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 10 explores the complications arising from proposals for a 21 month transition in in EU27/UK relations during which the UK would remain bound by EU rules and regulations but would no longer be a part of the EU.
Extension of ACP EPA Based DFQF Access: The EU Authorisation Requirement
The proposal for a transition period in EU27/UK relations running from 30th March 2019 to 31st December 2020 potentially complicates UK efforts to re-consolidate current reciprocal trade references under economic partnership agreements as ‘UK-only’ FTAs.
Once the UK leaves the EU on the 29th March 2019, as a result of the territoriality clause of EU trade agreements, the current EPA agreements with the EU will no longer apply to the territory of the UK.
This means there will be no WTO compatible basis for the reciprocal tariff preferences currently available on UK-ACP EPA member states trade.
While the UK wants to ‘cut and paste’ existing EU trade agreements into ‘UK only’ trade agreements, the EU has made it clear that during the transition period it will not accept the UK undertaking such arrangements without explicit EU authorisation.
Thus the first complication during the transition period is that any bilateral UK arrangements to roll-over existing EPA tariff preferences will need the explicit authorisation of the EU and cannot simply be unilaterally enacted by the UK.
Extension of ACP EPA Based DFQF Access: the 3rd Country Complication
Leading WTO members have made it clear to the EC that post-Brexit the UK must be treated the same as any other 3rd country, otherwise they will insist on the same treatment as that accorded the UK.
The EC is keenly aware of these 3rd country concerns, with the EC’s 29th January 2018 negotiating instructions calling on the UK throughout the transition period to ‘remain bound by the obligations stemming from the agreements concluded by the Union’.
It was maintained these UK obligations should be agreed ‘in the Article 50 Agreement between the EU and the UK’, thereby becoming part of the legally binding Withdrawal Agreement.
However the EC feels no such assurances can be provided within the Article 50 process in regard to ensuring the ‘UK keeps the benefits from these international agreements’, since the EU’s ‘partners around the world may have their own views on this’.
This implies the UK will be required by the EU to make binding commitments to extending current duty free-quota free access to ACP EPA process countries, without any parallel binding assurances of continued preferential access for UK exporters to ACP EPA signatories markets.
This is in complete contradiction to the primary objective of the UK’s Trade Bill which aims to roll-over existing EU trade agreements into ‘UK-only’ trade agreements in order to preserve existing UK trade preferences on 3rd country markets where EU trade agreements are in force.
This is the second complication during the transition period with it be unclear how the UK government will respond.
The Political Complications in the UK Around the Transition Period
The 29th January 2018 EU Council guidelines for transition negotiations reiterated the EU’s longstanding position that any transitional agreement should:
- preserve ‘the integrity of the Single Market’ and exclude a sector by sector approach
- recognise ‘the four freedoms of the Single Market are indivisible’;
- preserve the autonomy of decision making of the EU and the role of the ECJ;
- ensure the EU acquis would apply in its entirety to the UK throughout the transition period, including any changes the EU may introduce;
- no longer involve UK participation in EU institutions or decision making bodies.
This would effectively roll-over the status quo throughout the transition period, with the exception that the UK would no longer have any voice in EU decision making.
While the UK government has agreed to remain bound by EU rules and regulations throughout the ‘implementation period’, the UK government is also insistent that it will not only leave the EU on the 29th March 2019, but also the EU customs union and EU single market.
This gives rise to the question: if the UK is to abide by EU rules and regulations in their entirety throughout the transition period, how can it do so in a WTO compatible manner when it has also left the EU customs union and single market on the 29th March 2019?
The UK government seems to believe it can leave the customs union and single market while unilaterally complying with all EU rules and regulations.
However this course of action would greatly complicate the EU’s trade relations with 3rd countries who have made it clear that once the UK leaves the EU it should be treated the same as any other 3rd country.
Indeed leading WTO members have gone further by insisting that should the EU accord the UK any special trade treatment after the UK has formally departed the EU, they will seek equivalent treatment from the EU.
This problem could be avoided if the UK were to remain part of the EU customs union and single market throughout the transition period, despite having left the EU on 29th March 2019.
The UK government appears to believe this problem can be addressed if the framework for a comprehensive EU27/UK trade agreement is in place by 29th March 2019 and there is simply a two year implementation period before it fully enters into force.
This option is viewed as largely unrealistic within EU institutions, with it being unclear how this issue can be resolved without a substantial revision in the UK governments’ current position.
This constitutes the third and potentially most politically challenging complication within the transition process.
Access to ACP EPA Country Markets and the 3rd Country Complication
The principle that a post-Brexit UK should be treated the same as any other 3rd country is also likely to be applied to post-Brexit ACP-UK trade relations.
This suggest that if existing preferential access for UK exporters to ACP markets under EU EPAs were rolled over outside of the framework of a fully WTO compatible free trade area agreement, 3rd countries may seek the same tariff treatment in their own exports to ACP EPA country markets.
This represents a fourth layer of complication faced during the transition period which ACP governments will need to bear in mind.