Summary
Despite earlier fears the UK’s proposed future schedule has largely left unaffected MFN tariffs on agri-food products of export interest to Caribbean ACP countries. The principal issues now faced in future agri-food sector exports to the UK arise in the context of a possible ‘no-deal’ departure of the UK from the EU customs union and single market. These include: the need to ensure the continued smooth functioning of triangular supply chains given the regions limited shipping service options; the future evolution of EU sugar prices and the sourcing decisions of Tate & Lyle Sugars; the future basis of access for African banana exporters in the absence of rolled over UK-only ‘Continuity Agreements’ with Ghana, Cameroon and Cote d’Ivoire and the Covid-19 related interruption of negotiations; and the future phytosanitary imports controls to be applied to UK citrus imports.
Given the debate in the UK government over moving towards a ‘zero production/zero tariff’ approach to the UK’s future MFN schedule, concerns arose in the Caribbean over the scope for the further erosion of the margins of tariff preferences which Caribbean agri-food exporters currently enjoy on the UK market. The products where fears of a move over to a ‘zero production/zero tariff’ approach were most acute included bananas, rice, rum, oranges, avocadoes. There were even concerns the UK’s ‘zero production/zero tariff’ approach could be extended to the sugar sector, given the UK has a structural deficit of sugar production amounting to 50% of domestic UK consumption needs.
If we include sugar in the products of concern, then the move over to a ‘zero production/zero tariff’ approach could have adversely impacted on some €236 million in direct Caribbean exports of agri-food products to the UK market. This does not take into account the value of exports to the UK market which enter via initial ports of landing in EU27 member states (most notably rum).
The countries which would have been most seriously affected include Belize (95% of total exports to the UK in 2019), Dominican Republic (85%) St Lucia (85%), Guyana (83%), St Vincent & the Grenadines (50%) Dominica (38%), Grenada (37%).
Main Caribbean Exports of Agri-food products to the UK and Total Exports by Country – 2019 (€)
| Country | Fruit
(08) |
Vegetables
(07) |
Sugar (1701) | Rum
(220840) |
Rice
(1006) |
Sub-Total | % total | Total to UK
|
| Dominican Republic | 110,105,525 | 2,514,358 | 0 | 459,897 | 0 | 113,079,780 | 84.7% | 133,469,578 |
| Belize | 31,290,109 | 16,692 | 51,191,672 | 0 | 0 | 82,498,473 | 94.2% | 87,567,559 |
| Saint Lucia | 4,427,699 | 179,194 | 0 | 274,220 | 0 | 4,881,113 | 84.5% | 5,779,180 |
| Jamaica | 777,754 | 3,351,789 | 1,936,466 | 9,516,284 | 0 | 6,066,009 | 13.9% | 43,608,913 |
| Saint Vincent & Grenad | 22,288 | 736,326 | 0 | 1,990 | 0 | 760,604 | 49.6% | 1,532,707 |
| Dominica | 0 | 577,869 | 0 | 0 | 0 | 577,869 | 37.6% | 1,536,373 |
| Barbados | 279,543 | 16,175 | 232,587 | 851,783 | 0 | 1,380,088 | 16.8% | 8,211,343 |
| Antigua and Barbuda | 117,182 | 0 | 0 | 0 | 117,182 | 1.4% | 3,697,127 | |
| Grenada | 82,125 | 13,876 | 0 | 73,376 | 0 | 169,377 | 37.2% | 457,111 |
| Guyana | 0 | 0 | 14,409,618 | 7,406,236 | 11,169,136 | 32,984,990 | 83.3% | 39,596,047 |
| Trinidad & Tobago | 0 | 0 | 0 | 484,325 | 0 | 484,325 | 0.4% | 116,682,207 |
| Suriname | 0 | 0 | 0 | 72,308 | 72,308 | 10.9% | 665,065 | |
| St Kitts &Nevis | 0 | 0 | 0 | 6,974 | 6,974 | 1.5% | 452,780 | |
| Sub-Total | 147,102,225° | 7,406,279 | 67,770,343 | 19,075,085 | 11,241,444 | 252,595,376 |
Source: EC, Market Access Data Base https://madb.europa.eu/madb/statistical_form.htm
In its 19th May 2020 announcement of the proposed new MFN tariff schedule the UK government made reference to maintaining in place some existing tariffs where this supports ‘imports from the world’s poorest countries that benefit from preferential access to the UK market’ (1) (see companion epamonitoring.net article ‘Future UK Only MFN Tariff Announced’ 21st May 2020).
In light of this consideration, except for currency conversions of fixed tariffs from euros to pound sterling we find no significant changes are proposed for future UK MFN duties on:
- Bananas (€131 million in direct Caribbean exports to the UK in 2019).
- Sugar (€67.8 million in direct Caribbean exports to the UK in 2019).
- Rum (€19.1 million in direct Caribbean exports to the UK in 2019).
- Rice (€11.2 million in direct Caribbean exports to the UK in 2019).
- Ethnic Roots and Tubers/Sweet potatoes (€0.266 million in direct Caribbean exports to the UK in 2019) (2).
