UK Africa Investment Conference Aims to Boost UK Trade With Africa But What of Current African Exports to the UK?

While the UK is reportedly planning a £395 million trade related initiative as part of the Investment Summit, the investment support initiatives planned in association with the City of London appear to be more closely connected to seeking out new markets for the UK financial services sector, in light of the loss of access to the EU27 market which will arise as a result of the UK’s departure from the EU customs union and single market.

The tight timetable set by the UK government for the conclusion of a trade agreement with the EU is likely to mean that only a ‘light’ trade in goods agreement will be possible by 1^st January 2021 (2), with the UK financial services sector thereby taking a major hit as a result of the loss of current access to the EU27 market and ongoing uncertainties over the basis of UK trade in financial services with the EU27.

What makes this UK export focus of such concern is that it is leading the UK government to neglect a range f basic nuts and bolts issues in future Africa-UK trade relations, which have the potential to undermine African agri-food exports to the UK worth around €1 billion in 2018.

This is a result of two related issues: the UK’s future autonomous MFN tariff schedule and the potential for disruption of triangular supply chains through which African exporters of short shelf life products serve the UK market via distributors in the Netherlands and Belgium. There are profound concerns over the impact the UK’s withdrawal from the EU customs union and single market will have on the functioning of these triangular supply chains for short shelf life products such as cut flowers.

While the UK has taken initiatives to ‘roll over’ existing duty free-quota free access to the UK market for African LDCs and EPA participating countries, these ‘rolled over’ tariff preference only have a real commercial value if the UK retains in place the high MFN duties imposed on competing products from internationally competitive agri-food exporters, such as Brazil, India and Thailand.

While it is difficult to put a precise value on the extent of the triangular trade flows which will be affected by changes to UK MFN tariffs, on the basis of earlier UK ‘No-Deal’ Brexit MFN tariff proposals (3), it is easier to calculate the value of current direct African agri-food exports which could be affected by a radical review of the UK’s currently applied MFN tariffs.

This ‘temporary’ UK-only tariff regime proposed to eliminate tariffs and supplementary levies on all cut flower, fruit and vegetable imports with the exception of fresh beans and bananas.

In the case of cut flower imports the current EU MFN tariff is 8.5% for fresh cut flowers and 10% for dried ornamentals. In 2018 the value of ACP cut flowers exported directly to the UK was in excess of €89 million (but with a substantially larger value of exports taking place along triangular supply chains).

The concerns over the impact of the abolition of UK MFN duties on African cut flower exporters relates not to competition from existing Andean Pact and Central American exporters (who already enjoy duty free access to the EU28 market but whose primary market remains the United States and Canada) but rather the impact on other emerging competitors such as India, where major investments have been made in recent years for production of roses under protected farming systems exclusively for export (4).

This is a major source of concern given the flight time from the major exported orientated rose producing areas of India is only 90 minutes longer than from Kenya.  Currently Indian exporters complain about the high MFN tariffs they face on the EU28 market and the higher freight costs. Freight costs however would be likely to fall dramatically if volumes were to increase significantly.  The UK is already the primary market for those limited Indian rose exports which already take place (4).

Beyond cut flowers the proposed move to zero UK MFN tariffs for most UK fruit and vegetable imports (except fresh beans and bananas) would impact on around €205 million in direct African exports to the UK market (in 2018). However once again this underestimates the significance of the UK market as a destination for these fruit and vegetable exports given the role the Netherlands and Belgium play as transit routes for African exports to the UK market.

This being noted the highly diverse nature of these products means a detailed product by product analysis is required to assess for each product and supply chain what the trade impact of the abolition of UK MFN tariffs would be on African exporters.

The UK’s decision in October to exclude bananas and fresh beans from this general “zero MFN tariff approach” in the fruit and vegetable sector was welcome, since this could have affected €136 million. in African exports.

A similar welcome was given to the decision by the UK government to maintain in place currently applied MFN duties for:

·        canned tuna (African exports to the UK of €196 million in 2018);

·        cocoa paste and butter (African exports to the UK of €124 million in 2018);

·        sugar (African exports to the UK of €45 million in 2018);

·        beef (African exports to the UK of €25 million in 2018).

However, it is by no means clear what the UK’s MFN tariffs for these African products will be once it leaves the EU customs union and single market on 1^st January 2021. Will the UK government:

a)      continue to apply existing MFN tariffs;

b)     apply the announced October 2019 no-deal Brexit MFN tariffs;

c)      extend the “zero MFN tariff” approach to all areas where the UK had no production or a structural deficit?

This is an important issue, since when triangular trade flows are also taken into account, this will affect around €1 billion in African exports to the UK.  This includes areas which have attracted strong investment interest in the past 15 years and where considerable employment has been generated in sectors exporting to the UK with the benefit of long-standing tariff preferences

In addition, above and beyond the MFN issue there are a range of important issues which need to be addressed in regard to maintaining the smooth functioning of triangular supply chains, through which goods transit through EU27 member states in serving the UK market. This will require targeted discussions between the UK and EU authorities, with this being an issue which could easily be lost sight of in the complex and difficult U/EU negotiations which lie ahead.

These are trade and investment issues which require the urgent attention of the UK government in its relations with Africa if existing trade and investment flows are not to be undermined and a solid market base is to be retained for future UK investment in African structural economic development.