Summary
The duty free access enjoyed for exports to and imports from the UK under the various EPAs will lapse once the UK leaves the EU. The countries most dependent on the UK market it is vital current market access arrangements are not disrupted. More generally sectors dominated by smallholder producers exporting undifferentiated bulk commodities on the basis of traditional high levels of tariff preferences are likely to be most severely affected by a loss of preferential access to the UK market. Initiatives are urgently needed to ensure a continuation of current preferential access to the UK market. Longer term issues of preference erosion on the UK market will also need to be addressed.
The Commonwealth Secretariat has posted a Trade Hot Topics briefing containing some reflections on post-BREXIT UK-ACP trade relations. It notes, once the UK leaves the EU ‘all rights and obligations’ under trade agreements concluded in an EU context will lapse. This means, in the absence of new regulatory initiatives by the UK authorities, the duty free-quota free access enjoyed under to the UK market the EPAs and EBA arrangements will no longer apply. ACP countries exporting to the EU would face standard MFN tariffs. For a range of largely agro-food and textile exports, this will increase the costs of placing ACP goods for sale on the UK market. It will also increase competition on the UK market for ACP exporters who would be exporting to the UK on the same terms and conditions as all other suppliers.
How this affects individual ACP countries will be determined by the relative significance of the UK market for ACP exporters. This needs to be seen in the context of the doubling of the value of sub-Saharan African exports to the UK between 2000 and 2015 (exports to the EU28 in total were up 137%).
The analysis identifies ACP countries with the highest dependence on the UK market in their trade with the EU (Botswana, Seychelles, Gambia, Equatorial Guinea, Mauritius, Kenya, South Africa, Belize, the Dominican Republic, the Windward Islands, Fiji, Papua New Guinea) and countries with a particularly strong dependence on the UK market for certain product exports. The product exports most vulnerable to higher MFN duties and hence trade disruption are largely agro-food products, including: fish and seafood; floriculture; edible vegetables; prepared meat and seafood; prepared vegetables, fruit and nuts; tobacco and tobacco products.
It is seen as imperative that ‘BREXIT does not result in trade disruptions or unfavourable outcomes’ for ACP countries. In this context the major challenge faced is to ‘ensure trade continuity on terms that are at least as favourable as those provided under the EPAs’ (and one should add the existing EBA). Specifically the analysis calls for the UK to transpose the EBA regime in favour of least developed countries into national UK legislation and to go further with regard to improving the rules of origin applied to LDCs and reducing non-tariff barriers which inhibit LDC exports.
The analysis also maintains the UK government will also need to ‘consider not only whether the replication of EPAs is possible but whether it should be pursued’. It is suggested that in order to ‘avoid any immediate adverse outcome the UK could explore offering temporary, unilateral preferential access to developing countries that currently have access to the UK market through FTAs and EPAs’.
An important additional point made is that the UK government should provide early assurances that trade disruptions will not be allowed to occur, since ‘such reassurances of trade continuity are vital for investment decisions and future planning’.
Sources:
Commonwealth Secretariat, ‘Post-Brexit UK-ACP Trading Arrangements: Some Reflections’, Trade Hot Topics Issue 137, 2016
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Comment and Analysis While the Commonwealth analysis identifies a range of countries with a high dependence on the UK market in their trade with the EU, this does not automatically mean these economies will be severely affected by the lapsing of access to the UK market under an EPA/EBA. This depends on the structure of their trade and the level of standard MFN tariffs which would be applied.
Many ACP exports are primary commodities which do not compete with EU production and which would enter the UK market at zero duty regardless of the trade regime applied. Other countries such as Botswana, while having a high dependence on the UK market in terms of the volume of trade (34.4%), have a very low dependence on the UK market in terms of the value of that trade (1.9%), given Botswana’s high value exports go to non-UK EU markets. A more detailed review is therefore needed.