New UK MFN Tariff Schedule for Agri-Food Products of Export Interest to the Caribbean,
|
UP = Unit Price
SIV = Standard Import Value
For products such as avocadoes (€7.4 million in direct Caribbean exports to the UK in 2019) the tariff was simplified to a year-round tariff of 4%, from a seasonally variable tariff of from 4% to 5.1%. While for products such as mangoes (€7.2 million in direct Caribbean exports to the UK in 2019) the UK MFN tariff review was always going to have no impact, since the EU MFN tariff was already set at zero (2).
Meanwhile, for directly exported products such as oranges, the value of Caribbean exports of which has declined in recent years in the face of stricter EU phytosanitary import controls on citrus specific diseases, the system of Standard Import Values and entry price requirements is to be abandoned, with ad valorem tariffs being set in place in their stead (2).
Depending on the variety of the citrus fruit involved, these new ad valorem tariffs will vary from seasonal tariffs of from 2% (from 1st May until 31st October) to 10% (from 1 November to 30th April) for navel oranges to year-round tariffs of between 12% and 16% for other varieties (2).
| Comment and Analysis Despite earlier concerns, the value of tariff preferences enjoyed by Caribbean exporters over MFN suppliers of competing agri-food products will be maintained under the UK’s future autonomous MFN tariff schedule. It appears as if the UK government was clearly listening to the representations from Caribbean private sector associations and governments (led by the government of Belize) which raised with UK Ministers, Parliamentarians and Government officials the regions’ most immediate concerns in regard to the potential adverse impact of the adoption of a ‘zero production/zero tariff’ approach to the UK’s future MFN schedule.This was of the greatest significance in the banana sector, where any move over to a ‘zero production-zero tariff’ policy would have profoundly impacted on the basis for the majority of UK imports of bananas, since exporters subject to reduced tariff quota restricted access under ‘rolled over’ UK only FTAs would simply have begun exporting under the standard zero tariff MFN conditions which such a profound policy shift would have entailed. The UK governments’ decision not to pursue a ‘zero production/zero tariff’ approach, despite the structural deficit on the UK sugar market, was of considerable significance to Caribbean sugar exporters. Indeed, should no UK-EU trade deal be in place by the time the UK is scheduled to leave the EU customs union at the end of 2020, the imposition of MFN tariffs on refined sugar imports from EU27 countries could provide a major boost to UK sugar prices and demand for raw cane sugar for refining from Tate & Lyle Sugar’s Thames refinery. This refinery has been working at severely underutilised capacity in recent years, in the face of the decision by the EU to abolish sugar production quotas. Given the close corporate links between Tate & Lyle Sugar and Belize Sugar Industries (via their ownership by American Sugar Refiners- ASR) this would place Belize and probably the Dominican Republic in a food position to capitalise on new sugar market opportunities in the UK. While the Dominican Republic has not exported raw cane sugar to the UK in recent years, ASR has extensive production interests in the Dominican Republic. In the context of low global sugar prices, should UK MFN tariffs be applied to imports of refined sugar from EU27 member states (mainly France) the UK could be offering prices which would be much more attractive than other markets which Dominican Republic sugar exporters have access to. If imports from the Dominican Republic are not developed, then the Guyanese sugar company GUYSUCO could benefit from higher UK sugar prices and increased UK import demand for raw cane sugar for refining. Fellow ACP sugar exporting countries such as Mauritius and South Africa would however appear to be well placed to expand refined sugar exports to the UK market to fill part of the gap left by EU27 suppliers. This would be facilitated by their existing corporate connections to Napier Brown and British Sugar respectively. For Caribbean rum exporters, such as Belize and the Dominican Republic, important issues related to the functioning of triangular supply chains will need to be addressed given the bottling operations which take place in EU27 member states prior to onward export to the UK. In both these cases close attention will need to be paid to setting in place arrangements to ensure bottling operations in EU27 member states do not result in any loss of duty free access to the UK market for rum originating in Belize and the Dominican Republic. Attention will also need to be paid to the trade administration and logistical issues for bottled rum exports which could arise given the available shipping services for Caribbean exporters, which tend to focus on unloading in Rotterdam, prior to onward shipment to the UK. No issues are seen as arising in the rice sector, although for certain categories of rice the simplification process alongside the currency conversion process has seen a de facto lowering of tariffs for certain categories of rice (2). Potentially, some new market opportunities could arise for speciality rice varieties from the imposition of standard MFN duties on rice imports originating in EU27 member states in the event of a no-deal UK departure from the EU customs union at the end of 2020. For oranges, a no-deal UK departure from the EU customs union at the end of 2020 could offer opportunities for the removal by the UK of un-necessary EU phytosanitary import controls for citrus specific infections, given the absence of any citrus production in the UK. |
Sources:
(1) gov.uk, ‘UK Global Tariff backs UK businesses and consumers’, 19 May 2020
https://www.gov.uk/government/news/uk-global-tariff-backs-uk-businesses-and-consumers
(2) UK Global Tariff: Search Engine
https://www.check-future-uk-trade-tariffs.service.gov.uk/tariff?q=070410&n=25&p=1