Summary
The UK High Commissioner to South Africa Nigel Casey has argued Brexit will be good for South Africa since the UK will no longer be tied to EU restrictions. However this will only be the case if the UK takes the necessary steps to remove EU27 driven restrictions on South African exports as an integral part of the conclusion of the initial ‘Continuity Agreement’. This will require modification and extension of the existing EPA provisions where these constitute an obstacle to the full development of South African and wider African export potential in its trade with the UK. This includes addressing issues related to: rules of origin; SPS controls; the removal of quantitative restrictions and, in the short term, trade administration challenges and issues related to the unfair functioning of supply chains. This latter issue needs to be seen in a context where a ‘no-deal’ Brexit is likely to generate substantial additional costs, which under current practices are likely to be passed back down to African exporters.
The UK High Commissioner to South Africa Nigel Casey has argued Brexit will be good for South Africa since the UK will no longer be tied to EU restrictions. Against this background it was argued ‘Britain’s departure from the European Union…by 31 October will bring increased trade and development’ opportunities for South Africa. Areas of opportunity identified by the UK High Commissioner included South African exports of wine, fruits and fruit juices where it is maintained ‘there is enormous demand in British supermarkets’. This it is held provides ‘a very good basis for looking to expand trade in the future’ (1).
The High Commissioner also argued the UK was committed to using its autonomous trade policy ‘to drive development in Africa’, including through promotion of the African Continental Free Trade Area. The High Commissioner argued ‘there’s a real opportunity to bring together our trade and development objectives which has not always been possible in the past’ (1).
However in the short term the immediate prospect is one of trade disruption as laid out in the leaked Cabinet Office report on preparations under ‘Operation Yellowhammer’. This predicted ‘a no-deal Brexit would lead to food, medicine and petrol shortages’ (2). The Freight Transport Association (FTA) reacted with alarm to suggestions a ‘no-deal’ Brexit could lead to fuel shortages maintaining ‘these possibilities had not been conveyed to them by the government’. The FTA described the situation as ‘worrying’ since ‘this would affect the movement of goods across the country, not just to and from Europe’ (2).
This needs to be seen in a context of moves by supermarkets in both the UK and EU towards ‘delivered duty paid’ stipulations in contracts currently being concluded with 3rd country suppliers (3). While the duty costs of these ‘delivered duty paid’ stipulations can be dealt with by rapidly concluding a ‘Continuity Agreement’ with the UK, there have been suggestions these ‘delivered duty paid’ stipulations will extend to the exporter carrying the costs of any delays or disruptions of supply chains up to the supermarket door.
Thus even under a concluded ‘Continuity Agreement’ South African exporters could face disruptions to their exports to the UK for up to six months or even beyond.
Michael Gove, the Cabinet Office minister in charge of no-deal planning, said the leaked document showed ‘absolutely the worst case’, with projections being drawn from ‘an old document that did not reflect significant steps taken by Johnson’s administration over the last four weeks’. According to press reports senior sources at the Prime Minister’s office claimed the document reflected the situation prevailing ‘when ministers were blocking what needed to be done to get ready to leave’, since then it was maintained funds had been made available to mitigate the worst effects of a ‘no-deal’ Brexit. It was further claimed the report to Cabinet had been ‘deliberately leaked by a former minister in an attempt to influence discussions with EU leaders’ (2).