The ACP countries most at risk are those with an above average dependence on the UK market in products where high MFN tariffs are still applied. This primarily affects agro-food products, including fisheries products, and to a more limited extent textiles and foot ware.
A more detailed review of current patterns of ACP exports to the EU reveals 16 of the 49 ACP countries which have engaged in EPA negotiation processes with the EU have a disproportionate dependence on exports to the UK in their trade with the EU, for products where the application of inherited MFN tariffs would give rise to significant new tariffs being levied. This includes:
• 5 out of 31 EPA participating African countries, namely: Seychelles (34%); Gambia (30%); Kenya (28%); Mauritius (27%); South Africa (27%). • 7 out of 16 Caribbean EPA signatories, namely: St Lucia (78%); Belize (74%); Guyana (34%); Jamaica (33%); Dominica (29%); Dominican Republic (23%); Barbados (18%). • The 2 Pacific region EPA signatories, Fiji and Papua New Guinea, both have a higher than average dependence on the UK market in their export trade with the EU (45% and 19% respectively), with this being concentrated in the sugar sector in the case of Fiji.
It should be noted most of the countries whose trade potentially would be worst affected by BREXIT are non-least developed, Commonwealth ACP countries.
Some of these ACP countries have an exceptionally high dependence on the UK market, notably Belize and St Lucia, with this being concentrated in single products (sugar and bananas respectively). Other ACP countries while overall having only a high dependence or an above average dependence on the UK market, nevertheless have an exceptionally high dependence for particular products. For r example Guyana, Jamaica, Fiji have an exceptionally high dependence on the UK for their sugar exports to the EU, while South Africa has an exceptionally high dependence on the UK for its fruit exports, and Kenya has an exceptionally high dependence on the UK for its horticulture export to the EU (Kenya).
Any hiatus in preferential access to the UK market post-BREXIT is likely to have particularly disruptive effects on these countries.
Beyond these 16 ACP countries there are other ACP countries which, while having a low overall dependence on trade with the UK, have a high or exceptionally high dependence on the UK market for individual products. This affects both a wide range of products and a wide range of countries. The example of Namibia is illustrative in this regard.
Namibia has a low overall dependency on the UK market (only 5% of Namibia’s total exports to the EU go to the UK market). However fully 65% of Namibian fresh and chilled beef exports and almost 30% of its table grape exports to the EU go to the UK market. For these sectors therefore BREXIT will require some adjustment to current marketing arrangements, if an extension of current preferential access to the UK market is not guaranteed from day 1 of the UK’s departure from the EU.
A detailed assessment is required to identify these vulnerable commodities in ACP countries which do not otherwise have a high dependence on the UK market in their export trade into the EU.
The degree of a challenge which a high product specific dependence on the UK market poses will vary greatly from product to product and country to country. It will be strongly influenced by:
• the volume of exports involved relative to the overall size of the EU27 market; • the underlying price competitiveness of production; • the market positioning strategies adopted; • the functioning of the specific supply chain in which the ACP exporter is engaged, particularly whether it provides ready access not only to the UK but also alternative EU27 markets.
In some instances the required adjustments are likely to be manageable provided exporters have sufficient time and capacity to adjust their export strategies.
Once again Namibia provides and illustrative example. In 2015 Namibia exported 3,829 tonnes of quality differentiated fresh and chilled beef to the UK market. This needs to be seen in the context of the estimated size of the EU27 market for quality differentiated beef of around 900,000 tonnes. The affected Namibian beef exports to the UK would thus be equivalent to only 0.4% of consumption of quality differentiated beef in the EU27. Two years would appear to provide a more than adequate time frame for Namibian beef exporters to reposition themselves on EU27 markets, if it looked like preferential access to the UK market were to be lost.
However in other products, where capacity constraints are faced in making proactive market adjustments or the production volume is larger and competition on EU27 markets is more intense, sector adjustments challenges could be more problematical. This could then adversely impact on 10,000 of thousands of jobs and livelihood opportunities in the affected sectors.
