The UK elections, Brexit and agro-food sector trade

The UK election result creates further uncertainties around the Brexit process, making it even more necessary for ACP counties to secure an unequivocal commitment to the automatic, unilateral extension of existing terms and conditions of access for ACP exporters to the UK market from the date of the UK’s formal departure from the EU. Such arrangement would be transitional and would need to remain in place until reciprocal trade agreements can be negotiated and ratified to replace the existing EU negotiated economic partnership agreements. A precedent for such a unilateral UK regulation exists in the EU’s MAR 1528/2007.

The unexpected UK election result saw the Conservative Party lose its absolute majority in the House of Commons. the Parliamentary arithmetic is now such as to make a ‘hard Brexit’ less likely (2). Press analysis has suggested the new parliamentary arithmetic, which could see the Conservative Party running a minority government with the tacit support of the Ulster Unionists creates ‘an opportunity for the UK government to climb down from their hard Brexit rhetoric’. This it is argued could lead to an outcome ‘similar to that of Norway and Switzerland’ (2).

According to the former Conservative Chancellor of the Exchequer George Osborne, a ‘hard Brexit went into the rubbish bin tonight’. For his part the UK Secretary of State for Exiting the EU, David Davis has suggested the Conservative Party’s loss of its Parliamentary majority in the House of Commons ‘might amount to losing the mandate to take Britain out of the single market and customs union’ (2). While ‘hard Brexiteer’ Michael Gove has been brought back into Prime Minister May’s Cabinet as Environment Secretary, ‘pro-EU Conservatives predicted the outcome of the general election would change the government’s approach to Brexit’ (4). In this regard there has been speculation by political commentators in the UK that Prime Minister May ‘will have to water down a possible hard Brexit in order to placate the DUP and Scottish Conservative leader Ruth Davidson’ (5).

However, with a hung Parliament and the Conservative government dependent on the Democratic Unionist Party, analysts have suggested the ‘UK may face a fresh general election later this year’ (1). This would then create further uncertainty and complicate the process of UK-EU27 exit negotiations. Some European politicians have argued that following the election result Prime Minister May now has no credibility as a negotiating partner (2). This consideration may well be what led some EC officials to suggest unofficially a need to further extend the transition period to accommodate the uncertainty which has now emerged in the UK.

Officially Guy Verhofstadt the European Parliament representative at the Brexit negotiations for his part suggested the election result will ‘make already complex negotiations even more complicated’ (2). The President of EU Council Donald Tusk meanwhile tweeted that while it was still unclear when the Brexit negotiations would comment it was clear ‘when they must end’.  He urged British official to avoid a situation of ‘no deal as a result of no negotiations’ (2). The EU’s chief negotiator, Michel Barnier for his part, urged the British government to commence negotiations as soon as possible.

In this context it should be noted Prime Minister May has reiterated 19th June 2017 remains the date for the formal commencement of Brexit negotiations. However ‘the EU’s Budget commissioner, Gunther Oettinger, told German radio … having Britain as a weak negotiating partner could result in what he described as a poor outcome’ (3).

In terms of the implications of the election results for the UK agro-food sector, UK agriculture industry representatives have long called for a ‘soft-Brexit’, ‘which would see trade barriers and tariffs kept to a minimum, rather than a more go-it-alone “hard” strategy’.  A ‘soft-Brexit’ it is argued could also involve ‘the UK making concessions on immigration limits’, which would ease concerns ion the UK agro-food sector which is heavily dependent on migrant labour (1). However, given the contrary indicators as to what will happen next the overwhelming mood in the UK agro-food industry is one of uncertainty, which heightens concerns across the sector (2).

Comment and Analysis
Uncertainty over whether the new Government has a ‘mandate to take Britain out of the single market and customs union’ need not delay the formal commencement of Brexit negotiations, since in the first stage this will focus on the ‘divorce settlement’ between the UK and the EU27 and not the issue of future trade and economic cooperation relations between the UK and the EU27.

From an ACP perspective it needs to be borne in mind that even if there were to be a ‘softer Brexit leading to the UK having a relationship to the EU similar to that of Norway, this will still leave ACP countries requiring new regulatory arrangements for their access to the UK market.

In this context the immediate danger faced in the coming nine months is that continued uncertainty over the trade consequences of Brexit will lead to a situation where UK supermarkets, importers and food and drink industry buyers enter into commercial contract negotiations with ACP suppliers on the basis of a ‘worst case’ scenario. Such a ‘worst case’ scenario would see standard MFN duties applied to imports from the ACP, given the absence of any regulatory framework, for the extension of existing DFQF access for ACP suppliers to the UK market. This could then adversely impact on both choices of sources of supply and prices offered for ACP products.

These negative effects on ACP countries could be avoided if the UK government made an unequivocal commitment to the automatic, unilateral extension of existing terms and conditions of access for ACP exporters to the UK market, from the date of the UK’s formal departure from the EU, with such arrangements remaining in place on a transitional basis until such time as alternative bilateral reciprocal preferential trade arrangements can be negotiated and ratified.

Such an initiative would at a stroke remove uncertainty around commercial negotiations, which will need to get underway in the coming 6 months. Making such unilateral non-reciprocal arrangements transitional would reduce the likelihood of such arrangements being challenges by WTO members. It should be borne in mind that in 2007 the EU established similar unilateral non-reciprocal transitional market access arrangements under market access regulation 1528/2007, in defence of the transitional interim EPA arrangements, and since this date no WTO member has ever challenged this arrangement.

(1) Agrimoney, ‘Farming could yet prove a winner of UK election May-hem’, June 9 2017–529.html
(2), ‘Hard Brexit breakdown opportunity for meat trade’, 9 June 2017
(3) BBC, ‘Election results 2017: What does it mean for Brexit?’ 9 June 2017
(4) BBC, ‘Cabinet reshuffle: Theresa May praises Tory ‘talent’, 11 June 2017
(5) BBC ‘A recap of today’s headlines’, 11 June 2017

Key Words:           BREXIT, UK elections
Area for Posting:  BREXIT