The European Council has indicated it expects the UK to honour its international commitments entered into while the UK was part of the EU. However, it is unclear whether this also applies to the long standing preferential access enjoyed by ACP countries to the UK market under EU agreements dating back 42 years. The UK favours ‘grandfathering’ reciprocal preferences from day 1 of BREXIT, but this is likely to face challenges from WTO members.
The EU27s openness to ‘transitional arrangements’ could help ACP governments in lobbying for temporary arrangements which avoid any loss of ACP preferences on the UK market from 30 March 2019. It also offers scope for dialogue on avoiding disruption of ACP agro-food sector supply chains operating through the UK into EU27 markets (and visa-a-versa).
The agro-food sector is likely to be a particularly difficult area of UK/EU27 negotiations, with implications for ACP exporters which may need to be addressed both bilaterally (between the ACP and UK and between the ACP and EU27) and on a trilateral basis (ACP/UK/EU27).
On the 29 March 2017, in a letter presented to the EU President Donald Tusk, the UK formally applied to leave the EU. A number of points were raised of relevance to the ACP in both the UK government’s formal letter and the EC’s initial guidelines for managing the BREXIT process.
Prime Minister May’s letter placed emphasis on ensuring ‘as little disruption as possible’ due to the BREXIT process, and ‘giving citizens and businesses in the United Kingdom and the European Union – and indeed from third countries around the world – as much certainty as possible, as early as possible’. This was seen as one of the guiding principles for the BREXIT negotiations. (1)
While the EU27 guidelines share the concern to ‘reduce uncertainty and, to the extent possible, minimise disruption caused by this abrupt change’, these guidelines emphasise how the UK’s decision to leave the EU inevitably means ‘businesses and other stakeholders will lose the predictability and certainty that come with EU law’. These different starting points for the common consensus on the need to avoid uncertainty, could prove problematical as negotiations get underway.
This needs to be seen in the context of the EU27’s assertion that in the negotiations ‘the Union’s overall objective… will be to preserve its interests, those of its Member States, its citizens and its businesses’ (2) and the reality that the UK will no longer be a member of the EU from 30 March 2019. The EU27 will thus be putting the interests of the remaining EU members first and will give secondary importance to UK interests.
Prime Minister May’s letter also highlighted the UK’s desire to ‘agree the terms of our future partnership alongside those of our withdrawal from the EU’, acknowledging in passing that if the UK leaves the EU without a trade agreement, ‘the default position is that we would have to trade on World Trade Organisation terms’. The UK argues both parties should ‘work hard to avoid’ this outcome. (1)
The EU guidelines in contrast envisage a 2 stage approach to EU27/UK negotiations. First negotiations on an agreement in principle on the divorce settlement and the future mutual rights and obligations for citizens and businesses post BREXIT. Second, negotiations on the new relationship between the UK and EU27. While this is an implicit rejection of the UK proposal to agree terms of a future trade arrangement alongside the agreement on the UKs withdrawal, provision is made for negotiations on a new relationship once satisfactory progress has been made in the primary area of negotiations. However, it is stressed an agreement on a new relationship can only be finalised once the UK is no longer a part of the EU. (2)
Given a new relationship can only be finalised once the UK is longer part of the EU, the EU27 negotiating guideline propose the establishment of transitional arrangements, including a ‘…time-limited prolongation of (the) Union acquis’. (2) This is a firmer commitment on the part of the EU27 to the need for transitional arrangements, than Prime Minister May’s reference in the UK’s withdrawal application to the need for ‘implementation periods to adjust in a smooth and orderly way to new arrangements’ ‘in order to avoid any cliff edge’ in relations which would be damaging for business. (1)
The firmer EU27 commitment to the need for transitional arrangements reflects the profound scepticism on the part of EU27 governments to UK government assertions that the process of ‘divorce’ can be settled within a two year period.
There is a shared consensus that the UK government cannot be allowed to ‘cherry pick’ those aspects of the EU single market with which it wishes to remain engaged. Prime Minister May’s letter therefore asserts the UK will ‘not seek membership of the single market’. (1) What the UK authorities will seek however is ‘a deep and special partnership between the UK and the EU’, which should be ‘a bold and ambitious Free Trade Agreement … of greater scope and ambition than any such agreement’, concluded to date by the EU. (1)
The EC for its part asserts ‘a non-member of the Union that does not live up to the same obligations as a member, cannot have the same rights and enjoy the same benefits as a member’. As a consequence while ‘any free trade agreement should be balanced, ambitious and wide-ranging. It cannot, however, amount to participation in the Single Market or parts thereof, as this would undermine its integrity and proper functioning’. It notes how ‘preserving the integrity of the Single Market excludes participation based on a sector-by-sector approach’. (2)
An element of the EU27 guidelines of particular relevance in an ACP context which is wholly missing from Prime Minister May’s letter is the statement which declares ‘the European Council expects the United Kingdom to honour its share of international commitments contracted in the context of its EU membership’. This is potentially of considerable relevance to those ACP countries which wish to avoid any disruption of their current conditions of access to the UK market on 30 March 2019. However, it should be noted that this section of the EU27 guideline also calls for ‘a constructive dialogue with the United Kingdom on a possible common approach towards third country partners and international organisations’. (2) Clarification is needed on what this could mean for ACP countries.
In addition to these points, which would appear to have a direct and indirect bearing on ACP interests, there are a range of internal EU/UK issues raised in this exchange of communications which could derail an orderly BREXIT process. These range from reaching agreement on the mutual rights of UK and EU27 citizens post-BREXIT to the status of Gibraltar.