Overall sectors dominated by smallholder producers exporting undifferentiated bulk commodities on the basis of traditional high levels of tariff preferences are likely to be most severely affected. These ACP producers need to be identified and supported in either:
a) making the case for immediate action by the UK government to ensure a continuation of current preferential access to the UK market from day 1 of the UK’s departure from the EU; b) preparing market adjustment and repositioning strategies so that the adverse consequences of a loss of preferential access to the UK market post BREXIT can be minimised.
The former can be seen as a responsibility of the UK authorities, the latter would appear a responsibility of the EU28 collectively.
Many ACP governments signed onto the EPAs with the aim of preserving traditional preferential access. Where BREXIT leads to the loss of this preferential access the ACP have a moral right to demand some level of compensation from the EU28, given the fundamental change in market access circumstances which BREXIT has given rise to for these ACP countries.
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National Level of Dependence on The UK Market in Exports to the EU in 2015
| Exceptionally High Dependence | High Dependence | Above Average Dependence | Low Dependence |
| WEST AFRICA EPA Group | WEST AFRICA EPA Group | WEST AFRICA EPA Group | WEST AFRICA EPA Group |
| –
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Gambia (30%) | – | Benin ( 2.5%)
Burkina Faso ( 3.9%) Cape Verde ( 0.2%) Ivory Coast ( 7.2%) Ghana (11.6%) Guinea ( 0.2%) Guinea Bissau ( 0.1%) Liberia ( 0.4%) Mali ( 2.5%) Mauritania ( 1.3%) Niger ( 0.05%) Nigeria (10.8%) Senegal ( 7.9%) Sierra Leone ( 0.6%) Togo ( 3.9%) |
| EAC EPA | EAC EPA | EAC EPA | EAC EPA |
| Kenya (27.8%)
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Tanzania ( 5.6%)
Uganda ( 4.5%) Burundi ( 3.4%) Rwanda (17.0%)
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| SADC EPA | SADC EPA | SADC EPA | SADC EPA |
| – | – | South Africa (26.7%)
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Namibia ( 5.0%)
Swaziland (10.4%) Botswana ( 1.9%) Lesotho ( 0.3%) Mozambique ( 7.2%) |
| CENTRAL AFRICA EPA | CENTRAL AFRICA EPA | CENTRAL AFRICA EPA | CENTRAL AFRICA EPA |
| – | – | – | Cameroon ( 8.6%) |
| ESA EPA Grouping | ESA EPA Grouping | ESA EPA Grouping | ESA EPA Grouping |
| – | Seychelles (34.3%) | Mauritius (26.9%)
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Madagascar ( 5.7%)
Zimbabwe (11.5%) |
| CARIBBEAN EPA | CARIBBEAN EPA | CARIBBEAN EPA | CARIBBEAN EPA |
| St. Lucia (77.8%)
Belize (73.6%) |
Guyana (34.3%)
Jamaica (33.0%) Dominica (28.8%) Dominican Republic (22.9%) |
– | Barbados (17.6%)
Haiti (17.3%) Trinidad & Tobago (12.6%) Grenada (12.4%) St Vincent & ( 9.8%) St Kitts & Nevis ( 1.4%) Antigua & Bar. ( 1.2%) Bahamas ( 0.9% |
| PACIFIC EPA | PACIFIC EPA | PACIFIC EPA | PACIFIC EPA |
| – | Fiji (44.9%) | Papua New Guinea (19.2%) |
Source: Extracted from the EC Market Access Data Base
Definitions: • exceptionally high dependence countries (+ 55% dependence on UK market in exports to the EU);
- high dependence countries (between 30% & 55% dependence on UK market);
- an above average dependence countries (between 18% & 30% dependence on UK market);
- Low dependency (between 0 and 17%dependence on the UK market)
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Key words: BREXIT, Area for Posting: BREXIT, EPA General, SADC EPA, West African EPA, central African EPA EAC EPA, ESA EPA, Caribbean EPA, Pacific EPA
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