, as the difficult process of restructuring the UK’s actual international trade relations gets underway. |
| Key words: BREXIT, South Africa, Fiji, Mozambique, Sierra Leone, Ghana Area for Posting: BREXIT, Southern Africa, East Africa, West Africa, Caribbean EPA, Pacific EPA, EPA General |