Summary
In discussions between the South African Minister of Trade and UK International Trade Secretary the possibility of building on the existing EPAs in developing future bilateral trade relations with the UK was raised. This is seen by the South African Minister as providing a simple mechanisms for avoiding any unintended adverse fallout from the Brexit process. A key question to be determined is the ‘when and how’ related to the launching of such a re-fitting process. This would appear to be an important issue for clarification at the forthcoming inaugural meeting of Commonwealth Trade Ministers.
South Africa’s Minister of Trade and Industry, Rob Davies, met with the UK’s International Trade Secretary, Liam Fox, on the 25th January 2017 to discuss future trade and economic relations. (1)
From a South African perspective the UK is ‘a key market especially for agriculture exports accounting for over 20% of SA’s exports of wine and 30% of fruit exports globally’. The UK is also ‘the biggest destination in the EU for South African investment, accounting for 30% of SA investments into Europe’, while fully ‘46% of SA’s global investment originates from the UK’. (1)
From a UK perspective South Africa is a strategic partner for the UK’s trade with Africa and ‘is the third biggest trading partner for the UK in the Commonwealth’, (1) with since 2009 the value of UK exports fluctuating between €2.1 billion (2009) and almost €4.2 billion (2011), with exports valued at of €3 billion in 2015. (3)
South Africa-UK Trade (Euro)
| 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | |
| UK Imports | 8,268,959,973 | 7,003,519,910 | 7,010,558,564 | 7,486,680,756 | 3,323,870,689 | 5,570,671,307 | 5,164,612,092 |
| UK exports | 2,102,997,123 | 2,959,895,534 | 4,196,504,473 | 3,042,723,289 | 2,890,623,411 | 2,823,464,486 | 3,001,349,53 |
Source: EC, Market access data base (Member state: UK; Partner country, South Africa; Product code, All; years, 2009-2015)
http://madb.europa.eu/madb/statistical_form.htm
South Africa is looking to expand its agricultural exports to the UK post-Brexit, since ‘the UK doesn’t have the sensitivities of some of the countries from southern Europe’. These sensitivities have been most vividly illustrated in recent years by Spanish efforts to restrict imports of citrus fruit from South Africa, nominally on the basis of concerns related to the dangers of transmission of citrus black spot infections to Spanish orchards via the trade in citrus fruit. (2)
To facilitate this expanded trade South Africa’s Trade Minister spoke of the need to establish ‘a predictable trade and investment environment for mutual benefit for both parties’. More specifically Minister Davies is seeking discussions on how post-Brexit trade with the UK could ‘build on the recently concluded Economic Partnership Agreement with the EU’. (1)
In a radio interview prior to discussions with the UK government Minister Davies stressed how the aim of his discussions in the UK was to ‘consolidate’ South Africa’s ‘understanding with the UK’ on the importance of ensuring ‘no interruption of trade between South Africa and the UK as an when the UK exits the EU’. He made reference to the EPA concluded with the EU in 2016, which had improved access for South African agricultural exports to EU28 markets and noted how South Africa was ‘already having discussions with the UK through the embassy and officials’. He expressed the view that South Africa and the UK could ‘build on the Economic Partnership Agreement, that can be taken over into a UK-South Africa version of the same thing’. (4)
While Minister Davies recognised this would require re-negotiation of certain quota arrangements on trade with South Africa, for the neighbouring BLNS economies, Minister Davies expressed the hope that the UK will take over the duty free quota free access which the BLNS economies enjoy to the EU market. (4)
He noted how there was a need to talk to the UK about ‘when this can happen, how it can happen and see that we have a common understanding so that our priority is that when the Article 50 process is triggered and the negotiations conclude and the UK exits the EU…. that there is no interruption of trade between the UK and South Africa.’ (4)
Quizzed on a possible worst case scenario for South Africa arising from the Brexit process Minister Davies made the following comments: ‘a worst case scenario is we find Britain has exited the EU, that we have an agreement with the EU which covers access for our agricultural products and other products to the EU and we have nothing with the UK….then we will have an MFN arrangement which will have to be determined…. which would probably be less favourable’. (4)
