Summary
There is a lack clarity on the legal possibilities for ‘grandfathering’ existing reciprocal preferential trade arrangements into bilateral deals with the UK. There are also serious human resource capacity constraints on the UK governments ability to simultaneously negotiate more than a handful of free trade area agreements. This is likely to require a prioritisation of UK FTA negotiations, with smaller ACP countries potentially being left out in the cold. This suggest a need for a coordinated ACP initiative to establish a joint ACP-DIT working group to explore
a) the establishment of transitional unilateral arrangements to prevent any disruption of current ACP access to the UK market and
b) simplified modalities for refitting existing EPAs into bilateral trade agreements with the UK, including the addition of a range of necessary ‘EPA+’ elements.
The House of Commons International Trade Committee report on ‘UK trade options beyond 2019’ has highlighted two issues of particular concern to ACP countries, namely: the difficulties which will be faced in ‘grandfathering’ existing reciprocal preferential trade arrangements and the human capacity constraints which the UK government will face in conducting multiple simultaneous trade negotiations.
The report notes the UK through its membership of the EU ‘is party to some 50 FTAs’. However this covers trade with substantially more than 50 countries, given the regional nature of some of these agreements. In addition, concluded EU FTA negotiations with a multiplicity of regions will see a number of new FTAs coming into force covering many ACP countries, before the UK’s scheduled departure from the EU.
The British Chamber of Commerce in its written submission Committee, highlighted the need for the UK to ‘grandfather existing deals that we benefit from thanks to our current membership with the EU’. This was seen as important in order to ‘ensure that British businesses do not face less advantageous terms than those on which they currently trade with the many third countries where the EU presently has a trade deal’.
This view was reinforced by other written submissions to the Committee. However some witnesses highlighted how there was ‘unlikely to be continuity under these agreements’, since ‘as soon as the UK is not an EU member states, it has no acquired rights’. The Law Society for its part saw this issue of ‘grandfathering’ as a ‘political rather than a legal’ issue.
The International Trade Committee concluded ‘if the UK and the countries with which the EU has an FTA were simply to start applying the terms of the FTA, this is likely to be against the rules of the WTO’.
According to the Agriculture and Horticulture Development Board ‘grandfathering’ would create a situation where ‘if the UK and other countries were to simply continue allowing each other tariff-free market access without a formal new trade agreement, other WTO members might claim they should have the same rights’.
This led the House of Commons International Trade Committee to conclude that uncertainty existed over whether the UK could simply ‘grandfather’ existing preferences. The Committee therefore called the UK government to ‘seek the earliest possible clarity’ as to whether ‘such grandfathering is legally possible’, with the initiation of ‘early discussions with the WTO about the degree of proactive support they can provide to promote such a smooth transition’.
In terms of the human capacity constraints which the UK government will face in conducting multiple simultaneous trade negotiations, the International Trade Committee noted the limited capacity currently in place. It highlighted the submission from the British Exporters Association which held the negotiation of ‘a bilateral trade agreement requires a trade team of between 50 and 100 experienced individuals’.
DIT officials meanwhile acknowledged ‘a negotiation team for an FTA might consist of between 50 and 100 people, but there could be “double-hatting”, with one person covering the same specialist area across … several sets of negotiations in parallel’. Expertise from sector specialists could also be drawn from other government departments.
It was acknowledged that ‘other countries could typically undertake four or five sets of negotiations at once’. However given ‘some negotiations would not be starting from scratch’ and could be based on existing EU arrangements neither DIT officials nor the Secretary of State for International Trade, would commit to how many processes of negotiations the UK government ‘would be able to manage simultaneously’.
Significantly according to submissions from DIT officials the Department currently has a round 145 trained officials (up from 45 in June 2016), with some 400 other officials in a multiplicity of other government departments undergoing some form of training on trade policy and trade negotiations.
Against this background the House of Commons International Trade Committee concluded the UK government ‘will need to prioritise countries or regions for new FTAs’, since ‘there is a limit to how many FTAs can be negotiated at one time’. It argued the UK government ‘must be clear about what those priorities are, what negotiating resources it is able and willing to procure, and how those resources will be deployed’.
Sources:
House of Commons ‘UK trade options beyond 2019’, Summary, 6 March 2017
https://www.publications.parliament.uk/pa/cm201617/cmselect/cmintrade/817/81703.htm
House of Commons ‘UK trade options beyond 2019’, Full Report, 6 March 2017
https://www.publications.parliament.uk/pa/cm201617/cmselect/cmintrade/817/817.pdf
House of Commons ‘UK trade options beyond 2019’, Conclusions & Recommendations, 6 March 2017
https://www.publications.parliament.uk/pa/cm201617/cmselect/cmintrade/817/81709.htm
House of Commons, ‘Published written evidence’
https://www.publications.parliament.uk/pa/cm201617/cmselect/cmintrade/817/81714.htm#_idTextAnchor096
| Comment and Analysis Given the possible challenges to ‘grandfathering’ UK rights under existing EU free trade agreements highlighted by the Agriculture and Horticulture Development Board, the ACP Group may wish to propose to the EU28 that the ACP (79 members) and the EU (28 members) should jointly explore with WTO members the easier option of ensuring continuity in ACP member states access to the UK market on a transitional basis, pending the conclusion of new bilateral trade agreements with the UK.Efforts to secure such tolerance from WTO members could use as a precedent the existing WTO tolerance of EU interim economic partnership agreements, which have not been challenged since their initiation in 2008. In this context it should be noted this tolerance is for one-way preferences in favour of developing countries and does not tolerate WTO illegal preferences for developed economies in their trade relations with developing countries. From an ACP perspective there is therefore a need to breakdown the issue of ‘grandfathering’ inherited preferences into its constitute parts, in terms of securing WTO tolerance of transitional ‘grandfathering’ arrangements. The human resource constraints on the ability of the UK government to negotiate multiple FTAs simultaneously (even when not starting from scratch), and the likely need for prioritization of different UK negotiation processes, suggests an ACP initiative is required to ensure both transitional interim measures are set in place and the modalities are elaborated on how negotiations which are not starting from scratch can be administratively simplified. Such an initiative could take the form of the establishment of a joint ACP-DIT working group to explore precisely these issues. The establishment of such a working group, focused on ensuring interim measures are set in place and the modalities for re-fitting existing EPAs are elaborated, would go a long way to reassuring UK importers that existing terms and conditions of access for ACP exporters will not be disrupted on day 1 of the UK’s formal departure from the EU. However it should be noted that of the 46 pieces of written evidence submitted to the International Trade Committee inquiry there were no written submissions taking into account by the Committee from the ACP group or individual ACP member states governments. The principal submissions on the consistency of the British governments Brexit policy and its development cooperation commitments came from UK NGOs (Fairtrade Foundation, Traidecraft, Trade Justice Movement) and development policy research institutes (Overseas Development Institute). |
| Key words: BREXIT, Area for Posting: BREXIT, Southern Africa, East Africa, West Africa, Caribbean EPA, Pacific EPA, EPA General |