Summary
Brexit could potentially impact on a large volume of UK trade, with trade in agricultural products likely to be most severely affected. This will include products where some ACP exporters have significant export interests. However UK exporters will also be adversely affected. Analysis of the effects of Brexit related trade disruptions could potentially assist the ACP in identifying useful allies in lobbying the UK government for pro-active initiative to minimize trade disruption.
Research from the House of Commons Library, requested by Anna Soubry MP (Conservative) has found ‘continued membership of the Single Market and the Customs Union will give the UK free trade with the countries that buy 90% of everything’ the UK exports. This will be the case if by remaining a member of the Customs Union the UK remains a party to the existing trade agreements the EU has with over 50 countries and the pending EU trade deals which are still under negotiation. (1)
Anna Soubry MP maintains the research underlines ‘the serious potential perils of pulling out’ of the Singe Market and/or the EU customs union. She called on the UK government to ‘bring before parliament serious cost-benefit analysis of the potential impact of the leaving both the Single Market and the Customs Union. And whether their benefits can really be replicated outside’, with this being done ‘before Article 50 negotiations start’. (1)
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Profile of UK goods exports in 2015 · 47% of UK exports go to the EU. · 11% of UK exports go to non-EU countries with whom the EU has trade agreements. · 4% of UK exports go to non-EU countries with whom the EU has an agreement pending ratification. · 28% of UK exports go to non-EU countries with whom the EU is negotiating an agreement. |
According to studies carried out by Centre for Economics and Business Research, the lapsing of all EU trade agreements post-BREXIT would cost UK importers ‘an additional £1.2 billion’ in import duties. This represents a 2.4% rise in the costs of imports compared to the status quo. (3) UK exporters meanwhile would face a loss of competitiveness as additional import duties on sales to third country markets totaling £698.4 million were re-imposed as a result of the lapsing of the benefits of pre-existing EU trade agreements. This is equivalent to roughly 1.7% of the value of these exports in 2014. (4)
These are likely to be under-estimations of the additional costs facing UK businesses, since it does not include the trade agreements which the EU has negotiated and which have not yet entered into force (e.g. those with most ACP EPA regions) and those EU negotiations which are on-going (e.g. with the USA, Mercosur, Japan).
UK Import and Exports Where MFN Duties Would be Applied (Millions) – 2014
| UK Imports | UK Exports | |||||
| Product | Value Trade | Value MFN duties | % MFN duties | Value Trade | Value MFN duties | % MFN duties |
| Animal products | £45.4 | £0.6 | 1.2% | £124.9 | £7.0 | 5.6% |
| Bev & Tob | £429.9 | £12.3 | 2.8% | £863.2 | £55.8 | 6.5% |
| Cereal & Prep | £217.3 | £11.4 | 5.3% | £333.0 | £23.1 | 6.9% |
| Coffee, tea | £150.3 | £3.6 | 2.4% | £81.0 | £4.2 | 5.2% |
| Cotton | £70.0 | £3.0 | 4.3% | £19.5 | £1.2 | 6.3% |
| Dairy | £19.7 | £0.8 | 4.2% | £149.1 | £1.3 | 0.9% |
| Fish & products | £854.7 | £87.0 | 10.2% | £30.3 | £0.3 | 0.8% |
| Fruit & veg, plant | £1,938.6 | £167.9 | 8.7% | £138.5 | £5.0 | 3.6% |
| Oilseed, fat oils | £159.2 | £10.0 | 6.3% | £52.0 | £1.0 | 1.9% |
| Other agri prod | £59.4 | £1.9 | 3.2% | £123.2 | £4.0 | 3.2% |
| Sugar & Confect | £227.5 | £44.4 | 19.5% | £45.0 | £0.4 | 1.0% |
The highest percentage increases in duties are on UK imports of agricultural products, where ACP countries have major export interests, notably for sugar an sugar confectionary (where ACP suppliers account for 82.6% of extra-EU sugar imports into the UK), fruit and vegetables (where countries like South Africa and Kenya have a high dependence on the UK market for certain products) and fish and fish products. (3)
Trade with some countries is likely to be more severely affected than with other countries, with the analysis picking out South African and Turkey, when it comes to UK export interests being most adversely affected. (4)
Meanwhile an article by the Cabinet Secretary, the head of the UK civil service has set out how the UK government administration is seeking to prepare for BREXIT. In terms of trade relations with non-EU countries this analysis highlights how the new Department of International Trade (DIT) has already been able to attract staff to provide ‘a strong policy nucleus… as well as detailed knowledge of UK export sectors and overseas markets’. A priority for DIT will be ‘scoping out the necessary resource for negotiating trade agreements’ and identifying ‘the skills needed to negotiate free trade agreements and other trade deals for the UK outside the EU’ The DIT will focus on ‘preparing for negotiation of the UK’s position within the World Trade Organization and market access deals with non-EU countries’. (5)
Sources:
(1) Open Britain, ‘Soubry – 90% of UK trade will be free if we stay in the Singe Market and the Customs Union’, 17 October 2016
http://www.open-britain.co.uk/soubry_90_of_uk_trade_will_be_free_if_we_stay_in_the_single_market_and_the_customs_union
(2) Open Britain, ‘Mandelson – Hard Brexit will lead to £1.2 billion bombshell for British businesses’, 14 November 2016
http://www.open-britain.co.uk/mandelson_hard_brexit_will_lead_to_1_2_billion_bombshell_for_british_businesses
(3) Open Britain, ‘The impact of Brexit on UK imports from outside the EU’, November 2016
https://d3n8a8pro7vhmx.cloudfront.net/in/pages/11414/attachments/original/1478799409/Open_Britain_Tariffs_Research_-_Imports_FINAL.pdf?1478799409
(4) Open Britain, ‘The impact of Brexit on UK exports to destinations outside the EU’, November 2016
https://d3n8a8pro7vhmx.cloudfront.net/in/pages/11414/attachments/original/1478799406/Open_Britain_Tariffs_Research_-_Exports_FINAL.pdf?1478799406
(5) Gov.UK, ‘Brexit – rising to the challenge’, 1 November 2016
https://quarterly.blog.gov.uk/2016/11/01/brexit-rising-to-the-challenge/
| Comment and Analysis The analysis highlights the extent to which any disruption of trade between the UK and ACP countries following BREXIT would carry adverse consequences not only for ACP exporters but also UK exporters, importers and consumers. This potentially provides a basis for identifying the scope for alliance formation in ensuring that ACP interests are addressed in the run up to BREXIT. Potential allies in the UK in terms of ensuring no disruption of the current basis for ACP access to the UK market include the Fresh Produce Consortium (FPC) and the British Retail Consortium (BRC). In addition, within the ACP the position of the South African government is potentially of considerable significance, since UK exporters already enjoy tariff preferences which would be lost should the market access arrangements under the SADC-EU EPA lapse in the case of the UK, post BREXIT. In this context there would appear to be a need for the South African government to take a lead in putting together a concerted lobbying initiative by the potentially worst affected ACP countries, with the aim of averting any disruption of trade with the UK. The analysis from the UK Cabinet Secretary suggests that the skills and expertise being built up by DIT is primarily focused on EU export interests, with the issues at stake for ACP developing countries arising from the UK’s departure from the EU being little considered. It is in this context that a pro-active coordinated initiative by the Governments of those ACP countries which are likely to be worst affected would appear to be in order. |
| Key words: BREXIT, Area for Posting:IMPLEMENTATION EU TRADE AGREEMENTS/BREXIT, SADC EPA, EPA General |