| Comment and Analysis The short term challenges which will arise from the disruptions which the Cabinet Office report on ‘Operation Yellowhammer’ identified as arising under a ‘no-deal’ Brexit, will generate immediate challenges in South African trade with the UK. These will be compounded by the challenges which the UK Border Force agency will face in dealing with all the new demands which a no-deal Brexit will place on its already under-resourced staff. The multiple sources of potential disruption to the supply chains along which South African companies export to their final customers in the UK will need to be addressed. Similarly the cost increases which arise as a result of shortages of storage capacity and freight service will also need to be addressed, if disruptions to South African exports to the UK under a ‘no-deal’ Brexit scenario are not to occur even with a ‘Continuity Agreement’ being set in place. Of more immediate relevance to the comments by the UK High Commission that the UK need not be tied to EU restrictive practices is the absence of any pro-active UK initiative within the ongoing UK-SACU Continuity Agreement negotiations to move away from existing restrictions arising from EU27 driven policy concerns and choices. For example, the UK is not proposing to modify the current restrictive EU rules of origin for fisheries products. EU rules of origin for fisheries products include restrictive crewing and ownership requirements for fisheries capture operation the interests of EU registered long distance fishing fleets. Despite the absence of any UK long distance fishing fleet interests, there are no indications the UK intends to move away from these restrictive rules of origin to allow any fish caught in the EEZs of SACU members to be granted originating status. Equally there are no indications the UK is willing to allow any African input to be used by any other African country in goods exported duty free to the UK (so-called ‘cumulation’), a move which would encourage the development of intra-African supply chains and support the consolidation of the pan-African Continental Free Trade Area. Similarly given the specific agro-climatic conditions in the UK, there is no indication the UK is considering revising existing EU-wide SPS restrictions which are simply not relevant in a UK-only context. The most prominent example in this regard relates to current EU controls on the fungal infection citrus black spot (CBS). CBS is a citrus specific infection which poses no threat to human health. Given the absence of any commercial UK citrus production the continuation of these SPS import controls would appear to be entirely irrelevant in a purely UK trade context. This issue is likely to take on considerable importance as Spanish citrus growers continue to lobby for the inclusion of CBS as a ‘priority quarantine pest’ under the EU’s new Plant Health Regulation (see companion epamonitoring.net article ‘Tunisian Citrus Black Spot outbreak linked to Infected planting materials’, 12 September 2019). Staying with the citrus sector the UK has no production interest in maintaining quantitative restrictions on imports of citrus fruit from South Africa and hence could easily remove the existing EU quantitative restrictions on citrus imports from South Africa from the date of entry into force of any SACU-UK Continuity Agreement. So far there are no indications the UK is addressing these and other similar issues in the context of the SACU-UK Continuity Agreement negotiations. UK trade officials appear to be taking the line that while the UK remains a member of the EU, it is subject to the EU’s common commercial policy and that as a consequence in negotiating Continuity Agreements the UK is limited to a ‘strict technical replication of the current effects of the EU EPAs’. It is implied any discussions of how things might be improved will need to be postponed until some future date, with the immediate priority being ratifying the ‘trade agreements in place’ to ensure continued duty free-quota free access to ACP exports to the UK. However this is rather disingenuous since the whole basis of the ‘Continuity Agreements’ currently being concluded is they can only enter into force once the UK is no longer a member of the EU and no longer subject to the EU’s common commercial policy. There is thus no logical reason why such ‘Continuity Agreements’ should not give full expression to the UK’s ability to escape EU restrictions. Indeed it would appear imperative that they do so, since the human resource constraints on the ability of the UK government to negotiate trade agreements is likely to be severely stretched in the years following a ‘no-deal’ Brexit. The UK is thus likely to have little capacity or interest in revisiting already concluded ‘Continuity Agreements’, to address issue of concern to partner exporters if UK export interests have already been fully addressed and secured under the initial ‘Continuity Agreement’. Thus while High Commissioner Nigel Casey argues Brexit will be good for South Africa since the UK will no longer be tied to EU restrictions, this will only be the case if the UK takes the necessary steps to remove EU27 driven restrictions on South African exports as an integral part of the conclusion of the initial ‘Continuity Agreement’. These are not issue to be addressed through positive thinking, boundless enthusiasm and optimism but by detailed modification and extension of the existing EPA provisions where these constitute an obstacle to the full development of South African and wider African export potential in its trade with the UK. |
Sources:
(1) dailymaverick.co.za, ‘Brexit will be good for South Africa, according to UK High Commissioner’, 12 August 2019
https://www.freshplaza.com/article/9132640/brexit-will-be-good-for-south-africa-according-to-uk-high-commissioner/
(2) Guardian ‘No 10 furious at leak of paper predicting shortages after no-deal Brexit’, 18 August 2019
https://www.theguardian.com/politics/2019/aug/18/number-10-furious-leak-document-predicting-no-deal-brexit-shortages
(3) BBC, ‘Lidl lines up suppliers to cover no-deal costs’, 19 August 2019
https://www.bbc.com/news/business-49389152