The UK has committed to extending in the immediate post-Brexit period the non-reciprocal duty free access granted LDCs under the EU’s current EBA initiative. However action was expected given the long standing UK support for duty free-quota free (DFQF) access for LDCs. The issue has always been whether current DFQF access enjoyed by ACP non-LDCs would be extended from 30th March 2019. This issue remains unclear, with the UK government solely making a commitment to explore options for maintaining existing trade arrangements.
On the first anniversary of the Brexit result the UK’s Department for International Development, Department for International Trade and the Prime Ministers’ Office released a joint statement committing the UK government to ‘protect current trading relationships, keep prices in check and help build our trading partners of the future’. The statement entitled ‘Government pledges improved post-Brexit access to UK markets for world’s poorest countries’, focussed on specific commitments to least developed countries (those countries currently covered by the EU’s ‘Everything But Arms’ initiative).
For the least developed countries it committed the UK government to ‘securing their existing duty-free access to UK markets and providing new opportunities to increase trade links’. The reference to providing new opportunities appears to refer to the UK governments continued support for ‘critical trade infrastructure like ports and roads, and building trade skills in those countries, so that they can take better advantage of trading opportunities’ (1).
For non-least developed countries the UK government has committed itself to ‘explore options’ to expand on current trade relationships ‘as well as maintaining existing trading arrangements and avoiding costly tariffs’ (1).
It is noteworthy that in the case studies the press release cites the case of bananas where countries such as the Dominican Republic, Cote d’Ivoire, Cameroon and Ghana’ provide 30% of total UK banana imports (1), although none of these countries are LDCs.
It also cites the case of tea it also cites the important role of Kenya which again is a non-LDC so not directly affected by the commitment on continued duty free quota free access made in the statement. In addition for products like tea and coffee the import duty on the basic product is zero regardless of the countries of origin, although there is some degree of tariff escalation in some areas (1).
The Fairtrade Foundation’s Tim Aldred welcomed the Government’s pledge ‘to guarantee and strengthen the position of the least developed countries’. However it was also pointed out ‘the position of poor countries just outside the ‘least developed country’ category, such as Kenya, will need to be clarified’ (2).
Traidcraft’s policy director Liz May described the UK governments’ commitment as ‘a great first step’, which provided ‘much-needed reassurance for businesses and producers in the poorest countries who rely on exports to the UK to earn a living and work their way out of poverty‘. She announced Traidcarft looked ‘forward to working with the Government as they explore options to fulfil their pledge to secure and improve access for those countries not covered by the ‘Everything But Arms’ (EBA) scheme, but who are still vulnerable’.
She argued ‘Unilateral market access has provided a valuable platform for developing countries to enhance their ability to trade and post-Brexit the UK has a unique opportunity to improve on the existing Generalised Scheme of Preferences (GSP) and GSP+ schemes] while creating a viable alternative to the EU’s problematic Economic Partnership Agreements’ (3).
|Comment and Analysis
This UK government statement has been welcomed by development NGOs, since it now provides certainty for LDC suppliers as they enter into contract negotiations with UK importers. While the UK government has committed to providing LDCs with ‘new opportunities to increase trade’, it is unclear whether this extends to the important areas of providing non-restrictive rules of origin (e.g. for fisheries products) and creating as special dispensation for LDCs with regard to SPS inspection charges levied, where this can create a barrier to market entry given the way the current system of risk assessment related charges works in practice.The basic DFQF based tariff dispensation for LDCs was always anticipated given the UK governments long standing support for full duty free-quota free (DFQF) access for LDCs to developed country markets. The announcement thus comes as no surprise but is nevertheless timely.
The main issue faced however relates not to the market access arrangements for LDCs but rather what will happen to the current DFQF access to the UK market granted to ACP non-LDCs under either full EPAs or interim EPAs once the UK departs the EU on 29th March 2019?
The reality is once the UK departs the EU these agreements will no longer be legally applicable to the territory of the UK. In the absence of any clear alternative regulatory framework UK customs officials will have no choice but to apply standard MFN duties to all non LDC ACP exporters.
Many of these non-LDCs (particularly Commonwealth countries) have a high exposure to the UK market in their overall goods export trade with the EU, while even more have a high exposure to the UK market in individual sectors and products
The UK governments’ statement is thus but a first step in providing clarity on future market access conditions to ACP exporters. This is acknowledged in the UK governments’ statement with a commitment being made to ‘explore options’ for future trade arrangements with non-LDCs. However there needs to be swift movement on this issue if non-LDC ACP exporters are to have clarity on the tariff treatment they will be accorded as they enter into contract negotiations with UK importers.
ACP EPA Signatories Most Exposed to the Adverse Trade Effects of Brexit Based on UK share exports to the EU
Currently while the UK government talks of maintaining existing trading arrangements with non-LDCs, this is primarily being driven by the export interests of these developing countries but the export interests of UK suppliers. The UK governments’ primary objective is to secure the ‘grandfathering’ of existing reciprocal trade preferences, so as to ensure continued parity of treatment of UK exporters with their EU27 competitors.
While this UK government focus is understandable, it is likely to face serious challenges in the WTO. While WTO members have shown tolerance of the extension of non-reciprocal trade preferences in favour of developing countries outside of an FTA framework for the past 10 years (i.e. tolerance of the EU’s MAR 1528/2007, which extended DFQF access while the EPA negotiations were completed), they are highly unlikely to show such tolerance for reciprocal trade preferences, which extend to a developed economy – the UK – tariff preferences they themselves do not enjoy.
Such a tolerance of reciprocal trade preferences would drive a coach and horses through WTO rules and could seriously jeopardise the world trading system given current threats to international trade rules form other quarters.
Any such WTO challenge could lead to a disruptive hiatus emerging in the terms and conditions of access to the UK market for non-least developed ACP countries.
There would appear to be a need for the UK government to first commit to maintaining existing terms and conditions of access for non-LDC ACP exporters to the UK market, while securing a commitment from partner countries to expeditiously re-fitting existing EPA arrangement into bilateral trade agreements which:
a) restores parity of treatment for UK exporters compared to their EU27 competitors;
b) addresses ACP concerns over preference erosion and effectively enhancing access to the UK market.
Such a two stage approach would appear vital given the uncertainty over future UK policies which could profoundly impact on the value of such trade arrangements to ACP countries and the very real negotiating capacity constraints faced in the UK (see companion article ‘Capacity constraints and complexities of ‘grandfathering’ highlighted by Parliament Report’, 27 March 2017).
(1) DFID, ‘Government pledges improved post-Brexit access to UK markets for world’s poorest countries’, 24 June 2017
(2) Express & Star, ‘Developing countries ‘to keep duty-free access to UK for imports post-Brexit’, 25 June 2017
(3) Traidcraft, ‘Government pledge on post-Brexit market access: Traidcraft’s response’, 26 June 2017
|Key words: BREXIT, LDCs, Bananas
Area for Posting: BREXIT, SADC EPA, CARIBBEAN EPA, West Africa EPA, Central Africa EPA, ESA EPA, EAC EPA, Pacific EPA