Will ACP Exporters Serving the UK Market Under EPAs Still Enjoy Duty Free-Quota Free Access During the Transition Period in EU27/UK Relations?

While ACP countries duty free access to the UK market is guaranteed under the revised text of the Withdrawal Agreement, it remains unclear whether this will be granted on a non-reciprocal basis (i.e. the UK has to respect its obligations throughout the transition period without enjoying the same rights of access to 3^rd country markets which EU27 exporters will continue to enjoy under EU trade agreements) or on a reciprocal basis (i.e. ACP EPA signatory governments will be required to continue to grant the UK the preferences agreed under the EU EPAs).

With the UK having left the EU on the 29^th March 2018, the territory of the UK will no longer be legally part of the territory covered by the EU FTAs with third countries. Hence any decision by third country governments to treat the UK as if it were a member of the EU would de facto amount to the extension of reciprocal preferences to the UK outside of the framework of a WTO compatible FTA. This could lead to problems in ACP members’ trade relations with major WTO members such as the USA, who may then insist on receiving the same trade treatment as that accorded to the UK.

Against this background two areas of uncertainty arise: firstly whether there is a common EU27/UK agreement on the text contained in the footnote and secondly, what is the legal status of the footnote?

The EU may have avoided including the text of the footnote in the main body of the legally binding Withdrawal Agreement, so as to avoid any conflict with WTO members (i.e. the USA) who are insisting that once the UK leaves the EU it has to be treated the same as any other 3^rd country and can only enjoy the same rights as any other 3^rd country.

The use of footnote to deal with this point may be intended as a device which allows the EU to accommodate UK concerns over UK exporters not being disadvantaged vis a vis EU27 exporters on 3^rd country markets covered by existing EU trade agreements, while at the same time avoiding the EU having to take a position which could complicate its relations with major WTO members.

This formulation however could complicate ACP EPA signatory government’s relations with major WTO members (e.g. the USA).  If ACP governments grant the UK preferential access to their markets despite the UK no longer being a party to the EU EPA agreements, they will de facto be granting the UK trade preferences outside of a WTO compatible FTA.  This could lead other WTO members to demand the extension to their own exporters of the same trade preferences as those enjoyed by the UK.

This problem for ACP governments would be avoided if under the Withdrawal Agreement throughout the transition period the UK simply remained bound by its obligations under EU trade agreements. For ACP EPA signatories this would mean throughout the transition period DFQF access to the UK market would be enjoyed on a non-reciprocal basis. This would then carry longer term implications.

If under the legally binding Withdrawal Agreement the UK will not automatically enjoy the trade preferences currently granted all EU28 exporters under existing EU trade agreements, then the position of ACP negotiators in negotiations with the UK government on the refitting of existing EU EPAs into bilateral ‘UK-Only’ trade agreements will be strengthened.

This will make it easier for ACP negotiators to insist any refitted EPAs are not simply ‘rolled over’ with minimal changes into ‘UK-Only’ trade agreements, but that the process of re-fitting  also addresses longer term ACP concerns in future trade with a UK post-Brexit Britain.

These longer term concerns include:

· the establishment of more permissive development friendly rules of origin for exports to the UK which assist ACP agro-food exporters in moving up the value chain (in parallel with negotiations on the rules or origin to be applied to UK exports  once the UK is no longer  part of the territory of the EU);

· the establishment of more development friendly SPS and food safety inspection and control requirements aimed at removing the current systematic discrimination against small scale exporters and small scale producers;

· the extension of current and enhanced codes of conduct on the elimination of Unfair Trading Practices (UTPs) applied within the UK to the functioning of ACP-UK agro-food supply chains;

· the establishment of trilateral administrative cooperation arrangements between ACP exporting countries/the UK/the EU27 to minimize any disruption of triangular supply chains which serve the UK market via an EU27 member states (or EU27 markets via the UK), as a result of the UK’s departure from the EU;

· the establishment of consultative arrangements and trade adjustment support programmes to assist ACP exporters in dealing with the consequences of preference erosion which are likely to arise from changes to UK trade and agricultural policies in the post-Brexit period;

· the establishment of a binding commitment to the flexible and responsible interpretation and implementation of trade agreement commitments, which places the structural development of ACP economies in first place in the implementation of trade agreements (particularly in regard to managing import surges which could arise under a ‘hard’ Brexit scenario in the agro-food sector).

If ACP EPA signatories are already guaranteed access to the UK market through the rolling over of UK obligations throughout the transition period, there will be no immediate commercial pressure on ACP governments to move ahead with minimally modified ‘cut and paste’ UK-only EPAs.  This means ACP EPA signatory governments can then focus negotiations on ensuring the UK effectively addresses those areas where the process of Brexit could adversely affect the value of their existing  duty free-quota free access to the UK market

This is likely to remain a contested area given the primary concern of the UK government is to prevent UK exporters from being excluded from the trade preferences currently enjoyed under EU trade agreements. The UK government sees this as essential since the competitive position of UK exporters vis a vis EU27 exporters would be undermine across a range of current exports if UK exporters did not enjoy the tariff preferences made available to EU27 exporters under all existing EU trade agreements.