Is the Final Count Down to Brexit Underway or Will the ACP have Three More Months to Take Action to Mitigate the Trade Disruption Effects of No Deal Brexit?

There is a perception in some quarters that Prime Minister May’s recent outline of the way forward signals the beginning of a move towards abandoning Brexit. This is a complete misreading of the parliamentary numbers in terms of support for any given position on resolving the Brexit impasse.

As the CBI analysis has pointed out there are no less than 5 competing positions in the House of Commons on the way forward, none of which can command a Parliamentary majority. The only position on which a Parliamentary majority exists is on the need to avoid a ‘no-deal Brexit’. With the exception of parts of the ERG group of Conservative MPs this outcome is seen as being a short to medium term disaster for the UK economy.

This creates a situation where a 3 month extension of the article 50 process, while deferring the prospect of a ‘no-deal’ Brexit, would provide no assurances that this outcome would be avoided in July 2019.

A 21 month extension of the article 50 period would offer more time for making substantive progress on a longer term EU-UK trade deal. Such progress if substantive enough would serve to reduce the significance of the Irish back-stop issue.

Such a move would de facto shift away from the EU’s insistence that Withdrawal Agreement issues first be addressed before negotiations commence on the longer term framework for EU27/UK trade relations. This would be a significant concession by the EU. However it is unclear whether in the current political climate Prime Minister May would be able to secure Parliamentary support for such a long extension of the article 50 period.

This suggests current developments would give ACP governments an extra 3 months to ensure measures were set in place in relations with both the UK and EU27 which would reduce the adverse impact of a no-deal Brexit on ACP exports.

In terms of relations with the UK this would require the inclusion of a detailed ‘Annex of Concerns’, in all ‘Continuity Agreements’ concluded with the UK which seek to simply roll-over existing EPA tariff arrangements. This needs to be based on the recognition that tariff schedules are but one dimension of what gives commercial value to trade agreements, with a range of other substantive issues also needing to be addressed. In this context each ‘Annex of Concerns’ would set out the range of additional issues in future ACP trade relations with the UK which need to be addressed in the context of a ‘no-deal’ exist of the UK from the EU if not only continuity of tariff treatment, but continuity in trade flows and continuity in the value of existing tariff preferences is to be maintained. These include:

· addressing the issue of the trade documentation which ACP exporters should use on exports to the UK once the UK is no longer part of the EU customs union, single market or any other existing EU trade facilitation arrangement over which the EU has proprietary rights (this includes SPS and food safety documentation) – such arrangements would need to remain in place until alternative ‘UK only’ trade documentation systems were in place which allowed the continued smooth flow of imports;

· establishing customs cooperation and trade facilitation arrangements to ensure the continued smooth functioning of triangular ACP supply chains which serve the UK market through EU27 member states (or EU27 markets through the UK), with this being a particular issue of concern for floriculture and horticulture exports to Eastern and Southern Africa given the role of the Netherlands as a trading hub in these products;

· the issue of the future value of existing duty free-quota free preferential access to the UK market if the UK goes ahead with plans currently under discussion to abolish high MFN duties on all products where the UK has no production interest (e.g. bananas, rice, citrus fruit and potentially sugar where a structural deficit of 50% of consumption exists) (for more details see companion epamonitoring.net article, ‘UK Development NGOs Call for Extension of Existing Tariff Preferences on Unilateral Basis While Problems of UK Continuity Agreements Are Addressed’,  25 February 2019);

· addressing the impact of a ‘no-deal’ Brexit on the functioning of EU27 markets arising from a failure to apportion between the EU27 and UK markets the existing EU28 bilaterally negotiated TRQs for sensitive agricultural products (especially bananas) (for details on the issues to be addressed in each of these areas see the companion epamonitoring.net article ‘State of Play in the EU/UK Brexit Negotiations: Update 4 February 2019’, 8 February 2019).

Where UK only ‘Continuity Agreement’ negotiations are still at an early stage such an “Annex of Concerns” should form an integral part of the agreement. Where Continuity Agreements have been formally concluded or initialled the “Annex of Concerns” should take the form of a codicil to the ‘Continuity Agreement’. This would replicate the current approach to the Irish border issue being adopted in the EU/UK negotiations process.

In terms of relations with the EU27 a dialogue would need to be urgently launched with the EU to ensure a range of issues of concern are addressed, including;

· securing a commitment to allow the continued use by ACP exporters in post-Brexit trade with the UK of trade documentation systems over which the EU has proprietary rights, until such time as alternative ‘UK-only’ trade documentation systems are in place and fully functioning;

· securing a commitment to the establishment of simplified administrative, customs inspection and customs clearance arrangements for products where the UK and EU27 accord the same tariff (e.g. DFQF access)  and non-tariff treatment to ACP exports , so as to facilitate the conduct of triangular trade across UK/EU27 borders;

· securing a commitment to supporting a jointly agreed approach with the UK to the apportionment of bilaterally negotiated EU TRQs for products where ACP export interests are impacted (e.g. bananas), on the basis of patterns of trade flows to UK and EU27 markets over an agreed reference period or taking equivalent unilateral action if no bilateral agreement can be reached;

· securing a commitment to providing support to market repositioning in ACP export sectors adversely affected by the UK’s withdrawal from the EU;

· securing a commitment to revising EPA commitments and obligations for countries whose overall trade with the remaining EU member states will be adversely impacted by the UK’s withdrawal from the EU, so as to revalorise the existing economic partnership agreements;

· securing a commitment to the practical extension of existing EU measures and initiative on the elimination of unfair trading practices to ACP-EU agri-food sector supply chains.

If this additional 3 month breathing space is not fully utilised then individual ACP exporters in the most vulnerable sectors could well see their export trade with both the UK and EU27 severely disrupted by the consequences of a deferred ‘no-deal’ outcome to the current Brexit negotiations.