Summary
Following the signing of the Ghana-UK trade agreement in London on 2 March 2021 and the tabling of a statutory instrument on 4 March, duty free access will be restored for Ghanaian exports to the UK on 5 March 2021. This will avert the further imposition of UK import tariffs, which in the past 2 months have cost Fairtrade banana exporters over £177,000. It is unclear what long-term implications the recent hiatus in Ghana’s duty-free access will carry for the sourcing decisions of UK importers, a number of which in the past two months have looked elsewhere for supplies.
On 1 March 2021 Ghana’s Trade and Industry Minister-designate, Alan Kyeremanten announced Ghanaian duty-free access to the UK market would be restored from 5 March 2021 (1), following the scheduled signing of the trade agreement concluded with the UK at the beginning of February (2). Trade and Industry Minister-designate, Alan Kyeremanten said the agreement with the UK was based on the text of the EU-ECOWAS agreement, pointing out how ‘if you are a member of the ECOWAS customs union, you have no flexibility to negotiate outside the customs union’.
The formal signing duly took place in London on 2 March between Secretary of State for International Trade Liz Truss and Ghana’s Acting High Commissioner to the UK, Peprah Ampratwum, with Minister designate Kyerematen joining in by video link. At the signing ceremony Minister for International Trade Ranil Jayawardena said the deals secured ‘tariff-free access for products that British shoppers love – and supports jobs in Ghana – paving the way for further economic growth as we build back better from Covid-19.’ For his part, the UK Minister for Africa James Duddridge argued ‘tariff-free access for Ghana to the UK… will enable businesses to scale up their operations, support innovation in markets and create jobs as we recover together from the coronavirus pandemic’ (3).
It was emphasised how the agreement will boost mutual trade worth £1.2 billion (£652 in UK export and £548 in Ghanaian exports in 2019). Ghana’s export trade consists primarily of ‘mineral fuels and oil, preparations of fish, fruit, cocoa and cocoa preparations’ (3). Duty-free access will be restored via the tabling on a statutory instrument on 4 March, with provisional application occurring from 00.01 hours on 5 March 2021. This should put an end to the application of UK import tariffs on direct Ghanaian exports to the UK market.
This followed 8 weeks during which a range of Ghanaian exporters, notably Fairtrade bananas, canned tuna, and value-added cocoa products, faced import tariffs. This saw:
- Import tariffs totalling £177,088 were imposed on Fairtrade banana imports, with this total exceeding £200,000 when all Ghanaian banana imports to the UK in 2021 are considered.
- A shifting of sources of supply of prepared fruit away from Ghana to other preferred suppliers.
- A suspension of canned tuna exports and closure of the canning plant in the first two months of 2021, given the first consignment of exports to the UK scheduled for 2021 would have faced tariffs of up to £1 million.
- A stalling of efforts to move over to increased direct exports to the UK of Ghanaian cocoa butter and cocoa paste, in the face of new rules of origin requirements for goods traded via the EU which result in such goods becoming “stateless goods” and facing standard MFN import duties (for more details see companion net articles ‘Restoring Ghana’s Duty-Free Access to the UK Market is an Urgent Priority’, 26 January 2021, ‘Ghana-UK Trade Deal Concluded but Import Tariffs Still Being Paid on Ghanaian Goods Entering the UK Market’, 9 February 2021, and ‘Two weeks after the Conclusion of Ghana UK Trade Negotiations UK Import Tariffs on Ghanaian Products Remain in Place’, 18 February 2021).
