On 22 February 2018 ACT Alliance convened Seminar on the Implications of Brexit in the agro-food sector for ACP countries and for the forthcoming ACP-EU Post-Cotonou negotiations. A series of twelve 2 page summary notes were produced for the seminar covering both substantive issues arising within the Brexit process and the current state of play in the Brexit process. Note 5 explores the impact of Brexit on the erosion of the value of ACP trade preferences through an exploration of the specific case of ACP banana exports, in the context of the likely evolution of the UK’s independent trade policy once the UK is freed from the disciplines of EU customs union and single market rules and regulations.
Conditioning Factor: Absence of UK Domestic Production
In the absence of any domestic banana production in the UK (unlike the EU as a whole), post-Brexit the UK government will have little interest in maintaining the high EU import tariffs and after any transition period (i.e. from 1st January 2021) may move swiftly to lower or even abolish tariffs on UK banana imports.
The main question faced is likely to be whether the UK opts for reducing banana sector tariffs unilaterally or as part of new ‘UK-Only’ FTAs? This basic policy decisions will have an important bearing on the pace of preference erosion in the banana sector.
Opting for unilateral tariff liberalisation would mean existing ACP tariff preferences would be lost sooner rather than later, while opting for liberalisation via UK-Only FTAs will take longer given, the serious human resource constraints on the UK’s ability to negotiate simultaneously multiple FTAs.
According to submissions to the House of Commons International Trade Committee, the negotiation of ‘a bilateral trade agreement requires a trade team of between 50 and 100 experienced individuals’. Yet according to a submission from the UK DIT, in March 2017 there were only around 145 trained officials (up from 45 in June 2016), with some 400 other officials across government undergoing some form of training on trade policy and trade negotiations.
Conditioning Factor: the Future UK/EU27 Trade Arrangement
However future UK banana sector tariffs will also be influenced by the nature of the long term UK/EU27 trade arrangement set in place and how closely aligned UK & EU agricultural trade policies will remain.
If the UK remains in a customs union with the EU it will need to maintain the EU common external tariff.
However the UK government has stated its commitment to leaving the customs union and single market.
The EU is firmly opposed to the UK ‘cherry picking’ sectors where policy divergence (e.g. on tariffs applied) will be allowed, while still retaining access to the EU market.
The nature of the future relationship the UK seeks with the EU27 will thus be a major factor influencing the level of preference erosion faced by ACP banana exporters to the UK.
Banana Sector Dependence on the UK Market 2016 (tonnes)
| EU | UK | UK % share | |
| St Lucia | 7,397 | 7,397 | 100% |
| Belize | 71,741 | 43,869 | 61.1% |
| Dominica Republic | 375,453 | 218,905 | 58.3% |
| Ghana | 58,006 | 31,496 | 54.3% |
| Cameroon | 297,115 | 44,926 | 15.1% |
| Ivory Coast | 308,261 | 43,246 | 14.0% |
The Importance of Future UK Banana Sector Tariff Policy
According to representatives of the Compagnie Fruitière (which is the largest export orientated banana producer in Africa), the maintenance of current margins of tariff preferences is critical to the competitive position of African (ACP) banana exports vis a vis $ banana exports.
The future of UK banana tariff policy is thus a critically important issue in the banana sector.
Post-Brexit the key issue in future trade with the UK is likely to be how price competitive individual ACP banana exporter will be in serving the UK market if the UK government reduced or eliminated import tariffs on $ bananas.
The main established competitive $ banana exporters to the UK market are Colombia, Costa Rica and Ecuador.
With the benefit of EU trade agreements, largely concluded in 2013, $ banana suppliers have been increasing their exports to the UK market. With the Ecuador agreement only coming into effect in 2017, the recent decline in Ecuadorian banana exports to the UK is now being reversed.
Main $ Banana Exporters to the UK – Trends (tonnes)
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | + % 10-16 | |
| Total UK | 927,746 | 964,402 | 974,425 | 1,030,433 | 1,021,148 | 1,028,650 | 1,069,321 | +15.3% |
| Colombia | 212,901 | 226,778 | 253,366 | 266,673 | 267,746 | 296,521 | 327,300 | +74.4% |
| Costa Rica | 203,789 | 183,007 | 125,296 | 159,469 | 202,117 | 160,985 | 159,214 | -21.9% |
| Ecuador | 64,538 | 94,219 | 132,977 | 149,229 | 142,410 | 138,394 | 113,709 | +76.2% |
| Panama | 3,144 | 11,868 | 14,294 | 27,484 | 23,335 | 23,747 | 31,396 | +898.6% |
| Mexico | 684 | 1,361 | 391 | 2 | – | 6,092 | 20,999 | +2,970.0% |
| Guatemala | 1,239 | – | – | – | 4,125 | 13,831 | 14,354 | +1,058.5% |
| Brazil | 10,397 | 13,247 | 10,954 | 8,177 | 10,650 | 6,892 | 5,961 | -42.7% |
| Nicaragua | 0 | 0 | 0 | 0 | 0 | 0 | 2,187 | – |
| Peru | 234 | 1,589 | 2,420 | 3,228 | 2,666 | 1,571 | 1,757 | +650.9% |
| Honduras | 1,494 | 594 | 425 | 247 | 148 | 219 | 1,040 | -30.4% |
| Sub-Total | 498,420 | 532,663 | 540,123 | 614,580 | 653,197 | 648,252 | 677,917 | +36.1% |
| 53.7% | 55.2% | 55.4% | 59.6% | 64.0% | 63.0% | 63.4% |
Source: EC, Market Access Data Base
The Complications of the ‘Cut & Paste’ Approach to FTAs with $ Banana Exporters
Refitting existing EU trade agreements with $ banana suppliers into bilateral ‘UK-Only’ FTAs through a ‘Cut and Paste’ approach will be complicated by the extensive use of TRQS in the banana sector.
Dollar banana exporting countries are likely to be unwilling to give up part of their access to a guaranteed and growing EU27 banana markets in exchange for a quota on the mature UK market where the future of the UK’s multilateral banana sector tariff policy is uncertain.
This is likely to require considerable negotiations involving the establishment of entirely new UK TRQs for bananas and the retention in full of existing EU negotiated TRQs, with the EU TRQ being applicable only to the territory of the EU27.
Refitting these agreements is likely to place considerable demands on the limited complement of the UK’s trained trade negotiators and technical staff.
Against this background the negotiation of entirely new UK trade agreements with $ banana exporting countries is likely to take some time to negotiate and is not likely to take place until a number of years after the transition period has ended.
Sources:
epamonitoring.net, ‘ACP banana exporters and Brexit’, 19 June 2017
http://epamonitoring.net/acp-banana-exporters-and-brexit/?_sft_category=brexit&sf_paged=4
epamonitoring.net, ‘The challenges of Brexit: The illustrative case of Belize’, 6 March 2017
http://epamonitoring.net/the-challenges-of-brexit-the-illustrative-case-of-belize/?_sft_category=brexit&sf_paged=6