However Minister Davies expressed the view that this ‘scenario is not going to arise because it’s not a big exercise between the two of us’. (4) Overall Minister Davies takes the view that in re-fitting the existing EPA into a bilateral agreement with the UK ‘there’s nothing that’s going to require a huge amount of negotiating effort on both sides’. Much of the existing agreement it is maintained, could be replicated. While in the specific case of South Africa there will be a need to ‘renegotiate quotas for some products’, this, it is felt could be done ‘before the Brexit process is complete’. (2)
In the press release following the meeting the UK International Trade Secretary, Liam Fox was les forthcoming on the specific of how future UK-South Africa bilateral trade and economic relations should be developed. While highlighting the importance of South Africa as a trade and investment partner his statements were restricted to generalities on the need to ‘continue building on our relationship’ and the need for discussions on ‘how we progress that’
Sources
(1) Department of International Trade/GOV.UK, ‘UK-South Africa Joint Trade Statement’, 24 January 2017
https://www.tralac.org/news/article/11169-uk-south-africa-joint-trade-statement.html
(2) Moneyweb.com, ‘South Africa hopes to increase agricultural trade post-Brexit’ 26 January 2017
http://www.freshplaza.com/article/169987/South-Africa-hopes-to-increase-agricultural-trade-post-Brexit
(3) EC, Market access data base (Member state: UK; Partner country, South Africa; Product code, All; years, 2009-2015)
http://madb.europa.eu/madb/statistical_form.htm
(4) 702.co.za, ‘Minister Rob Davies in the UK to discuss Brexit and trade with SA’, 25 January 2017
http://www.702.co.za/articles/240372/minister-rob-davies-in-the-uk-to-discuss-brexit-and-trade-with-sa
| Comment and Analysis In the meeting on the 25th January Minister Davies appears to have raised with the UK International Trade Secretary Liam Fox the possibility of re-fitting the existing EU-SADC EPA into a bilateral agreement with the UK. Public statements related to the meeting do not indicate how thoroughly this issue was discussed, with Minister Davies comments on the relative straight forward process of re-fitting the existing EPA being reported in the context of a prior press interview.What is clear is that the need for a ‘predictable’ trade regime which avoids any disruption of the existing basis for ACP exports to the UK market is common to all ACP countries. In this context Minister Davies proposals to build on the existing EPAs with the EU would appear to be an approach relevant to all ACP EPA participating countries. In highlighting the importance of early discussions on the ‘when and how’ of such a process of refitting existing EPAs, the comments of Minister Davies would appear to give added significance to the forthcoming inaugural meeting of Commonwealth Trade Ministers. This is particularly the case if a policy priority of Commonwealth ACP countries is to avoid any interruption of the current duty free-quota free (DFQF) access to the UK market, following the UK’s departure from the EU. Unfortunately the UK government statement on the UK-South Africa discussions provides no clear indication from the UK government on the ‘when and the how’ of such discussions. While Minister Davies expressed the view that re-fitting and EPA would not require a huge amount of negotiating efforts , the process may not prove as straight forward as this implies. There are some in the UK who wish the UK to seek better access to third country markets than the EU as part of the UK’s broader trade liberalization agenda (see companion article, ‘Brexit, the Commonwealth and Opportunities for Addressing ACP Countries Trade Concerns’). However any such efforts on the part of the UK would be likely to fall foul of the EPA MFN clause, which requires ACP signatory governments to automatically extend to the EU any better preferences which it includes in trade agreements with other developed economies. Any efforts by the UK to overcome this constraint could then slow down the process of re-fitting the EPAs such that alternative reciprocal trade arrangements are not in place by the time the UK formally departs the EU. In this context the need for the UK to establish a ‘transitional’ unilateral preferential trade arrangement which replicates existing EPA DFQF access to the UK market from day 1 of Brexit, cannot be under-estimated. Such an arrangement would need to be clearly transitional in order to secure the necessary waiver form the WTO. |
| Key words: BREXIT, South Africa Area for Posting: BREXIT, EPA General, SADC EPA, West African EPA, central African EPA EAC EPA, ESA EPA, Caribbean EPA, Pacific EPA |