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The Emergence of “Stateless Goods” Which Face MFN Tariffs Regardless of Trade Agreements in Place with the UK The issue of “stateless goods” has emerged as a result of the rules of origin now applicable to trade between the EU and the UK. Ghanaian exporters shipping cocoa paste or cocoa butter to the UK via the EU, now need to proof the ‘origin’ of their product when claiming duty free access. This involves documenting compliance with specific rules of origin requirements under the relevant agreement. However, in the absence of ‘diagonal cumulation’ arrangements, this means the exported products have to remain under customs supervision (under Common Transit Convention procedures) until delivery to the UK if duty free access sis to be claimed under the pending UK-Ghana trade agreement. If the cocoa paste and cocoa butter enters the EU customs territory, it loses its Ghanaian origin. If it is then traded on to the UK without further processing which enables it to gain EU originating status, then duty free access cannot be claimed under the EU-UK trade agreement. The product then becomes “stateless good” on which no tariff preferences of any sort can be claimed, with as a consequence standard MFN tariffs being applied. This is not only an issue for Ghanaian cocoa paste and cocoa butter exports, but all products entering the EU customs territory, prior to onward shipment to the UK or entering the UK customs territory prior to onward shipment to the EU (e.g., to the Republic of Ireland or Northern Ireland). The emergence of “stateless goods” is proving highly disruptive of the triangular supply chains which a wide range of ACP countries have built up since the creation of the single EU market in 1992. This is posing particular problems for smaller ACP exporters shipping short shelf-life products along triangular supply chains, who have been exploiting the economies of scale gained from serving multiple European markets through single distribution hubs. Exports from these countries were given a boost in 2008 when full duty-free/quota-free access to EU markets was granted for fruit and vegetable exports. |
Not surprisingly, after 2 months of considerable bewilderment and expense, Ghanaian banana exporters expressed delight at the restoration of duty-free access to the UK market. This will avert any imposition of tariffs on the shipment of Ghanaian bananas scheduled to arrive in the UK on Saturday 5 March (1).
| Comment and Analysis While UK trade officials have stressed how the usual process of ensuring the entry into force of the signed agreement are being waived in view of the urgent need to have duty-free access for Ghanaian products restored as soon as possible, the question remains: why was Ghana excluded from the statutory instrument tabled in December 2020 which, through the establishment of a ‘bridging mechanism’, allowed continued duty-free access for Kenyan, Cameroonian, and Colombian exporters given procedural delays faced in ratifying these concluded agreements?Equally, the question arises as why Ghana’s loss of duty-free access was not rectified via the expedited adoption of the relevant statutory instrument following the 4 February Joint Ministerial statement announcing the conclusion of trade negotiations?It is unclear why it took a further month for a formal virtual signing involving the Ghanaian Trade Minister designate, when the constitutional constraints which prevented formal signing had been in place since the commencement of the election process and have still not been fully removed given the closure of the Ghanaian Parliament due to a Covid-19 outbreak prior to the ratification of the Ministers appointment. The Ghanaian President had throughout this process stood willing to give executive approval to the agreement, substantive negotiations on which were concluded in December 2020, alongside a UK commitment to immediately restore duty free access. It is unclear what long-term implications the recent hiatus in Ghana’s duty-free access will carry for the sourcing decisions of UK importers, a number of which, in the past two months, have looked elsewhere for supplies. This will become clear only when the Ghanaian tuna canning plant reopens, if UK prepared fruit importers return to sourcing from Ghana and if the expansion of direct Ghanaian cocoa paste and cocoa butter to the UK can now get underway, given the already more firmly established Ivorian suppliers have had a further two months to consolidate their position. Ghanaian Exports of Selected Products to the UK and EU27 (2019 – € and Tonnes)
Source: EC, Market Access Data Base, https://trade.ec.europa.eu/access-to-markets/en/statistics?includeUK=true |
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Sources:
(1) Myjoyonline.com, ‘Ghana, UK to sign new trade agreement tomorrow’, 1 March 2021
https://www.myjoyonline.com/ghana-uk-to-sign-new-trade-agreement-tomorrow/
(2) gov.uk, Department for International Trade, ‘Ghana-UK joint statement on a new interim Ghana-UK Trade Partnership Agreement’, 4 February 2021
https://www.gov.uk/government/news/ghana-uk-joint-statement-ghana-uk-trade-partnership-agreement
(3) gov.uk, ‘UK signs Trade Partnership Agreement with Ghana’, 2 March 2021
https://www.gov.uk/government/news/uk-signs-trade-partnership-agreement-with-ghana