(1) Letter Prime Minister May to EU President Tusk, 29 March 2017
(2) Text of the EC Draft Guidelines for the Negotiation of Brexit
(3) Politico.eu, ‘What the EU27 wants from Brexit’, 29 March 2017
(4) Council regulation No 1528/2007 of 20 December 2007, ‘applying the arrangements for products originating in certain states which are part of the African, Caribbean and Pacific (ACP) Group of States provided for in agreements establishing, or leading to the establishment of, Economic Partnership Agreements’, Official Journal of the European Union, 31 December 2007
|Comment and Analysis
The EU27s call on the UK to ‘honour its share of international commitments contracted in the context of its EU membership’ would appear to provide a basis for the ACP to gain the support of the EU27 for the rolling over by the UK of existing market access obligations contracted in the framework of EU negotiated trade agreements.
However, the reference to holding ‘a constructive dialogue’ with the UK on ‘a possible common approach towards third country partners’ raises the question as to whether this is purely about the promotion of shared EU27/UK interests towards third countries or whether it could provide a basis for an ACP/EU27 dialogue aimed at safeguarding ACP trade interests in the context of the UK’s departure from the EU?
The emphasis in the UK letter on minimising ‘disruption’, ensuring ‘continuity’ and providing ‘as much certainty as possible’ alongside a recognition of the possible need for ‘implementation periods’ in order to avoid ‘any cliff edge’, are all points of reference which the ACP could usefully focus on. However, it needs to be borne in mind that the UK authorities are primarily focussing on avoiding unfortunate outcomes for UK exporters. This is their over-riding concern.
In an ACP context, this means the UK authorities are currently focussing on the option of ‘grandfathering’ existing reciprocal trade preferences already established under EU trade agreements. However this is likely to prove highly problematical in the WTO. WTO members are likely to show little tolerance for WTO incompatible arrangements which provide reciprocal preferential access for a developed country (the UK) to the markets of developing countries (ACP members), outside of the framework of WTO compatible free trade area arrangements.
Such an arrangement would create a quite different situation to the EU’s transitional EPA-related arrangement (under MAR 1528/2007) (4), which has been quietly tolerated by WTO members since 2008. This arrangements extended pre-existing non-reciprocal trade preferences to developing countries, pending the conclusion of WTO compatible reciprocal preferential free trade area agreements.
Given past experience, it is likely ACP countries would have a far greater chance of securing the tolerance of WTO members for an extension of pre-existing long standing preferential access on a non-reciprocal basis, than of securing WTO tolerance of a ‘grandfathering’ of reciprocal trade preferences to the benefit of the UK, as is currently being sought by the UK authorities.
This highlights the need for ACP governments to carefully assess what UK government representatives actually intend by the statements and commitments they make and the need for ACP governments to clearly differentiate between where ACP interest lie and where UK interests lie.
While the UK is looking for ‘a deep and special partnership’ with the EU27 involving an FTA of far ‘greater scope and ambition than any such agreement’ to date concluded by the EU, it is difficult to conceive of how this could be brought about in the agro-food sector.
As the USDA recently pointed out, in its relations with other OECD and advanced developing countries, the EU pursues anything but free trade in the agriculture sector. Despite the reforms of EU agricultural support measures the EU’s ‘market protection and trade policy tools remain(ed) intact’, with trade policy tools being used in ways which ‘actively disadvantage agricultural imports into the European market, particularly high value products’. In this context USDA describes the EU’s overall agricultural trade regime as ‘restrictive’ (see companion article ‘USDA Highlights EU’s Continued Use of Protectionist Tools in the Agro-Food Sector).
It is difficult to conceive of how an exception could be made for the UK in this regard, given the UK’s desire to pursue independent trade and agricultural policies and the centrality of the agro-food sector in intra-EU28 migrant labour flows. Agro-food sector trade is likely to be highly sensitive. For example, the Danish government, which is not part of the ‘hard BREXIT’ camp in the EU, has highlighted as a main priority the need to avoid ‘a situation in which British companies are able to bypass EU regulations, but retain good access to the single market, undercutting Danish goods’. This needs to be seen in the context of an EU policy which has raised regulatory standards across the EU to a Danish level of regulation, a move which has allowed Danish producers to remain competitive. (3)
The complexities which will be faced in UK-EU27 agro-food sector trade negotiations, will require ACP governments to pay close attention to the consequences for ACP exporters of the evolution of these discussions. Indeed, it could even require tough and detailed negotiations on the part of ACP governments in their dealing with both the EU27 and the UK if adverse consequences for ACP agro-food exporters are to be avoided.
Particular problems could arise for ACP agro-food exporters in those supply chains geared towards serving EU27 markets through the UK (e.g. Papua New Guineas trade in sustainably certified fully traceable palm oil) or UK markets through an EU27 member state (e.g. Fairtrade certified chocolate). These kinds of problems will need to be addressed through negotiating on a trilateral basis (ACP/EU27/UK) special transitional rules of origin and customs cooperation arrangements, aimed at minimising disruption of existing ACP-EU28 supply chains, for products such as Papua New Guineas sustainably certified fully traceable palm oil, processed at New Britain Palm Oil’s Liverpool facility, for the whole of the EU28 sustainably certified palm oil market.
Finally while the EU guidelines speak of a possible ‘time-limited prolongation of Union acquis’, it is unclear whether such a prolongation of the acquis would be extended to the UK obligations under EU negotiated trade agreements (e.g. under the EBA and the ACP-EU EPAs). This is an important issues which will need to be clarified, should it become clear that the BREXIT process will not be completed within two years.
|Key words: BREXIT, Pacific EPA, Papua New Guinea, Palm Oil, Fairtrade Chocolate
Area for Posting: BREXIT, Pacific EPA